Without additional funding from government there is a real risk to the survival of Eurostar

[RT4038]

It has supported the development of one of the busiest roll-on-roll-off trade routes in the world, reduced costs and journey times and promoted a fantastically successful economic integration. All until 31 December 2020 obviously. Eurostar by contrast has... reduced the number of full service flights although notably not to zero, but done next to nothing to stop the expansion of low cost airlines.

There are few low-cost airlines operating between London and Paris or Brussels, particularly in view of the large size of the market between these places. I would contend that E* have been very successful in stopping the expansion of low cost airlines on those routes. It is not only the premium market that has been affected

Only in the premium air market though, and only for one part of England.

Eurostar's target market is almost entirely comprised of just three groups:

Business traffic on top price corporate fares

Very wealthy tourists visiting Europe, especially from East Asia and North America

Well-to-do London and Home Counties folk on their romantic weekend break in Paris, skiing in the Alps or taking their kids to Disney

The rest is mainly people who won't, for personal reasons, fly, staff on discount tickets, or enthusiasts

I think that is a very blinkered view of the passengers travelling on E*, in my considerable experience of travelling with them. The markets which they do not target are those which they have no hope in competing in against low cost airlines, generally those involving travel to and from the provinces (of the UK or France) or further afield. No point in trying to conquer the unconquerable.

Because it carries a trivially low number of people compared to the number who could, in theory, travel feasibly by rail between cities through the tunnel. I.e. next to nobody who is travelling from the UK outside the South East of England, next to nobody who is going to Germany, etc. That's simply the way that's been more profitable for them, while Manchester to Koln passengers go by air.

E* are a business, and consequently have to operate profitably. There is no way that a Manchester-Koln journey is going to be made by train at the same fare (or actually much cheaper than, due to the journey time penalty and changing) to compete with a low cost airline. The only way of your 'theory' being 'feasible' is if low cost airlines simply did not exist. Anything else is romantic myopia. No different to thinking that Ocean Liners are ever going to compete with Airlines for the London-New York market, even though it would be possible in theory and be entirely feasible to convey all the passengers on offer.

Being bitter about not being able to go on a through Manchester-Koln train for £40 each way is the stuff dreams are made of. There are some pretty seismic political decisions, on subsidies and immigration, that would have to be made first for this to be a possibility. Probably not a priority just now.

 

[zwk500]

I am not sure if I agree with Starmill on Eurostar being trivial in decarbonasation. During normal operations the amount of passengers is not that little and it would take more than one plane to replace a train. Also airports tend to be a invoncienent locations for most.
I would even argue to quote Tesco: "every little helps".

Martin

Page 10 of the getlink results posted in #375 gave 2019 numbers as more than 11 million passengers. Which is more than 30, 000 passengers a day. If E* was not available, some of these would have driven, some would have flown, and some wouldn't have gone at all, but still represents a good saving.

 

[Starmill]

Being bitter about not being able to go on a through Manchester-Koln train for £40 each way is the stuff dreams are made of.

Why would I be bitter about it? I could fly to Koln for £5 if I wanted to, and others would be made to pay for the losses that sort of activity incurs. I wouldn't lose out and I could choose to do it if I wanted. Although I should say that the availability of direct services of any kind isn't a personal concern of mine really, only price and quality.

The reality is that railway enthusiasts and, dare I say it, middle class people, think that Eurostar is much more important than it really is. Although frankly that affects rail widely.

London to Geneva or Birmingham to Frankfurt or whatever are inside the normal competitive journey times for rail. Comparisons with intercontinental travel like London to New York are utterly irrelevant - and you know it. There's also an unavoidable role for low-cost air in Europe too which rail can never hope take away, such as journeys to Iceland, or between Britain and Ireland, or between cities in England and those in Croatia, Hungary or Romania, to take random examples.

PS transatlantic sea crossings are unlikely to offer any carbon savings whatsoever over flights

 

[BahrainLad]

Business traffic on top price corporate fares

Very wealthy tourists visiting Europe, especially from East Asia and North America

Well-to-do London and Home Counties folk on their romantic weekend break in Paris, skiing in the Alps or taking their kids to Disney

The rest is mainly people who won't, for personal reasons, fly, staff on discount tickets, or enthusiasts

Well, I have used Eurostar for business for 15+ years and have never paid anything resembling "a top price corporate fare." It's been Standard all the way, sometimes Standard Premier, and flashing a Amex Platinum to get into the lounges. Judging by looking round the carriage, I'm not alone. My cousin and his wife were, pre-Covid, heavy commuters...they are English and Belgian/Romanian, met in London, one got a job back in Brussels, and have alternate weekends in each city. Each do 26 round trips a year pretty much and they get the cheapest fares they can. There are many people who do this.

I think a lot of negativity around Eurostar stems from a) it doesn't serve anywhere in the UK other than London+Kent and b) it has a perception of being expensive. A lot of people say the same about British Airways!

 

[Starmill]

If you can afford a credit card that charges a fee of almost £600, then you're very firmly in Eurostar's target market.

 

[BahrainLad]

If you can afford a credit card that charges a fee of almost £600, then you're very firmly in Eurostar's target market.

a) I never said I wasn't b) it never used to be £600 c) there are plenty of ways to get a physical Amex card without paying anything like that fee

 

[Starmill]

a) I never said I wasn't b) it never used to be £600 c) there are plenty of ways to get a physical Amex card without paying anything like that fee

So what was the point being made then? We're discussing the public good Eurostar is providing in exchange for offering it exceptional public funding, over and above what other firms have received. Is a Business Class lounge only open to premium cardholders a reason to use public funds to preserve the current operation?

 

[BahrainLad]

I was making the point that not everyone who uses Eurostar for business is "Business traffic on top price corporate fares" - they might actually be on very cheap fares indeed. And similarly, even if you see people in the Business Premier lounge, they might not be paying a Business Premier fare!

Incidentally, you are also making a misapprehension that "corporate fare" = "top price", the reality is more likely to be the complete opposite. That's what corporate fare deals are for, after all.

 

[Astro_Orbiter]

I think a lot of negativity around Eurostar stems from a) it doesn't serve anywhere in the UK other than London+Kent and b) it has a perception of being expensive

This seems to be the main thrust of a lot of comments I've seen about Eurostar on here and other places.

 

[Starmill]

I was making the point that not everyone who uses Eurostar for business is "Business traffic on top price corporate fares" - they might actually be on very cheap fares indeed.

Very cheap fares indeed such as what? The £199 Standard Premier round trip? £145 Standard round trip? For a good benchmark I would normally pay the equivalent of £35 round trip between London and Manchester. I would expect to see this price point for the 'lead-in' cheapest rates at long advance booking for it to be considered "cheap", and a widely available round trip rate of £55 - 75.

 

[zwk500]

Very cheap fares indeed such as what? The £199 Standard Premier round trip? £145 Standard round trip? For a good benchmark I would normally pay the equivalent of £35 round trip between London and Manchester. I would expect to see this price point for the 'lead-in' cheapest rates at long advance booking for it to be considered "cheap", and a widely available round trip rate of £55 - 75.

FWIW, currently advertised absolute lowest prices for 6-8 weeks prior booking are £45-50.

 

[BahrainLad]

Very cheap fares indeed such as what? The £199 Standard Premier round trip? £145 Standard round trip? For a good benchmark I would normally pay the equivalent of £35 round trip between London and Manchester. I would expect to see this price point for the 'lead-in' cheapest rates at long advance booking for it to be considered "cheap", and a widely available round trip rate of £55 - 75.

I've just had a quick look through my inbox and the cheapest E* receipt I can find for a business trip was one-way Paris-London for £60, on the 1813 service on Tuesday evening (so peak time) booked 3 weeks out. I consider that cheap, particularly when you compare it to what BA/AF would charge (or even EZ by the time you've added a seat res and a bag) and the cost of making your way out to a London and Paris airport. Plus, not having the hassle of using one of the (uniformly horrific) Parisian airports is worth £20 of anyone's money IMHO.

It's certainly a world away from the £400+ Business Premier fares which you seemed to be referring to in your opener.

 

[Starmill]

FWIW, currently advertised absolute lowest prices for 6-8 weeks prior booking are £45-50.

Indeed, for one way fares.

I've just had a quick look through my inbox and the cheapest E* receipt I can find for a business trip was one-way Paris-London for £60, on the 1813 service on Tuesday evening (so peak time) booked 3 weeks out. I consider that cheap, particularly when you compare it to what BA/AF would charge (or even EZ by the time you've added a seat res and a bag) and the cost of making your way out to a London and Paris airport. Plus, not having the hassle of using one of the (uniformly horrific) Parisian airports is worth £20 of anyone's money IMHO.

It's certainly a world away from the £400+ Business Premier fares which you seemed to be referring to in your opener.

An equivalent of a £120 return was value for money for your trip, I would be in no doubt about that. Indeed it's a marvellous achievement that a commercial rail service can offer this, and presumably it provides you personally with a good deal of satisfaction. To be clear there's absolutely nothing wrong whatsoever with that. I don't disagree that werw I paid enough to occasionally afford a £120 travel budget for such a journey I'd find it equally worthwhile as you do.

But any claim that Eurostar deserves special access (over and above that granted to other firms) to public funds because it can offer £120 returns between London and Paris is fanciful.

 

[BahrainLad]

Indeed, for one way fares.


An equivalent of a £120 return was value for money for your trip, I would be in no doubt about that. Indeed it's a marvellous achievement that a commercial rail service can offer this, and presumably it provides you personally with a good deal of satisfaction. To be clear there's absolutely nothing wrong whatsoever with that. I don't disagree that werw I paid enough to occasionally afford a £120 travel budget for such a journey I'd find it equally worthwhile as you do.

But any claim that Eurostar deserves special access (over and above that granted to other firms) to public funds because it can offer £120 returns between London and Paris is fanciful.

Well, I haven't made any such claim. I took issue with your characterisation of Eurostar's customer groups and the resulting argument that it shouldn't be given any kind of support.

In my view,

- Eurostar is by far and away the most attractive option for travelling between London to Paris and Brussels
- The end to end journey times, even if you have to travel to STP from the Home Counties, are generally shorter than the equivalent by air
- The travelling experience is far more comfortable and less stressful (I shudder at the thought of the outbound passport queue at CDG T2, the RER out to CDG and ORY, the lack of any decent place to get a drink airside at ORY, the bus to the aircraft at CDG, today BA has decided to sub in a 35 year old BAe 146 for the flight today etc. etc.)
- It is competitively priced compared to the alternatives when you look at the overall travel cost of airport transfers and loco airline 'extras'
- Comparisons with London-Manchester are pretty meaningless: London-Paris is one of the largest travel markets in the world, the two cities are both global megacities, there are fewer trains, the operating costs are substantially higher
- It offers a broad range of fares and attracts a broad customer base as a result
- It has contributed to a large reduction in air services on the routes in which it competes which has delivered an environmental benefit

With the above in mind I really don't understand the opprobrium it generates. I think it should be supported. Yes, it disproportionately benefits Londoners but if we're going down that route, Londoners disproportionately support the rest of the country through their taxes and economic activity.

 

[Starmill]

I took issue with your characterisation of Eurostar's customer groups and the resulting argument that it shouldn't be given any kind of support.

They are entitled to the economy wide-support and support from their investors, serving the customer groups that I identified as well as they do. I don't see how that is in question. However it's not possible to describe their current operation and customer base as providing a large amount of public good, deserving of additional public funding, which is what I was saying when I described their customer segments.

 

[zwk500]

But any claim that Eurostar deserves special access (over and above that granted to other firms) to public funds because it can offer £120 returns between London and Paris is fanciful.

I don't think the claim is that it deserves special access because it can offer mid-range fares.

Eurostar last year in 2019 carried over 11 million passengers and made a profit of £92m. It provides a key link between Britain and the continent, providing an alternative to flights and ferries giving resiliance and competition on cross-channel travel. Revenue from E* also forms a key part of Eurotunnel's income, so if E* collapses the tunnel would need a financial hole plugging.
Given the fairly unique circumstances of the pandemic and the support the rest of the economy has taken, I personally don't think it's unreasonable for the government to assist E* with either an equity stake or loan with interest. The government should not be giving the money away, nor should it be a blank cheque, but there is every reason to be confident that E* will return to profitability (not immediately, and not necessarily to the same level), and that the government will get the money paid back.

 

[Starmill]

With the above in mind I really don't understand the opprobrium it generates.

Because by definition those are your own views and not widely shared. Indeed it's overwhelmingly likely that if you use Eurostar you think it's worth saving. But very, very few people do compared with other railway services in France, Belgium or the UK. Many people have confused personal utility for the public good.

I personally don't think it's unreasonable for the government to assist E* with either an equity stake or loan with interest.

Both could be well worked out, but there's a key reason they've not yet happened. An equity stake is an enormously risky use of public funds. What if the equity turns out to be worthless because Eurostar can never return to profitable operations after the market damage it has suffered? This is entirely possible. There is no guarantee a commercial high speed service can ever be run again given the costs that have had so much attention paid to them. A loan is more straightforward but if a loan could be taken on from the government why not from the market? Is Eurostar unable to borrow at competitive rates already? If so what spread should the government offer, and how big is the risk of default on the bonds if the company fails? I don't doubt that an answer to all of this could be found but equally it's bizarre that anyone thinks that the government should answer these questions because Eurostar is 'special' before they've even exhausted all market borrowing options.

 

[BahrainLad]

I would also support any bail-out coming with conditions attached. The government should be encouraging shift from air to rail for journeys up to 5h in length. Perhaps the regulatory environment needs to be looked at to force cooperation between E* and DB, for example. The airlines worked out decades ago that they were stronger together, so similarly the train companies should offer through ticketing, guaranteed transfers at places like BXL, the ability to earn/redeem points on each others services and so on. I should be able to buy a London to Frankfurt ticket on Eurostar.com, earn points, have the E* and ICE park on the same island platform for my transfer in Brussels and for someone to put me on the next train with no fuss if there's a problem.

 

[Starmill]

Another key point to consider here is that contributors on this forum are far, far more inclined to be pro-rail travel than on average, and far, far more inclined to be anti-air travel. And yet in spite of this Eurostar generates much criticism in these pages. This is hardly because criticism of Eurostar is simply fashionable either, indeed the construction of HS1 and the Channel Tunnel are considered among the greatest national achievements of recent decades without much dissent.

 

[BahrainLad]

"Because by definition those are your own views and not widely shared. Indeed it's overwhelmingly likely that if you use Eurostar you think it's worth saving. But very, very few people do compared with other railway services in France, Belgium or the UK. Many people have confused personal utility for the public good."

Why do you think my views are not widely shared? There are plenty of surveys that show that Eurostar is one of the most popular British brands.

 

[Starmill]

"Because by definition those are your own views and not widely shared. Indeed it's overwhelmingly likely that if you use Eurostar you think it's worth saving. But very, very few people do compared with other railway services in France, Belgium or the UK. Many people have confused personal utility for the public good."

Why do you think my views are not widely shared? There are plenty of surveys that show that Eurostar is one of the most popular British brands.

You asked why support for Eurostar has not been more forthcoming. Why haven't people been lobbying the government for special treatment of it if it's a popular brand? Why has it been almost entirely ignored by opposition politicians?

 

[zwk500]

Both could be well worked out, but there's a key reason they've not yet happened. An equity stake is an enormously risky use of public funds. What if the equity turns out to be worthless because Eurostar can never return to profitable operations after the market damage it has suffered? This is entirely possible.

It's possible, but you've spent a large amount of time arguing that it's only well-off people who use E* or people on business, and the former category are going to be desperate to go on jaunts to their favourite parts of France after 18 months of being stuck at home. I suspect business travel won't rebound as strongly, but what has been brought home (pardon the pun) during the pandemic is the value of a face-to-face relationship, so it won't disappear totally.
If the government introduces some of the Air Passenger taxes that have been mooted that would help E* compete.

There is no guarantee a commercial high speed service can ever be run again given the costs that have had so much attention paid to them.

I've not followed this discussion too closely, so what costs are those?

A loan is more straightforward but if a loan could be taken on from the government why not from the market? Is Eurostar unable to borrow at competitive rates already? If so what spread should the government offer, and how big is the risk of default on the bonds if the company fails? I don't doubt that an answer to all of this could be found but equally it's bizarre that anyone thinks that the government should answer these questions because Eurostar is 'special' before they've even exhausted all market borrowing options.

I didn't say E* shouldn't look to other options first, or as well, but it's entirely possible that the lending market is going to be quite stretched for the next few years as many loans have been defaulted on with bankruptcies, or had payment rescheduled because of pandemic-related cash flow issues. A hybrid solution may well be the best way forward.

 

[BahrainLad]

You asked why support for Eurostar has not been more forthcoming. Why haven't people been lobbying the government for special treatment of it if it's a popular brand? Why has it been almost entirely ignored by opposition politicians?

Where did I ask this?

But, since you mentioned it, there has been lobbying taking place: https://www.bloombergquint.com/busi...l-concern-grows-as-u-k-firms-lobby-for-rescue

London First goes as far as to describe it as "an especially vital international link."

 

[SHD]

I think a lot of negativity around Eurostar stems from a) it doesn't serve anywhere in the UK other than London+Kent and b) it has a perception of being expensive. A lot of people say the same about British Airways!

and c) it is majority-owned and controlled (in a financial sense rather than strictly operational) by SNCF Voyageurs, ie ultimately by Société nationale SNCF, a company whose sole shareholder is the French state.

 

[Starmill]

Where did I ask this?

But, since you mentioned it, there has been lobbying taking place: https://www.bloombergquint.com/busi...l-concern-grows-as-u-k-firms-lobby-for-rescue

London First goes as far as to describe it as "an especially vital international link."

Plenty lobbying from investors who own various assets which will plummet in value if Eurostar ceases trading Not so much from the casual traveller!

 

[BahrainLad]

Those noted investor groups the TSSA (http://www.travelweekly.co.uk/news/...o-pull-out-stops-to-safeguard-eurostar-future) and RMT (https://www.cityam.com/eurostar-collapse-would-be-disastrous-warns-rmt/)...

 

[Starmill]

Those noted investor groups the TSSA (http://www.travelweekly.co.uk/news/...o-pull-out-stops-to-safeguard-eurostar-future) and RMT (https://www.cityam.com/eurostar-collapse-would-be-disastrous-warns-rmt/)...

Who has less interest in the public good out of a hedge fund and the RMT? Hm, good question, one to ponder.

 

[BahrainLad]

Who has less interest in the public good out of a hedge fund and the RMT? Hm, good question, one to ponder.

Well, you can argue that all you like. But it is incorrect to say there has been no lobbying in support of bailing out Eurostar. Plenty of its customers (of all backgrounds) would be happy for it to be supported through this unprecedented situation. I can perfectly understand how on the face of it, someone from Manchester would question why their taxes were being used in such a way but when you consider to what extent London subsidises the rest of the country perhaps a moment of reflection is called for?

 

[Starmill]

But it is incorrect to say there has been no lobbying in support of bailing out Eurostar.

There has been massive self-interested lobbying both in the general media and among the forum's membership. It's obvious that trade unions, investors and wealthy customers will lobby for the preservation of the status quo isn't it? Indeed, that's exactly the point I've expended such energy shining a light on. What there hasn't been much of is objective analysis of why Eurostar wasn't doing better before the pandemic, and this is of crucial importance because it informs how or even if the service can recover. SNCF has sensed the threat of competition in its other big markets, so they know they've no choice but to offer better fares in the form of Izy, Ouigo, Intercites100% eco and so on. They've further reacted by gaining operating rights in Spain in order to strike first at RENFE before they can hit SNCF on home turf. In Eurostar however they instead seek to continue to hold a monopoly by regulatory means, offering no challenging cost savings, not even making a vague attempt to enter into the budget market, and self-interestedly keeping prices high. And apparently public funds need using on preservation of that.

 

[BahrainLad]

On what basis do you think “Eurostar wasn’t doing better before the pandemic?”

They consistently make money, the load factors are good, they compete well using price and quality of service against the other operators on the route, they have a popular brand and a loyal customer base. That’s before you get into - what you might call the public goods - of their UK employees, their contribution to the Exchequer, their help to the environment, the social benefits and so on.

Frankly a better target of criticism would be Eurotunnel’s access charging model, and UK Gov’s refusal to countenance on-train passport checks. Changing both would do far more to help cross Channel train travel grow than simply allowing another operator.