Labor are demanding that train operator Transpennine Express rescind its contract.
Transpennine, which runs across northern England and into Scotland, has been canceling trains every day for months.
Labour’s shadow transport secretary Louise Haigh said the service had “never been worse”.
Railway Minister Huw Merriman said if the service “can’t be turned around then decisions will be made”.
When railway concessions fail in England, they are taken over by a Department of Transport company called the Operator of Last Resort (OLR).
Ms Haigh asked in the House of Commons on Thursday for this to be done with Transpennine.
The railway company’s contract is to be extended in May.
Mr Merriman replied that he was “interested in ensuring that this is the case [OLR] has a manageable portfolio”, but “decisions are made” when Transpennine cannot reverse itself.
However, he added that there had been criticism of the performance of another rail operator, Northern, which is currently run by the OLR.
London and North Eastern Railway (LNER) and Southeastern Trains are also operated by the OLR.
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Transpennine has attributed its cancellations to high levels of sick leave and a backlog in driver training caused by the pandemic.
The train operator also lacks a current agreement on rest days with the Aslef drivers’ union.
On Wednesday, BBC Today asked Mick Whelan, Aslef’s general secretary, why members weren’t allowed to vote on an offer of 1.5 times overtime pay.
He replied that salaries had not increased for several years and that the day off was not intended for services.
Asked if an agreement on rest days would mean more trains running, he said: “I don’t think my people would work these trains for a lower wage rate even if we had an agreement.”
Mr Whelan added: “We have a company that is acting in complete bad faith and is voiding any agreement that we have.”
He said Transpennine was “underperforming, poor industrial relations and unable to operate in the 21st century”.
Ministers have repeatedly said that reliance on rest-day work must end.
A spokesman for Transpennine Express said the company is “committed to the communities we serve and want to reassure our customers that we do everything we can to provide a train service they can rely on”.
The company had cut services from its schedule on a daily basis due to “very high levels of sick leave and a post-pandemic training backlog,” the spokesman said, adding that Transpennine “remains working flat out to deliver higher levels of service delivery and to address the issues.” that customers face”.
Mr Merriman had said on Wednesday that the Transpennine Express contract was under review.
He told the Transport Select Committee: “If a train operator is not performing and it seems clear that they are not performing and cannot change that, this contract would end and we would have no hesitation in placing him in Operator of Last Resort. ”
“I’m already looking at what needs to be done … in relation to this contract,” he added.
Mr Merriman said he has weekly data on Transpennine and another struggling operator, Avanti West Coast, and what they are doing to improve performance.
Mr Merriman told the Transport Select Committee on Wednesday he would be meeting with the regulator about cancellations in advance.
This can happen up to 10pm the night before and is not included in the cancellation figures for the day.
Mr Merriman said these are currently outnumbered on the Transpennine Express.
On Thursday he told the House of Commons the practice needed “a good look” and he was worried about current levels on the Transpennine.
The government recently gave another troubled operator, Avanti West Coast, six months to urgently improve.
Mr Merriman said Avanti increased services in December without relying on rest days and hired more drivers, but a period of industrial action over Christmas meant it was difficult to assess whether the improvements were working.
He said Avanti’s performance has improved greatly in recent weeks and he hopes the operator “turns the corner”.
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