Ministers are set to make a decision if Northern Rail will be stripped of its franchise and renationalised today.
A statement from The Department of Transport said the decision will result in the service “either being taken on by the Operator of Last Resort or handed back to Northern as a Direct Award".
It said: "Transport for the North has been calling for the OLR as the only way to rebuild confidence and trust among passengers.”
The Transport Secretary Grant Shapps has previously described the rail operators service as 'completely unacceptable' and has ordered talks on formal renationalisation.
It follows years of poor performance from the beleaguered railway operator, with passengers forced to put up with constant delays, cancellations and travelling on pacer trains.
If the plans go ahead it will become the second of the national rail franchises to be nationalised by a govenment-owned business called the 'Operator of the Last Resort' which is owned outright by the tax payer. The first was the East-Coast inter-city franchise.
Arriva's current contract with Northern is due to end on March 2025.
Mr Shapps has previously suggested he could instead give Arriva a short term "direct award" contract on different terms to the existing deal.
Chris Burchell, Arriva’s managing director of UK trains said: “We accept services on the Northern network are not yet good enough and we sincerely apologise to our customers for our role in that.
“Many of the issues affecting the franchise however are outside the direct control of Northern.
"Assumptions were given when the plan for the franchise was developed that critical infrastructure projects would be delivered to enable growth and support capacity demands.
"Many of these have either been delayed or cancelled. This, along with unprecedented levels of strike action, has had a significant impact on the franchise – both in terms of service and financial performance.
“These challenges will continue to affect services irrespective of who is running them.
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"What is needed is a new plan, and, in that analysis, we are fully in agreement with Government.
"That is why the Government asked us to prepare a business plan for a shorter ‘Direct Award’."