Almost 60 new trains willbe in service by 2006
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More than 200 new jobs will be created when the new operator takes over one of the country's busiest rail routes.
FirstGroup and French-based Keolis have signed an eight-year deal with the Strategic Rail Authority (SRA) to operate the Trans-Pennine route.
The deal includes £260m worth of new trains and a pledge to improve punctuality and passenger services.
The route serves, Tyneside, Wearside, Cumbria, Teesside, Merseyside, Manchester and Yorkshire.
The service, formed by merging certain routes and operations currently run by First North Western and Arriva Trains Northern, is expected to generate about 13 million passenger journeys a year. The new eight-year franchise also has an option for a five-year extension.
Moir Lockhead, chief executive of FirstGroup plc, said: "We can't wait to get started.
"We have a major role to play in developing high quality public transport and providing an attractive alternative to the car on these vital routes. "
'Better integration'
Jean-Pierre Deghaye, Keolis director, said: "This is a great achievement, but the most important task is still ahead of us - to deliver what we have promised the SRA and our passengers."
The new deal also includes plans building new train maintenance depots on both sides of the Pennines, upgrading all 30 stations and developing better integration between train and bus services as well as more flexible ticketing arrangements.
The new franchise will have headquarters in Manchester, with key senior managers based east of the Pennines.
The new fleet of 56 trains will be built and maintained by Siemens in £350m deal with FirstGroup.
The diesel trains, called Desiros, have been specifically designed for operation on the Trans-Pennine network.
Due to be in service by 2006, they will feature security cameras inside carriages and dedicated facilities for disabled travellers.