The East Coast main line franchise is a joint venture of Stagecoach, which owns 90% of the franchise, and Virgin, which holds 10%.
Rail, Maritime and Transport union general secretary Mick Cash said: "This is the second time that the Government have called upon the public sector to launch a rescue operation on the East Coast Main Line and instead of being a temporary arrangement Chris Grayling should listen to his staff and the public and make it permanent".
Transport Secretary Chris Grayling said he would terminate the contract with Virgin Trains East Coast from the end of next month.
"They will then begin the task of working with Network Rail to bring together the teams operating the track and trains on the LNER network".
It reported losses on the line and in November a year ago Mr Grayling announced that the franchise would be terminated in 2020 to enable it to become a public-private railway.
United Kingdom government will take back control of the running of the rail route between London and Edinburgh from private operator Stagecoach (temporarily) after the company failed to make the contract work financially.
GNER was stripped of the route in 2007 after its parent company suffered financial difficulties, while National Express withdrew in 2009.
Former transport minister Lord Adonis labelled the government's decision a "bailout" for the companies that would cost the taxpayer billions of pounds.
Passenger and freight rail services in Britain were privatised in the 1990s, when routes were grouped into franchises and operators bid to run services for a set number of years.
Stagecoach chief executive Martin Griffiths said he was "surprised and disappointed".
A Great Northern spokesman told the Comet in response: "The government brought together Great Northern and Thameslink with Southern and Gatwick Express with a objective and that was to modernise and introduce a new, expanded Thameslink network - which is what we will be doing from Sunday".
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