Both franchises must be in financial trouble.
First have said they will take a £106m hit over 2 years (2019/20) for TPE, which means they are going to tough it out and deliver the agreed financials to DfT.
Bidding for ICWC meant they could hardly pull out, and now they have won that franchise it gives them some breathing space.
Northern have probably said they are not prepared to carry on with the current contract.
Arriva is negotiating a direct award for XC and is probably in no position to underwrite Northern to the end of the franchise.
Hence the planning for a direct award, with OLR brought in to benchmark the options.
While threatening noises have been made by DfT, the vibes don't feel like a "stripping" for poor delivery performance such as Andy Burnham has been seeking.
It feels more like VTEC where both sides recognise that the franchise financial targets cannot be met.
Arriva is also up for sale by DB and could change hands at any time.
Arriva is also challenging its disqualification from franchise bids, alongside Stagecoach and Virgin.
These are factors which DfT has to weigh up before pulling the plug.
No doubt the media will scream "bail out" and "reward for failure" if Arriva get a direct award, but it's not as simple as that.
Just my 2p.