The Department for Transport says the train operator has to 'drastically improve services'.
The Department for Transport added that it would "consider Avanti's performance" once the extension comes to an end on 1 April 2023.
"Today's agreement allows our team at Avanti West Coast to sustain their focus on delivering their robust plan to restore services to the levels that passengers rightly expect," said Graham Sutherland, FirstGroup's chief executive.
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