Virgin Trains is fighting to keep its grip on the West Coast Main Line franchise after a rival rail operator launched a bid to oversee the next phase of improvements on the service.
Govia, which runs trains in the West Midlands under the London Midland brand name, is bidding for the contract to oversee the addition of 106 new Pendolino carriages to the line.
It will compete against Virgin, which has been forced to bid for the contract even though it is the West Coast Main Line operator.
Virgin fell out with the Department for Transport after it refused to introduce new trains and carriages on the service unless its franchise, due to expire in 2012, was extended by two years.
Ministers have decided to press ahead with new carriages for the Pendolino "tilting trains", which run between London Euston and Birmingham New Street, with or without Virgin's co-operation.
The DfT has commissioned 106 new carriages, which will allow four new trains to be added to the line and allow 31 existing trains to be lengthened from nine to 11 coaches.
Govia has now submitted a bid for the contract to prepare the carriages for use on the West Coast Main Line - placing it in prime position to bid for the West Coast franchise, which is due to expire on 2012.
The firm became Virgin's main rival in the West Midlands last year when it was awarded the franchise to operate services previously run by Silverlink and Central Trains, including regular services between London and Birmingham.
As the West Coast Main Line operator, running regular services between Birmingham New Street and London Euston, Virgin would usually be expected to take responsibility for new coaches as a matter of course.
However, it has instead been forced to submit a bid for the work, and will need to compete against Govia to win the contract from the Department for Transport.
The extent of the Government's anger with Virgin was revealed when Rail Minister Tom Harris accused it of trying to "blackmail" Ministers, in a House of Commons hearing.
Officially, the DfT and the train operator insist they have a good relationship.
The new carriages will be produced by manufacturer Alstom in Italy.
Transport Secretary Ruth Kelly said: "Our priority for the railways is increasing capacity and this will provide much needed extra seats on the busiest services from London to Birmingham, Wolverhampton, Manchester, Liverpool and Glasgow.
"In addition, the £8.8 billion upgrade of the West Coast Main Line will cut journey times and deliver more frequent services."
Virgin and Govia have been named as preferred bidders for the contract, the Department for Transport said. Whichever firm is chosen will support the Department throughout the design finalisation, manufacture, delivery, testing and commissioning of new Pendolino rolling stock until the end of the current West Coast franchise, on March 31, 2012.
If Govia wins, it will work closely with Alstom, Virgin Trains, Network Rail and the DfT, giving it crucial inside information about the West Coast Main Line which would help any future bid for the franchise.
In a letter to The Birmingham Post last month, Rail Minister Tom Harris insisted the Government was still willing to work with Virgin.
He said: "Far from closing the door to Virgin Trains, they - like other organisations - are welcome to work with us to help deliver extra carriages, subject to commercial talks.
"Virgin can bid if they choose to. We would consider their proposals alongside all others on a fair and transparent basis."
