Jacques Damas, CEO of Eurostar: "Brussels will become the focal point of Eurostar"
For the head of Eurostar, Jacques Damas, Eurostar should stop losing money from December, even if, he says, "nothing will be as before".
Called on at the head of the group to carry out a profound restructuring, the historic leader of the railway company takes stock of the gradual recovery of activity, the financial situation, the merger with Thalys and the move to Brussels.
After fifteen months of very reduced activity, Eurostar has significantly increased the number of trainsets since this summer. Where is attendance?
Over the months, we rediscover the orders of magnitude of the period preceding the pandemic. Between March 2020 and June 2021, the average activity dropped to 5% of normal activity. Turnover and attendance were divided by twenty during this fifteen month period. That's a lot for a company like ours, which is not subsidized. The end of the compulsory quarantine for those vaccinated, from July-August, allowed a very clear and very regular increase in attendance, which reached, at the end of October, half of the attendance levels of the same period of 2019. The objective is to reach at least 60% in December, which will mean that Eurostar stops losing money. Reservations have already been made for the next six months, and the curve should continue to rise at the same rate in 2022, which should thus approach the levels reached in 2019.
Everything will therefore return to normal despite the surge in re-infections and the uncertainties of the Omicron variant ??
We depend on individual behavior and the evolution of the health crisis, and we know that nothing will be the same again. The pandemic has changed a lot of lifestyles, and everything will be different, but a new balance will be created, with fewer reservations in some categories, but more in others. We will be monitoring developments closely over the next few weeks. There will certainly be a short term impact on demand but, over the past three months, we have seen how strong the urge to travel is and quickly returns as soon as restrictions are relaxed.. We will continue to operate, as we have done every day of the pandemic, to ensure important travel, especially for those who want to visit their families and loved ones for the holidays. And we are convinced that the research carried out by scientists in a large number of countries on the Omicron variant and the experience acquired in vaccines over the past year will make it possible to quickly master this new test and resume the upturn in activity for our customers. "
Will Eurostar be able to repay its significant debts, even while regaining the momentum of profits of 2019 (62.4 million pounds, or about 70 million euros)?
If we continue on this path, we will not need to refinance . Our total debt stands at nearly 900 million pounds (around 1.05 billion euros), compared to a pre-pandemic turnover of 1.1 billion pounds. We were in debt before the pandemic, after massive investments in the renewal of our fleet of trainsets. This was the first constituent of debt. The second was the consequence of the pandemic, which was covered by the shareholders, to the tune of 250 million pounds (SNCF, SNCB and Patina), therefore 100 million forfeited dividends. We also took out bank loans, with 500 million pounds, to avoid the suspension of payments.
What guarantees did you have to provide?
The entire fleet has been placed as collateral, and bank loans have also been taken out thanks to the guarantee of our shareholders. We would not have had the same rates without these guarantees. We also had to make drastic cost reductions, with the priority of preserving the same quality of service, safety in particular, and of ensuring that we can become operational again as soon as activity resumes. We had to reduce the workforce, from 1,700 to 1,400 employees , starting with the head of the executive, with the departure of three leaders. The zero ebitda breakeven point is now between 55 and 58% against 70% before this restructuring.
Was the creation of new routes, notably via the merger with Thalys (Green Speed project), which should be effective in 2022, part of the conditions for obtaining these bank loans?
The baseline scenario is essentially on the main roads, namely the capitals London, Paris, Brussels and Amsterdam. Then, with Green Speed, we will have to return to the towns where we have already been. We are for the moment above the objectives set in May, only this evening in ebitda, with 25 million pounds in advance, and in cash.
What are the next steps for the Green Speed project, and what will it change concretely?
We must first wait for the green light from the European Commission, scheduled for the first quarter of 2022. We will build Green Speed pragmatically. On the first day, a common team will be at the head of three companies: the holding company, which will be based in Brussels, as an executive committee, and the two companies Eurostar and Thalys, which will remain unchanged. The CEO and CFO will head the three companies. The merger will be done gradually on the basis of the reality of the activity. One website will host all bookings, simplifying the passenger experience and reducing costs by a million per month. A loyalty program will be set up, which will allow Thalys passengers to earn points for traveling on Eurostar,Within 18 months, the common brand will be Eurostar . We had the choice between inventing a name or capitalizing on this name which enjoys greater notoriety, particularly on the international market, for example in Japan or the United States. The roots of each group will be preserved . Thalys trains will remain red, and Eurostar trains blue.
Is the move of Eurostar to Brussels a way of responding to the British government's refusal to provide you with financial assistance during the pandemic?
The British state helped British companies, only if they were not owned by foreign shareholders. Eurostar will henceforth be a European company, but based on the reality of markets and territories . The UK remains the biggest market. Continental extensions will be simpler from Brussels, which becomes Eurostar's nodal point.
The Spanish company Renfe has started discussions to run trains between Paris and London. Does this potential competition constitute a vital risk for Eurostar?
We are very calm and open. If Renfe wants to open a route between Paris and London, we'll play along. We're just asking that the rules apply. Those that have been put in place since the opening of international lines to competition twelve years ago are quite heavy. For Amsterdam, it took us several years, when it was only an extension of our Paris-Brussels route. For Renfe, it is not a simple extension, but a creation, between two countries where it is not present. We have been on the cross-Channel system for 27 years, and we are still making progress, every day. It's up to Renfe to prove that there is room for two operators.
You have called for a tax on air flights. How high?
It should be understood that in an Amsterdam - London, the flight time is very low, but the energy balance is crazy. The distance is so short that the plane only goes up and down. Eurostar's carbon footprint is ten times smaller than air travel over a similar distance. The train is at a disadvantage compared to the plane, because of the infrastructure charges, which alone represent 60% of the charges. In the air, infrastructure is just air…
In terms of prices, we cannot match flights, except to sell at a loss. A single passage in the Eurotunnel is 16 euros… We need fair competition.
We should also be able to reimburse rail infrastructure over a century, and not over a few decades.
