Fees for high-speed tunnel link derail Eurostar's gravy train

RICHARD BROWN, the boss of Eurostar, has something in common with Willie Walsh, chief executive of British Airways.

Both have had to move big transport operations to new terminals overnight. Brown’s move, shifting Eurostar across London from Waterloo to St Pancras in November, went well, with the service running at 97% punctuality on the first day. Walsh’s move, taking half of British Airways’ Heathrow services to the new Terminal 5 last month – well, let’s just say it didn’t go quite as smoothly.

Unlike Walsh, Brown did not have to deal with a new baggage system, Terminal 5’s Achilles heel. There was, however, the matter of shifting 27 trains as well as a new station, railway and maintenance depot to manage, and informing thousands of passengers of the change.

“We had done exhaustive trials, so we thought the railway would work fine, but we were worried that hundreds of people would turn up at Waterloo,” said Brown.

This week Eurostar, which operates trains from London to Paris and Brussels, will confirm the benefits of the new station, and the new high-speed railway that links London to the Channel tunnel. Journey times have fallen by 20 minutes – London to Paris is now 2 hours and 15 minutes – and passengers have flooded in.

Eurostar is expected to say traffic was up 20% in the first quarter compared with the same period last year, a much bigger increase than expected.

With 8m passengers a year – it might be 9m this year – Eurostar is the largest inter-capital rail service in the world. It has borne out France’s experience with the TGV, and shown that high-speed rail can overpower the plane. It now claims more than 70% of the London-Paris travel market, airlines having gradually cut back their flights since it started running in 1994.

Despite its popularity, the British arm remains resolutely loss-making. It hasn’t yet published figures for last year, but Brown said losses were running at about £100m annually.

It won’t turn a profit, he said, until it was rid of the crippling charges it has to pay to use the new high-speed line. These total £200m a year – most of which goes to service the loans raised to pay for construction of the link – yet Eurostar has total revenues of only £550m. It pays another £25 per passenger to use the Channel tunnel.

“It [Eurostar] just cannot support such high fixed costs. There has to be a way of bringing down the cost of access to the railway.”

A reduction in the charges would transform its finances. If it was paying what the French side of the operation forks out for access to French tracks, “we would be the most profitable train company in the UK, by some margin”, said Brown.

A chance for such a transformation is not far off. The government is considering the break-up of London & Continental Railways, the consortium that built the link and which holds the UK share in Eurostar. This could provide the opportunity to reduce the burden on Eurostar, said Brown. “We must get Eurostar on to a sustainable footing.”

At the same time, the break-up could present another opportunity to remake Eurostar itself. At the moment it is a loose alliance of the three national railways of Britain, France and Belgium. Brown is the chief executive and runs the entire business, but has no contractual authority beyond Britain.

Project Jupiter, a plan to formalise the arrangement by creating an actual joint venture, was abandoned four years ago. Brown would like to see the plan revisited, and the LCR break-up provides the likely starting point.

In the intervening years, more work has been done on how a deal might be structured. SNCF, the French national rail group, would almost certainly be the majority partner as it controls the largest section of the route and contributes half the train fleet.

Meanwhile, Brown is promoting Eurostar’s green credentials. He claims the London-Paris service generates one-tenth the green-house-gas emissions of a comparable plane trip, and has struck up an alliance with Friends of the Earth – a good selling point.

He said: “There is pressure on companies to show they are being responsible with their travel budgets, and if they use us that’s a big tick in the box.”

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