* Government to return East Coast franchise to private hands
* Timetable for others announced, West Coast delayed to 2017
* Process reviewed after flaws in West Coast award last year
* Virgin welcomes move, expects to bid for East Coast line
By Rosalba O'Brien
LONDON, March 26 (Reuters) - Britain has announced ashake-up in the way it awards rail franchises, battling torestore confidence in a privatised network which has been doggedby financial problems at rail companies and costly errors in thebidding process.
The government said on Tuesday it would implement therecommendations of an independent review set up after mistakesin the way bids were assessed forced it to tear up the award ofthe West Coast mainline franchise last year..
The recommendations include staggering the award offranchises and creating a new advisory panel.
Britain's railways have faced a string of problems sincethey were privatised in the 1990s, including fatal crashes thatled to expensive and disruptive network upgrades, as well asfinancial problems at rail companies which led the government tobring the East Coast mainline back into public hands in 2009.
The Department of Transport said on Tuesday it wouldimmediately start a competition to return the East Coast serviceto the private sector, and gave a schedule for other franchises,with the West Coast line up for grabs from April 2017.
"The new programme will provide long-term certainty to themarket and support the delivery of the government's 9.4 billionpounds rail investment strategy for 2014-2019," said TransportSecretary Patrick McLoughlin.
Virgin Trains, which was to lose the West Coast servicebefore flaws in the award process led the government to ask itto stay on, gave a cautious welcome to the new proposals.
"It seems a lot of things we were arguing for have come topass," said a spokesman. "It's clear they've learnt theirlessons. Let's hope we can move on."
However trade unions, which oppose the privatisation, saidthe East Coast line had "flourished" under state control.
"This is privatisation for privatisation's sake, asministers steadfastly ignore what is best for the rail industryand the people who work on it and use it," said Trades UnionCongress general secretary Frances O'Grady.
NEW TIMETABLE
Virgin Trains, a venture between businessman RichardBranson's Virgin Group and Stagecoach, was asked lastyear to continue running the West Coast service until November2014.
Its spokesman said the new timetable for the franchise meantits contract was effectively being extended, although thecompany would need to sit down and negotiate with the Departmentof Transport as it "would prefer an incentivised contract."
He said Virgin also expected to bid for the East Coastservice, which runs the London to Edinburgh route and is nowslated to return to the private sector from February 2015.
An eight-year East Coast contract was won by NationalExpress in 2007 after the demise of the original holder,GNER. But the service was renationalised after the company saidfunds set aside to cover losses on the line would run out.
The new staggered timetable means extensions on existingcontracts will be needed to get expiring franchises into place.
This should benefit current operators Go-Ahead,FirstGroup, Stagecoach and National Express, saidanalysts at Jefferies.
"While that should be seen as a small positive for all, itmay be most so for FirstGroup, which should secure some neededcash flows for longer out of this," they said.
FirstGroup - which runs Capital Connect, Great Western andTransPennine Express - and Stagecoach both welcomed thetimetable publication in separate statements.
FirstGroup was awarded the West Coast franchise - whichlinks London to Glasgow - last year, before the governmentcancelled its decision at a cost of around 40 million pounds($61 million) to the taxpayer.