The Welsh Government has decided to nationalise its railways following a significant drop in passenger numbers because of coronavirus.

The country’s transport minister Ken Skates said bringing day-to-day rail services for its Wales and Borders franchise under public control would help secure the future of passenger services and protect jobs.

Private firm KeolisAmey, a joint venture between French transport giant Keolis and Amey, has run the franchise in Wales for just two years after taking it over from Arriva Trains Wales.

It was awarded the contract in 2018 by the Welsh Government’s wholly-owned transport company Transport for Wales (TfW), of which a new publicly owned subsidiary will now take direct control of services in February next year.

On Thursday, Mr Skates said: “The last few months have been extremely challenging for public transport in Wales and across the UK.

“Covid has significantly impacted passenger revenues and the Welsh Government has had to step in with significant support to stabilise the network and keep it running.

“We have decided to transfer day-to-day rail services to a new publicly-owned subsidiary of Transport for Wales.”

He added: “In Wales we continue a partnership approach between TfW and KeolisAmey as we work together to protect services for the Welsh public, safeguard jobs and secure the important Metro projects we have been working so hard on over the last few years.”

Under a new agreement, KeolisAmey will continue to support development of the South Wales Metro, as well as maintenance of the Core Valleys Line and delivering new rolling stock for rail services.

James Price, chief executive at TfW, said: “KeolisAmey have made a significant contribution to transport in Wales over the past two years and I’ve welcomed their collaborative approach to securing this agreement, which has allowed us to achieve a positive way forward for the Wales and Borders contract.

“There is no doubt that there will be difficult decisions in the future as we adapt to the realities of a post-Covid era, but this agreement will give us a stable base from which to build back better.”

Kevin Thomas, chief executive of KeolisAmey Wales, said: “In light of Covid-19, we recognise the need for Welsh Government to have a sustainable way forward for delivering its ambitious objectives for rail and we are pleased to have agreed and put in place robust principles as we work on the details of a new agreement.”

Reactions from the Welsh Parliament to the news contrasted between opposition parties.

Welsh Conservative shadow economy minister Russell George said: “Given the track record of the Welsh Labour-led Government, its decision to take control of our vital train industry has not filled me with any hope.

“Given how reliant the people of Wales are on using trains, we cannot allow the Welsh Labour-led Government to run it into the ground, like it has with Cardiff Airport.

“Before making this decision, Welsh Labour-led Government ministers should have consulted the Welsh Parliament on the list of failings facing the industry pre-Covid especially the lack of outdated train stock – as well as, crucially, how much this decision is going to cost the Welsh taxpayer.”

Plaid Cymru’s shadow transport minister Helen Mary Jones said: “This could well be the right decision. Plaid Cymru has always maintained that our railways should be brought into public hands and the government put passengers before profit.

“We called for the rail franchise to be a not for profit model before it was let – calls that were dismissed by Labour.

“However crucial questions remain. What are the financial implications? Does Transport for Wales have the capacity to directly manage the service? What is the nature of this subsidiary?”

Unions welcomed the development, including Wales’s largest rail union RMT, which demanded the UK Government now give Wales the ability to permanently retain the rail service in the public sector.

Powers over rail passenger services are not fully devolved to Wales, and UK law currently prevents it from permanently retaining the service in public ownership.

RMT general secretary Mick Cash said: “There is huge public support for public ownership because privatisation and profiteering has never been an efficient way to provide value for money, and this is even more the case when extra funding has been needed during the coronavirus pandemic.

“So as well as supporting this decision we are calling on the UK government to give the Welsh Government the necessary powers and support to ensure the railways in Wales have a safe, secure and sustainable future in public ownership.”

TSSA general secretary Manuel Cortes said: “This is a welcome and positive step from the Welsh Government, which will put our railways back in public hands and again shows the abject failure of privatisation.”

Unite Wales regional secretary Peter Hughes said: “Unite has long argued that rail should be in public hands so today’s news from Welsh Government is one that we warmly welcome.

“A service as fundamental to our society such as the railways should not be run by private companies whose motivation for profit often comes ahead of the needs of passengers.”

Train driver union ASLEF’s general secretary Mick Whelan also welcomed the move, saying: “We hope that it sends a message to the governments at Holyrood and Westminster about the way forward for our industry.”