Sir Richard Branson has threatened to walk away from the rail industry after Virgin lost a key main line franchise to FirstGroup.
Sir Richard said he was "extremely disappointed" that the Department for Transport (DfT) had preferred FirstGroup to Virgin, which had run the London to Scotland West Coast line since 1997, adding: "Based on the current flawed system, it is extremely unlikely that we would bid again for a franchise."
FirstGroup, which already runs a number of franchises including Great Western and ScotRail, promised cheaper fares, more services and improved stations.
But Sir Richard said bankruptcy had hit former East Coast main line operators GNER and National Express who had "overbid" for the East Coast franchise.
Sir Richard added that this was the fourth time Virgin had been outbid in a franchise tender process.
He went on: "On the past three occasions, the winning operator has come nowhere close to delivering their promised plans and revenue, and has let the public and country down dramatically
"GNER and National Express over-promised in order to win the franchise and spectacularly ran into financial difficulties in trying to deliver their plans.
The East Coast is still in government ownership and its service is outdated and underinvested, costing passengers and the country dearly as a result.
"Insanity is doing the same thing over and over again and expecting different results. When will the Department for Transport learn?"
FirstGroup will take over the West Coast line on 9 December, with the franchise running for 13 years and four months.
The DfT said the franchise deal was worth £5.5bn over the lifetime of the contract.
Sir Richard said Virgin had submitted "a strong and deliverable bid based on improving customers' experience, increased investment and sustained innovation", adding: "To have bid more would have involved dramatic cuts to customer quality and considerable fare rises which we were unwilling to entertain."
FirstGroup chief executive Tim O'Toole said the company was delighted to win the franchise. He added: "We will be making significant improvements, including reduced journey times and introducing new direct services.
"In support of our commitment to generate increased passenger growth we will be reducing standard anytime fares by 15 per cent on average."
Announcing the new franchise winner, Rail Minister Theresa Villiers said the deal would deliver "big improvements for passengers, with more seats and plans for more services".
But RMT union general secretary Bob Crow said: "FirstGroup and the government should be left in no doubt that we will mount a massive industrial, political and public campaign to stop any attacks on our members' jobs and the services that they provide to the travelling public as a result of this franchise award."
Manuel Cortes, leader of the Transport Salaried Staffs Association rail union, said: "This crazy franchise lottery, where the highest bidder scoops the pot, means that passengers will have to pay inflation-busting fare rises on the busiest line in the UK for the next 14 years.
"That is the only way that FirstGroup will be able to pay their annual £500m premium to Chancellor George Osborne as well as rewarding their shareholders with profits."