National Express has won the battle to operate one of the main routes between London and Scotland.
The transport group was awarded the contract to run the East Coast Main Line franchise by the Department for Transport after a bidding war.
National Express beat off opposition from Arriva, First Group and a joint venture between Virgin Trains and Stagecoach to win the contract.
The group will take over the operation from troubled GNER in December.
The new franchise, covering the arterial North-South rail route, will be called National Express East Coast.
It links London with Scotland, calling at Peterborough, Leeds, Doncaster, York, Newcastle, Edinburgh, Aberdeen and Inverness.
"The whole deal is very good news, not only for passengers but for the taxpayer"
It was put out to tender last year after the US parent firm of British rail firm GNER was struck by financial troubles and could not afford to pay the £1.3bn it had promised the government for the right to run the service.
Extra services
"The whole deal is very good news, not only for passengers but for the taxpayer," said Transport Minister Tom Harris, speaking to the BBC.
Under the terms of the deal, National Express has agreed to pay the Treasury £1.4bn to operate the franchise until the end of March 2015.
The group, which also operates the Gatwick and Stansted Express and the inter-city services between Yorkshire, the east Midlands and London through Midland Mainline, has also pledged to invest in extra services, stations and on-board services.
National Express said it would inject £7.4m to upgrade stations, including the creation of 2,000 extra car park spaces, over the course of the seven-and-a-half years.
It also said that from December 2010, the number of weekday trains could rise from 136 to 161 and a new London-to-Lincoln service would also be added.
The company will spend £400,000 in reducing energy use at stations and train depots.
GNER had joined forces with Virgin Trains and Stagecoach in their joint bid for the contract, in the hope it would retain a stake.
GNER's chief executive Jonathan Metcalfe said: "Naturally, we are disappointed that our joint bid was unsuccessful, but we now have to look to the future and work with the successful bidder to create an even bigger and better railway.
"The needs of our passengers will always come first."
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