Rail 655: Eurostar needs to really set itself free

Eurostar has always been a creature of government. All the major decisions determining its service have been made by government or state-owned railways but now the company is determined to establish itself in its own right. To do that would, ultimately, require Eurostar to be entirely freestanding and, obviously, to make a profit so that it would not be dependent on government handouts.

 The first step towards this was Eurostar’s establishment, on September 1st, as a separate entity replacing an impossibly complicated structure that made management decisions dependent on the whims of the three owning parties – London & Continental Railways, SNCF and SNCB. The new company has immediately shown it means business with the announcement that it is buying ten new trains from Siemens to use on routes that have yet to be determined. Clearly negotiations have being taking place for some months, but the new company’s aggressive intent is demonstrated by the timing of the launch which was a big PR jamboree complete with train prototype being displayed next to the Albert Memorial in Kensington Gardens. This took place just ten days before Deutsche Bahn’s ICE train was due to come through the Channel Tunnel as a demonstration of its intent to run trains to the UK from destinations as yet unspecified.

 So the gloves are off. Eurostar’s announcement about the new rolling stock was not, strangely, accompanied by any detail of precisely what these trains, due to arrive in 2014, will be used for. Frankfurt, Cologne and Amsterdam were all mentioned but according to Nicolas Petrovic, the chief executive of Eurostar, no decision has yet been made. I find it rather incredible, in the true meaning of the word, that Eurostar should commit itself to £700m of investment in new trains without knowing what they are for. If this were the case, then one has to wonder about the judgement of the company’s new top management.

 With DB announcing its intention to take a test train through the tunnel, Eurostar was rushed into its PR stunt. Certainly, the fact that the mocked up train had neither wheels nor seats suggest it was not quite ready for a public display. There is no doubt that Eurostar deliberately upstaged DB but I suspect that its failure to firm up any new destinations is to keep its German rival guessing over its plans.

 Of course, all this is great for rail passengers and the industry more widely since HS1 is an underused asset. There are, though, two fascinating aspects of the deal. First, the choice of Siemens over Alstom has caused ructions right up to the top level of the respective governments although it is unlikely to lead to the fourth invasion of France by Germany in 140 years. The procurement, oddly, was carried out through the Link Up process, which is a agreed list of suppliers, rather than the conventional route of putting out a tender in the European Union’s Official Journal. This avoided any pre-publicity although, of course, Alstom would have been one of the companies approached by Eurostar.

 M Petrovic was unwilling to give any clear explanation as to why Alstom, which of course is  French and was, for a time in the 2000s, partly owned by the state after getting into financial difficulty. It is, truly, an unexpected decision since Eurostar is 55 per cent owned by SNCF, which is of course heavily subsidised by the French government, which appears to have been greatly angered by the choice of German trains, and one which railway watchers from the sidelines

 Alstom is, too, apoplectic, complaining that the trains – which have distributed power rather than a locomotive at each end – are unsuitable for the tunnel. Certainly, the rules for going through the tunnel will have to be changed since the Siemens trains cannot be split and under current rules, the escape plan in the event of an emergency involves dividing the Eurostar train into two after shepherding the passengers into one half, but this has never been used and is a ludicrous and impractical requirements. Alstom’s bleatings were quickly put in their place by Richard Clifton, the head of the UK side of the Channel Tunnel Safety Authority

 Mr Clifton – who, I have to declare an interest here, was union president when at Warwick University when I was briefly a fellow member of the union executive – is becoming something of a serial debunker of the use of safety as an excuse for inaction or opposition, and jolly welcoming it is too. Last month, he quickly refuted DB’s suggestion that ‘elf and safety was preventing their trains from going through the Tunnel in time for the Olympics by saying that their request could be processed within a couple of months but that he had not received an application.

 The other interesting aspect of the Siemens deal  – actually bizarre would be a better adjective – is the choice of 900 seater trains which from a commercial point of view seems to make no sense. Eurostar is saddling itself with trains that are the equivalent to more than two Boeing 747s with no 737 size alternative available, and since the trains cannot be split, load factors for many services – midday service to Frankfurt anyone? – are bound to be low. TGV trains range from 368 seats to just over a thousand (when two Duplex sets are coupled together). Of course, again, the Channel Tunnel rules come into play, as trains are supposed to be at least 400m long to ensure one exit is always next to one of the entrances to the middle escape tunnel which are 375m apart, but that is another ludicrous requirement which Mr Clifton’s Authority well may dispense with.

 Incidentally I challenged Philip Hammond, the Transport Secretary on the HS2 connection at the launch since, under initial plans, the two lines would not be connected. While avoiding being totally categorical, since the issue is being examined by the Department, he believed such a link was essential. However, this could cost up to £3.6bn in one scenario – a huge tunnel from Rainham Marshes to Old Oak Common and there is another obstacle in making the trains pay for themselves, the ban on domestic journeys on international trains for security reasons, another nonsensical rule. (Mr Hammond may be learning that reducing the cost of HS2 – and indeed of HS2 operation – requires challenging these crazy rules imposed so carelessly on the railways)

  For LCR, the decision to go German has been greatly welcomed as the company is keen to see different types of train operating on the line. LCR is, of course, in an odd position. The previous government announced it wanted to privatise LCR in three sections – the property portfolio at Kings Cross and St Pancras, its 40 per cent stake in Eurostar and HS1 –  and the Siemens decision would have required the approval of all three shareholders (SNCB holds 5 percent). Therefore one can assume that LCR would have batted strongly for Siemens but the reasons for SNCF’s agreement will remain a mystery.

 The new trains decision is, in fact, well overdue. For too long Eurostar has been resting on its laurels as a state-subsidised company with a monopoly on high speed services through the Tunnel and with little ambition to do anything else but go to Paris and Brussels, and occasionally a few seasonal destinations such as Disneyland and Bourg St Maurice. Partly this was because of the various constraints imposed on the company but it has never lobbied to change them, precisely because it was a creature of government. It has, for example, done nothing to challenge the ridiculous safety rules in the tunnel, its poor allocation of space in St Pancras – where there is a massive waste in a totally empty ticket hall and the area above, about which I have written numerous times (see Rail passim) or properly considered alternative destinations despite having many spare train sets. Recently, it has begun to look more commercial with, for example, the operation of extra trains during the volcanic ash grounding of flights which were not only declassed but had all seats at a set price

 Moreover, its finances were a mystery. It published revenue figures, but not properly accounted costs, and therefore the extent to which it was receiving subsidy was unclear.   Don’t get me wrong. I have no problem with long distance rail services being subsidised, although, of course, it is a regressive benefit since most travellers are relatively well off. But I am convinced that the wider societal benefits make it worthwhile – though, as I have argued previously, not in the case of High Speed Two.

 However, the accounts must be transparent and open to scrutiny. When, at the launch, I asked Richard Brown, the former chief executive of Eurostar who is now the chairman, whether full accounts showing what precisely Eurostar would be paying for all the various services supplied by its shareholders – such as the use of the stations, maintenance facilities, etc – he said ‘of course not, no other company would do that’. In other words, the precise arrangements between SNCF and Eurostar will not be open and therefore it will be impossible to assess whether Eurostar can be really considered a conventional stand alone company and whether it is genuinely profitable. For a start, no normal company would be able to announce it is spending £700m on new equipment on the basis of one month’s balance sheet!

  Of course there are good reasons for Mr Brown’s reticence. Rail companies are not supposed to get state aid, and any subsidy would immediately attract the attention of rivals, both rail and aviation. Nevertheless, real detailed accounts would allow the industry and the public to see the real economics of high speed line operation. Even then, of course, you would have to take into account various capital items, such as the fact that Eurostar got given its first lot of British-owned Eurostar trains, worth £1bn, in the deal to finance the construction of what is now High Speed One. Such openness would certainly help inform the HS2 debate and until Eurostar’s finances are transparent, its claim to be a normal company will remain dubious.

  • Peter Hooper

    I’m really not sure why CW keeps referring to just one senario – a £3.6bn tunnel from Rainham Marshes to Old Oak Common and the ban on domestic journeys by international trains.
    Perhaps CW will explain why the HS1 tunnel, at or near to St Pancras, cannot be extended to to an Arup style GWR/M25/Heathrow hub with International facilities shared by HS1 and BAA.
    For the same reason why could Birmingham International not be shared by International trains and Birmingham airport. Ditto Manchester, Leeds, Glasgow, Edinburgh airports ???

  • Peter Davidson

    Of course, all this is great for rail passengers and the industry more widely since HS1 is an underused asset

    Care to qualify that statement with a reality check Mr. Wolmar?

    Surely your text should read “Of course, all this is great for rail passengers within easy commuting distance of HS1 stations, ie. St. Pancras, Ebbsfleet, Stratford International (potentially) and even Ashford International”

  • Dan

    One way in which Eurostar has started to act more ‘commercially’ as far as customers are concerend – is the recent downgrading of ‘Leisure Select’. Surely the antics of a company finding ways to emulate the model of transport operators who fail to understand there is a segment of the market that is prepared to pay a reasonable amount for quality.

    What are the seats likely to be like on these new trains? Crammed in? No wonder the mock up did not show them. London to Franfurt by train – could be very nice and I’d buy a ticket – but not if the seats are as rammed as the current Eurostar Standard Class….

  • RapidAssistant

    Acting in an “entrpreneurial fashion” sadly in the case of privatised transport operations takes us ever closer to the Ryanair model – Eurostar blatantly demonstrated this during the volcanic ash debacle when it remained aloof to those stranded on the continent and blatantly said that hideously overpriced full fare tickets were the only game in town when it should have been the railways’ opportunity to show its metal against aviation.

    Only when someone at Eurostar twigged it was facing another public relations disaster staring them in the face did they relent and offer emergency “get you home fares”…….so you have to be careful, all this talk about competition bringing fares down and the like is all very well, but it’s a double edged sword.

  • Peter

    The ban on domestic use of international trains is indeed quite absurd. If terrorists are intent on attacking trains they have thousands of domestic services to chose from.

    The rail industry ought to be fighting bogus security restrictions like this tooth and nail, but as always it never really seems to have the stomach for the fight.

    Or to put in another way: would the road lobby EVER tolerate this sort of thing for a moment?

  • David

    Although it has often been claimed that there is a ban on carrying domestic passengers on international trains, I’m not sure it is correct; moreover, I have seen in another magazine confirmation that no such ban exists (I think it was ‘Today’s Railways Europe’, but I’m not 100% sure).

    I believe the “ban” was established within BR to protect InterCity revenues; where North of London Eurostars and InterCity both operated, such as on the ECML and WCML, if domestic passengers were carried on international trains ORCATS would apply, and consequently there would be an abstraction of revenue from InterCity.

    Christian, have you any contacts who were about at that time in senior positions in InterCity or EPS who can advise?

  • Christian Wolmar

    It was definitely both for immigration and security reasons. It was totally spurious but Eurostar or other operators would face an uphill task trying to reverse it.

  • Richard Crompton

    All very interesting, but for longer distance european journeys to a destination that do not include London, forget it. I’ve just booked Zürich to Luton with good old Easyjet for £60 return. My overall journey from Baden to Rugby using public transport throughout takes about 7 hours including the excellent VT99 from Luton airport to Milton Keynes. Total cost – about £100 return. In the summer it’s £200 return.
    Why should I spend £400 for a 10 hour train journey? Until Eurostar can compete with flying on journey time & fares and get rid of the inane 30 minute check-in their market will continue to be limited to London to Paris and Brussels.

    What I long for is a direct train from St.Pancras to Zürich at a competitive fair but I don’t think I’ll ever see that.

  • Dan

    Richard – is that 60 quid inc all taxes and costs? Can you take the luggage you need in that cost? What will happen when Easyjet make a last minute cancellation? Is the airport in central Zurich?

    “It’s easy to travel from London to Basel or Zurich by train, taking Eurostar to Paris, a 10 minute walk from the Gare du Nord to the Gare de l’Est, then a direct Paris-Switzerland high-speed TGV on the brand-new TGV-Est line, opened in June 2007. It’s affordable, too, London to Basel starts at £119 return, city centre to city centre” FROM
    http://www.seat61.com/Switzerland.htm#Zurich

    I’m not saying you can get this £119 fare either but I guess you need to compare like with like to be fair.

    The problem is the railways don’t see a market in this longer distance rail travel as the conventional wisdom is that people don’t want to travel for that duration – so they can’t be bothered to put together a fare system that permits it. However, presumably DB think there is a market from St Pancras to Frankfurt etc or they would not be doing these trials?

  • RapidAssistant

    I think though that Richard’s example illustrates the wider argument that somewhere along the line there is a “crossover point” where rail, regardless of how fast they can make it doesn’t compete with air at all – even with all the associated security and airport hassles – e.g Glasgow/Edinburgh-London (at approx 4.5 hrs) is sitting right on the crossover point, roughly the same as the total journey time as air (1hr min flight + 1.5 hr airport waiting + 2hrs getting to and from airports at either end). Virgin and East Coast rightly promote these routes very heavily, as there is a valid contest between them and the airlines.

    Few though use an East Coast service (and that is direct remember, no changes) to go from London KX to Aberdeen/Inverness – illustrated by the paucity of rail services compared to the number of flights that are available.

    As in Richard’s case it’s the same – 10 hours sitting incarcerated next to a stranger on a train – any way you slice it – it’s miserable – fine if you can mitigate this by getting a cheap 1st Class seat – which is of course a complete lottery thanks to yield management. For this reason I doubt very much if we’ll see any serious pursual of direct international rail services beyond a certain distance into the continent.

  • Peter Hooper

    There is some interesting info on ticket costs and journey times on the Greenguage 21 web-site:-

    http://www.greengauge21.net/publications/high-speed-rail-fair-and-affordable/

    http://www.greengauge21.net/hsr/hsr-and-journey-times/

    For International journeys some operators may want to omit St Pancras, and instead stop at Stratford (for Jubilee & Crossrail) and then (at or near) Heathrow, before proceeding to Birmingham International, etc ; such a timetable may well suit an operator like DB.

    And let’s not forget that it is competition on the HS1 and HS2 lines that will keep down costs (along with budget flights).

    Finally, I do wish CW would tell us the answer to Post 1 ???

  • Dan

    Good points Rapid – but of course this is where Rail has other advantages – ie the ability to stop en route and people join leave at intermediate stations – these can be closer to where they actually live / want to go.

    Long distance services in large EU countries serve this role (eg DB Hamburg – Basel), as of course do the long distance international trains (there will not be many poeple going Paris Moscow on the through train that still exists (or Moscow Nice on the new weekly through trian just launched – but some adventurers might – but there will be many who use it for joining and leaving at many intermediate points).

    This of course brings us to the examples of long distance US services in Christian’s other thread, and what / who they are for.

    For the early parts of its life the ‘TGV model’ reduced cross border tains (fortunatly with Thalys and yes Eurostar etc this is changing), and the compulsory seat reservation system also weakened the rail model – but only at peak times does one get incacerated next to strangers – when I think of all the times I’ve been in part empty carriages. It’s a shame that these approaches have, for me, reduced Rail’s USP – ie turn up a few mins before departure, buy a reasonably priced ticket / or use a rial pass, and just get on and go.

    I guess the airline model works on relatively small number of people going from fixed point to fixed point quickly, with external costs (parking, getting to airport etc) transferred to customer. Lots of people seem to like this.

    The model is well established (like the supermarket vs local shop model – where the costs of distribution etc is moved on to shopper who is expected to drive to a large shop on a retail park to find goods, at their own expense, when goods were once brought to your local shop at the retailers expense – passed on at higher prices of course). But if you have to buy a car to do your weekly shopping, how much has your shopping really cost….

  • To answer point 1 – I don’t think a Heathrow connection is viable and the Mawhinney report backed this up. As for taking domestic passengers, of course it should be possible, but tell that to the security taliban.

  • Richard Crompton

    @Dan:
    OK, The Easjet return fare £59.60 was a special offer for the back end of February, it includes all Brown taxes, but no checked luggage (I prefer to travel light). For your interest, the cheapest ever I’ve paid to Luton from Switzerland was about 4 years ago; Basel to Luton & return for £29.50, inclusive. Taking off the taxes, Easyjet got about £8.00.
    These days, Easyjet flies from Zürich (that’s the same airport as used by BA, Singapore etc.).
    So I my timetable is:
    Baden d. 08:30 £10 return (SBB)
    Zürich Airport a. 08:55
    Zürich Airport d. 09.55 £60 return (Easyjet)
    Luton Airport a. 10:45
    Luton Airport d. 11:05 £10 return (Stagecoach)
    Milton Keynes a. 12.05
    Milton Keynes d. 12:25 £16 return (London Midland)
    Rugby a. 13:03

    I’ve just checked on SBB/TGVEurope/Virgin Trains for January – Total cost £154.
    Outbound journey 9 hours dead, return journey 9 hours, 40 minutes.

    I’ve been travelling the Baden – Rugby route for over eight years, six times per year, and reliability is good – neither Easyjet nor Stagecoach (nor the M1) has ever let me down; only the weather has delayed my journey twice by about three hours.

    I do not travel for the hell of it, neither is it for business. Booking two months ahead is necessary to get a cheap fare (plane or train) but I won’t take the risk that my weekend would be ruined by either of the two massive flies in the ointment:- TGV has to cross France where they strike without notice, and missing a connection could land me with a large bill to board a later train.

    So for people like me – a regular traveller, a ‘good’ customer, the trains have some improvements to make before they are competitive.

  • Richard Crompton

    Sorry, my arithmetic ain’t so good no more. That should have been 10 hours dead by rail

  • RapidAssistant

    Equally Richard – you’ve got to admit that French air traffic control, or baggage handlers can (and do) go on strike just as easily with exactly the same results – delays and/or cancellations that ripple through the system – it’s the French after all – oops – did I just say that?

  • Peter Hooper

    Thanks CW, I did not mean to be rude – I just wanted to pin down your position prior to the announcement expected before Christmas.
    I also read Mawhinney and was not impressed by his vision; when he was Transport Secretary he proposed introducing mixed mode at Heathrow to increase ATMs. Furthermore his support for OOK mirrors Adonis and the building of R3 at Heathrow.

    Whilst the coalition view is no R3, no mixed mode, no abolition of runway alternation and HSR to eliminate short haul near European and domestic flights.

    From my perspective it would be quicker to extend HS1 to or near Heathrow, than to build HS2 to Lanchester or Leeds – particularly as there are no flights to Brum.
    Yes I know that the GWR/M25/Heathrow hub is a more expensive option than OOK.

    But is this not a poker game where BAA are told that if they want to be on HSR to convert short haul to long haul – then they must cough up the ££££s ???

  • Dan

    Richard – it’s interesting that on your times (also made speedy without significant luggage) the train – which people would see as much slower, is only twice the time over that distance.

    For people who would do that less frequently than you some would certainly be prepared to take the train for the views, ability to walk about / avoid airports etc. But probably not if just a 2/3 day weekend. I would – as I go to just north of Basel in Germany every 2 or 3 years and always by train.

    In your case would you swap the plane for the train if the price was similar, or would the time saved still clinch it for you? (In which case the airline could charge more maybe?)

  • David

    Back to Eurostar’s contract with Siemens. There is a lot of legal detail about the Alstom claim here:

    http://www.pinsentmasons.com/pdf/Eurostarcontractallowed1110.pdf

    However, it looks as if there is still a long way to go, according to the ‘Economist’; see:

    http://www.economist.com/blogs/newsbook/2010/11/trainmakers

    Note also that the British and French governments have got involved, and the claim about the potential conflict of interests for Interfleet, who were apparently advising both Siemens and Eurostar at the same time, although it doesn’t say if it was on the same matter.

  • Anoop

    A high speed line doesn’t have to be high speed all the way into the city centre, because trains stopping in the city would be slowing down anyway. And while it is essential that HS2 is linked to HS1, the link does not have to be an enormously expensive high speed tunnel – they should use existing infrastructure such as the North London Line (e.g. by widening the Camden Road viaduct).

    Not all branches of HS2 need to be built to the Continental loading gauge, only those likely to be used by international trains, because trains continuing onto the standard network will have to fit the British loading gauge anyway. And as England is so densely populated, journeys are relatively short, so a maximum speed of 260 km/h is reasonable. (In Scotland the hilly terrain means that speeds higher than this may not be feasible.) This will not require highly specialised trains, only a slightly faster version of the existing Pendolino or Javelin (which can comfortably reach 225 km/h).

    As for serving Heathrow, this should be on a loop off the main HS2 because not all trains would need to stop there. If the Heathrow Express tracks can be extended north-west they can link to the Great Western main line and HS2. High speed trains from the north would be able to use this link to go to Heathrow and then continue to London along the existing Great Western Mainline (taking over the route of the Heathrow Express). This minimises the requirement for new infrastructure.

  • Peter Hooper

    @ Anoop. By the time you spur off the southern section of the Adonis HS2 line to provide access to Heathrow, you could loop the entire HS2 line via an Arup style GWR/M25/Heathrow hub on the GWR between Iver & West Drayton; an APM could then connect to T5 in just 3.5 minutes.

    One Arup diagram shows that such a proposal would only be 4 km (2.5 miles) longer than the Adonis proposal without a Heathrow loop. For a non-stopping train going through such a hub at 225kph – the additional time is just ONE minute.

    Similar arrangements could be made for other HS2 / UK airports such as Birmingham International, Manchester, Leeds, Glasgow & Edinburgh etc,

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