Virgin Trains is bidding to launch a rival rail service between London and Liverpool after it loses its franchise.

Fares would be “at least 10% cheaper” than those offered by competitors and passengers would be guaranteed a seat, according to the firm.

The operator has submitted an application to launch open access services from May 2021, which is 14 months after its current West Coast Main Line franchise is due to expire.

Virgin Trains – owned by Virgin Group (51%) and Stagecoach (49%) – has run services on the route since 1997.

But its bid for the next franchise was disqualified by the Department for Transport (DfT) in a row over pensions.

Most rail services in Britain are contracted through franchises, but a handful of firms including Grand Central, Heathrow Express and Hull Trains run competing open access services.

Applications for permission to launch non-franchised services are considered by rail regulator the Office of Rail and Road (ORR), which says they must generate extra demand rather than simply take revenue away from incumbent operators.

Virgin Trains hopes to generate around £50 million of revenue each year running an hourly service for most of the day between London Euston and Liverpool Lime Street, calling at Lichfield, Tamworth, Nuneaton and Liverpool South Parkway.

This would be in direct competition with whoever wins the West Coast Partnership (WCP) franchise, which will include West Coast Main Line and HS2 services.

Virgin Trains’ managing director Phil Whittingham said the firm has “led the UK rail industry for 22 years” with measures such as digital ticketing and scrapping Friday night peak restrictions.

He went on: “We want to go further. These new services will allow us to take the customer experience on the UK’s railways to the next level and show the rest of the industry how it can be done.”

An ORR spokesman said it will consider the application “in line with our open access policy”.

The initiative involves Virgin Group, Stagecoach, French state-owned operator SNCF and train manufacturer Alstom.

Virgin Trains’ failed bid for the WCP franchise was a joint venture between the three train operators.

They have launched legal action against the DfT over its disqualification, stating that bidders are being asked to take on “unquantifiable, unmanageable and inappropriate risk” in relation to pensions.

The DfT insists it has “total confidence in our process”.

Neil Lancefield, is Press Association Transport Correspondent.