GNER gave up its East Coast Mainline contract after parent company Sea Containers ran into trouble.

The firm also could not meet financial pledges to the government as passenger numbers dropped.

Transport Minister Tom Harris told MPs on Tuesday GNER lost the franchise for not being able to fulfil its terms.

Mr Harris said: "There's no need for an inquiry into why GNER lost its franchise.

Four contenders

"The fact that the contract was taken away from them is simply evidence that the Department for Transport will continue to take a robust view when a franchisee fails to deliver the terms and conditions that were agreed."

The management came to an agreement with the government to run services while a new franchisee was found.

As part of its franchise deal, GNER had invested �20m in its trains with refurbished carriages and new diesel engines to maintain the half-hourly service between London and Leeds.

They are now hoping to enter into a partnership agreement with the successful bidder for the full franchise but have not said whether they will provide an independent proposal.

The four contenders have been revealed as Arriva, First, National Express and a joint bid by Virgin and Stagecoach.

The successful bidder is likely to be announced in the summer.

GNER won a 10-year franchise in March 2005, but faced growing financial problems after the London bombings in July of that year.

Passenger numbers dipped, power prices rose and Network Rail's compensation payments declined.

This coincided with financial problems at its parent company Sea Containers.

It surrendered the franchise, as it would not have been able to meet its terms which involved paying hundreds of millions of pounds to the government.

It is now operating the franchise on an agreed 18-month management contract.