Sir Richard Branson yesterday warned his company would not bid again for the CrossCountry franchise if the Government turned it "into a bus run".

The Government has decided to end Virgin's franchise - which should have run until 2012 - next year.

However, Sir Richard said a Virgin bid for CrossCountry would depend on just how the Government saw the new franchise, which is being reconstituted as part of the overall shake-up of all rail franchises.

"There is a danger that the Government will go for the biggest return to the Treasury and not be interested in the problems of overcrowding and the quality of food and the quality of seating."

Sir Richard added that he understood that competitors who might bid for CrossCountry could use "rundown rolling stock" on the route.

His warnings came as he unveiled plans for the Virgin West Coast service, which it has been running since 1997, including increasing the frequency of trains from Birmingham-London to three every hour.

It also intends to start a pre-booked chauffeur service for first-class passengers in which they would pay between £22 to £34 for a car to avoid long taxi queues.

The company also said it might increase the length of its Pendolinos from nine carriages to 12.

Sir Richard said more flexible ticket pricing was needed on the railways and running more and longer trains was clearly one way to tackle capacity problems.

Virgin has seen passenger numbers on West Coast rise from 15.4 million in 1998/99 to 18.7 million in 2005/06, while over the same period Cross-Country passengers have risen from 13.6 million to 20.4 million. It is now taking 60 per cent of the air and rail market on travel between London and Manchester.

Sir Richard said: "There is no reason for short-haul air lines to exist on this route and it is beyond comprehension that people will want to fly on this route in future.

"I just can't see any reason for wanting to fly between London and Manchester.

"The train will have the last laugh."

Sir Richard said there had been a complete change of attitude in the last two or three years on the railways and passengers were now enjoying conditions as good as any there had ever been.

He said that Network Rail had "got its act together", although he hoped to see improvements at stations, including more passenger lounges.

Sir Richard said he also felt the railways were too often affected by heavy vehicles striking bridges and that rail bridges should be protected by metal bars.