Arriva Trains Northern will operate its service until September 2004 and Arriva Trains Merseyside will carry on until July 2003.

The interim franchises were awarded after Arriva failed to win the right to continue operating Trans-pennine Express services across the north of England after 2003.

Arriva currently runs the express service, but either Connex Transport UK Limited or First Group is to take over running the fast services, which will connect Tyneside to Merseyside, via Manchester and Yorkshire.

'Under-staffed'

Nick Newton, Strategic Rail Authority (SRA) managing director of operations, said: "We are pleased to have reached agreement with Arriva and that the company will continue to contribute to the delivery of the SRA's programme for improving the UK's rail service."

Bob Davies, Arriva's chief executive, said they were pleased to have reached agreement with the SRA.

He said: "When we took over these franchises in 2000 they were... suffering from under-investment and under-staffing. "

Arriva hopes to win the right to run a new Northern Rail passenger franchise from late 2004.

Pay dispute

That route will amalgamate Arriva's current non-express routes with those of train operator First North Western.

It will provide inter-urban, commuter and rural services across the north of England.

A new competition to run Merseyside services will be opened in July 2003.

Train conductors belonging to the RMT union have been in a pay dispute with Arriva since January 2002.