Stagecoach Group is to run the new East Midlands franchise from 11 November this year.

The Department for Transport today announced that Stagecoach Midland Rail Limited would take over the existing Midland Mainline services from London St Pancras, and the eastern section of Central Trains.

The existing Midland Mainline services are now run by National Express Group. Chief executive Richard Bowker said he was “extremely disappointed”.

The franchise will run for seven years and four months, and the DfT will receive a premium of £133m from Stagecoach Midland Rail Limited.

The DfT said passengers will benefit from improvements including:

•An hourly service between Kettering and London, increasing the number of off peak services on the midland main line to five trains per hour. It has also been agreed in principle to extend this service to a new station at Corby from December 2008, removing the need to split and join trains at Leicester.

•A nine per cent increase in peak capacity into and out of London St Pancras by 2010, and more carriages on the busiest trains between Nottingham and Liverpool.

•A new station at East Midlands Parkway will be served by two trains an hour from December 2008, and a daily direct service between Lincoln and London will be introduced.

•Journey times between Sheffield, Derby and London will be reduced, saving up to 12 minutes on an average journey.

•Improved performance, with a forecast 90.4 per cent of trains on time by the end of the franchise.

•The Community Rail service between Matlock and Derby will be increased to every hour and extended directly to Nottingham.

•More investment including more than £5m on improvements to stations, at least 1,250 extra car parking spaces and the introduction of smart card technology by 2010.

Stagecoach has indicated it may raise unregulated fares by an average of 3.4 per cent above inflation each year.

Mr Bowker said: 'We are very disappointed with today's announcement. We look forward to the DfT explaining the reasons for their decision.

“I would like to take this opportunity to thank all our employees at Midland Mainline and Central Trains. Midland Mainline's record of constant improvement has resulted in the company being top of industry league tables for operational performance as well as customer satisfaction, a record of which we are truly proud.

“The team at Central Trains have shown what can be achieved in a difficult franchise with the right people and the right focus.”

Stagecoach Group chief executive Brian Souter said: “We are delighted to be entrusted by the Government with the contract to run a key rail franchise in a region that is the heart of the UK transport and logistics economy, with significant growth potential.

“We plan to win back customers from the car and grow the market by delivering a high-quality service that meets the diverse needs of short and long distance commuters, business and leisure travellers.

Stagecoach already operates South West Trains and has a 49 per cent shareholding in Virgin Rail Group, which operates the CrossCountry and West Coast franchises.