Rail operator Northern was "surprised" by the government's announcement that the franchise may be renationalised, according to a senior figure at the company.
Pete Myers, Northern's stakeholder manager, said the firm had been taken aback by Transport Secretary Grant Shapps' move to potentially strip Arriva of the running of the service.
But he admitted to a meeting with passengers that the franchise in its current form was "no longer tenable" because of the changing political climate in the north.
Mr Shapps said on Wednesday that the Northern franchise "simply has to change" after years of delays and frustration for passengers.
Northern is due to be run by German-based Arriva until 2025, but the government may decide to strip the firm of the service and take control of it themselves, or award the contract to another operator.
Another option, which has been mooted, is for Arriva to continue running Northern, but with the government taking a more hands-on approach.
Reacting to the news at a public meeting, attended by passenger representatives in Wakefield on Thursday afternoon, Mr Myers said: "The reason for (the move) is that the political geography of the north has changed so much in the first few years of the franchise.
"The franchise as it was bid for is no longer tenable"
"We've been negotiating with the Department of Transport for a long time to look at other ways of operating the franchise.
"It was a surprise to me as much as anyone else in the business, but we will work with them."
The Department of Transport said on Wednesday it was developing contingency plans for the Northern network, and that it has the right to terminate the current contract if the operator is found to have defaulted on its terms.
Local Democracy Reporting Service