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

[Ianno87]

The relatively low frequency and lack of early morning and late night trains between London and Brussels, plus the fact that a portion of space gets given over to Belgium - France travellers, and increasingly Eurostar were catering to London to Lille and even a handful of Calais stops, all strongly suggests that a 1000 seat 400m train is much too much for the route too. Of course, using a train which is too long for your needs and then still focusing your energy on the highest yield market is exactly the criticism of Eurostar I was making.

So....:

-Serving intermediate stops to make best use of train capacity and benefit more markets is the wrong thing to do, whilst
-Concentrating only on the highest yield markets is also the wrong thing to do?

I don't follow.

 

[Starmill]

Post #427 of @Watershed sums the issue up quite well. Until the external costs of eating doughnuts are charged at the point of sale, lettuces have difficulty in competing! This is not really the fault of lettuces.

I quite agree. But unfortunately we have the government that we have, and it's popular because it's willing to let people have their cake and eat it, at the expense of future generations. I wish it weren't so. But while it is we have to play the game a bit, and "but Eurostar is special!" has had the predicted negative results. The reason I have waded in so strongly is because it's so detached from reality to think that Eurostar genuinely is "special".


The sort of 'earning overall benefits to the world' is not really within the gift of E*

It is however the proper role of government.

Serving intermediate stops to make best use of train capacity and benefit more markets is the wrong thing to do

It's certainly not wrong. It's simply that Eurostar were quite unable to sell anything like 1,000 tickets per train just between London and Brussels.

Another extremely odd factor I find in this debate is that the government chose to deny three million individual people any form of financial support whatsoever, despite them being taxpayers. Eurostar employees have at least been eligible for Coronavirus Job Retention Scheme. It could have been considerably worse.

 

[Ianno87]

It's certainly not wrong. It's simply that Eurostar were quite unable to sell anything like 1,000 tickets per train just between London and Brussels.

And? You could argue that about lots of rail services that rely on intermediate demand. It's rare for any rail service to be purely justified on end-to-end demand (its just happens that London-Paris is a rare example of one that is).

 

[Starmill]

And? You could argue that about lots of rail services that rely on intermediate demand. It's rare for any rail service to be purely justified on end-to-end demand (its just happens that London-Paris is a rare example of one that is).

Indeed it is. An example of a good solution. Surprisingly I'm well aware of the impact of churn thanks?

 

[Horizon22]

Exactly. I don't think that financial assistance should be withheld from Eurostar just because it is a service primarily used by people who are, on the whole, more affluent.

If Eurostar collapses, a viable low-carbon method of travelling from London to Paris and Brussels will disappear. You can be sure the airlines will be glad to pick up the slack. So preventing Eurostar from collapsing prevents the inevitable emissions that will result from the alternative that will fill any gap in the market.

The only alternative would be to tax flying and other carbon intensive activities more heavily, but there is already consternation at the current level of Air Passenger Duty, so it seems unlikely that there will be any notable movements in this direction during the current government's reign.

This has always been the issue with major infrastructure in the UK - expensive and long-term is what many aspects of the railways are, although it reduces ongoing negative externalities slowly but people don't pay much attention to that. Car usage has similar aspects. I'm not sure it would disappear though - there's likely some marginal profit to be had although the start-up costs might be prohibitive. The door-door timing and what business travellers may or may not do if it was to collpase and with Covid would be more uncertain.

A little off-topic but as for E* being more like an airline and having railway detractors, I can imagine HS2 goes down a fairly similar route in terms of the customer offering...

 

[Starmill]

HS2 services will offer so much greater capacity than Eurostar does that it's near certain that they'll have to bring average fares down, as the strategy of running at low load factors to keep prices high is more endemic on those routes, and will become unsustainable.

Compulsory reservation also needn't cut your load factors, because you can take small risks and overbook.

 

[Ianno87]

Indeed it is. An example of a good solution. Surprisingly I'm well aware of the impact of churn thanks?

In which case, I'm lost to the point that you are trying to argue.

 

[Starmill]

In which case, I'm lost to the point that you are trying to argue.

I can only apologise.

 

[Horizon22]

Compulsory reservation also needn't cut your load factors, because you can take small risks and overbook.

That of course would be straight out of the airline playbook too.

 

[Starmill]

That of course would be straight out of the airline playbook too.

Indeed. If it is effective at reducing average prices and there's a sound overbooking policy, why not?

 

[BahrainLad]

HS2 services will offer so much greater capacity than Eurostar does that it's near certain that they'll have to bring average fares down, as the strategy of running at low load factors to keep prices high is more endemic on those routes, and will become unsustainable.

Compulsory reservation also needn't cut your load factors, because you can take small risks and overbook.

You have yet to explain why it makes commercial sense for Eurostar (or indeed HS2) to routinely offer fares lower than the per-passenger cost of using the infrastructure. Yield management is a dark art but the one constant is that if your RPK is lower than your CASK then you will run into trouble.

 

[Peterthegreat]

Temporarily. If there's a profitable business to be had, which there is, someone would restart it.

I'm not sure it would be restarted in the short or mid-terms. It would attract very large start up costs before any revenue was earned. In the current climate it would be hard to justify these costs, staff training would be immense and traffic levels uncertain.

 

[Starmill]

You have yet to explain why it makes commercial sense for Eurostar (or indeed HS2) to routinely offer fares lower than the per-passenger cost of using the infrastructure. Yield management is a dark art but the one constant is that if your RPK is lower than your CASK then you will run into trouble.

Is there some evidence that the previous lower fares were loss-making? If that's true then perhaps that's why Eurostar are in a uniquely financially difficult position. If it is not true then there's scope to offer tickets as cheaper singles with better integration and improved customer service in the event of a delay. Good customer service tends to be more a matter of management than cost. If the company really cannot be trusted to get that right, they could be given loans in exchange for a covenant to offer a minimum proportion seats at cost price, and we'll have to see what number that produces. I'd also prevent them from re-introducing the ticket amendment fee up to the current 7 day cutoff. Of course if people might accept that Eurostar don't need 'special treatment' then they can offer whatever range of prices they wish.

 

[RT4038]

You have yet to explain why it makes commercial sense for Eurostar (or indeed HS2) to routinely offer fares lower than the per-passenger cost of using the infrastructure. Yield management is a dark art but the one constant is that if your RPK is lower than your CASK then you will run into trouble.

Well not necessarily. Ryanair and other low cost transport operators do it fairly routinely, often to get customers to the website by a reputation of a lotto of low prices. However, as you say, this is a dark art which I am not convinced (through experience I might add) works very well in the longer term, as it creates expectations that are impossible to fulfill. It does rely on being able to sell higher priced tickets, which may not be possible if your competitor has other advantages (such as faster journey time on routes over 3hr, in the case of E*)

Is there some evidence that the previous lower fares were loss-making? If that's true then perhaps that's why Eurostar are in a uniquely financially difficult position. If it is not true then there's scope to offer tickets as cheaper singles with better integration and improved customer service in the event of a delay. Good customer service tends to be more a matter of management than cost. If the company really cannot be trusted to get that right, they could be given loans in exchange for a covenant to offer a minimum proportion seats at cost price, and we'll have to see what number that produces. I'd also prevent them from re-introducing the ticket amendment fee up to the current 7 day cutoff. Of course if people might accept that Eurostar don't need 'special treatment' then they can offer whatever range of prices they wish.

Sorry, I don't agree that good customer service [whatever that means to an individual] tends to be a matter of management than cost. Good customer service usually costs money, sometimes a lot of money, which has to be paid for out of revenue. Yes, this may be able to be recovered from increased sales by the good customer service, but this is not always true by any means. There is a sweet spot, which government mandated conditions are unlikely to find. 'We'll have to see what that produces' doesn't inspire much confidence, and can only lead to more and more problems.

 

[MotCO]

I'm not sure it would be restarted in the short or mid-terms. It would attract very large start up costs before any revenue was earned. In the current climate it would be hard to justify these costs, staff training would be immense and traffic levels uncertain.

But you would have a lot of ex Eurostar staff looking for a job,and unless you wanted to train them completely differently, yet still abide by the regulations of operating in the Tunnel, these should not be significant.

 

[Starmill]

We'll have to see what that produces' doesn't inspire much confidence,

Well if the company are given a super cheap line of credit, we can be confident it will produce a single fare of £29 or lower, even with no attention on cost-reduction.

Sorry, I don't agree that good customer service [whatever that means to an individual] tends to be a matter of management than cost. Good customer service usually costs money, sometimes a lot of money, which has to be paid for out of revenue.

Indeed. And it is about getting value for your money. Pret for example pay their customer service staff at around the rate of the Living Wage Foundation recommendation, but they have a reputation for wonderful customer service. Some TOCs pay front line customer service staff near double that rate, despite very poor customer service indeed.

 

[Peterthegreat]

But you would have a lot of ex Eurostar staff looking for a job,and unless you wanted to train them completely differently, yet still abide by the regulations of operating in the Tunnel, these should not be significant.

Ok. Let us suppose Eurostar stops trading. Another operator would not take over the day after because they too would be making huge losses. The majority of the staff on the continent would return to SNCF/SNCB. Staff in the UK would start looking for other jobs and/or retire. It is likely staff like drivers would be in demand by domestic TOCs. If another operator were to try to start up it would need to recruit staff and train them in UK, HS1, Eurotunnel, SNCF and SNCB rules. They would also need to be competent in both English and French. The chances of doing this inside a couple of years are extremely low.
There is also no guarantee you would have trains!

 

[zwk500]

Ok. Let us suppose Eurostar stops trading. Another operator would not take over the day after because they too would be making huge losses. The majority of the staff on the continent would return to SNCF/SNCB. Staff in the UK would start looking for other jobs and/or retire. It is likely staff like drivers would be in demand by domestic TOCs. If another operator were to try to start up it would need to recruit staff and train them in UK, HS1, Eurotunnel, SNCF and SNCB rules. They would also need to be competent in both English and French. The chances of doing this inside a couple of years are extremely low.
There is also no guarantee you would have trains!

Out of interest, if E* did go under which country's process would it follow? Because I suspect that if it's the UKs then it would go into administration first, and there'd be plenty of people willing to take it on as a going concern after waiting for the market to settle (or even recover, if you're optimistic).

I have no knowledge of continental rules, nor shared ownership situations like this.

 

[Starmill]

I imagine that's an option as a limited company registered in the UK.

 

[Chester1]

Out of interest, if E* did go under which country's process would it follow? Because I suspect that if it's the UKs then it would go into administration first, and there'd be plenty of people willing to take it on as a going concern after waiting for the market to settle (or even recover, if you're optimistic).

I have no knowledge of continental rules, nor shared ownership situations like this.

Depends if goes into liquidation or administration. The former would mean the assets are sold and the company wound up. Administration is much more likely because it is a viable business that has accrued debt during extraordinary circumstances. The administrators would sell it as going concern minus some or all of its debt, with the proceeds being given to the companies creditors to partially reimburse them for the bad debt. Even if it "goes under" it could avoid either option if its creditors (mostly French banks) voluntarily accept exchanging money they have loaned for shares in the company.

 

[daodao]

it is a viable business that has accrued debt during extraordinary circumstances.

This assumes that travel between London/SE England and northern France/Benelux will eventually return to pre-Covid levels.

However, the extraordinary circumstances of Covid have coincided with the long-term change of Brexit. This will reduce business travel between the UK and the EU, particularly to/from Brussels, the EU capital and one of Eurostar's principal destinations. Brexit will also impede travel for non-EU tourists (including UK citizens) due to the requirement for Schengen visas or visa-waivers (an odd term as I presume they are just a different/simpler form of visa).

The need to retain Eurostar is lessened post Brexit now that the EU considers the UK to be a third country, and hardly a friendly one. When countries disengage with one another, international travel between them tends to decline. One example is the reduction in passenger rail services across the EU's eastern frontier, between the Baltic states/Poland and Russia/Byelorussia, over the last 30 years.

All the above weakens any case for additional funding from the UK government to mitigate the risk to the survival of Eurostar.

 

[BahrainLad]

“Brexit will also impede travel for non-EU tourists due to the requirement for Schengen visas or visa-waivers (an odd term as I presume they are just a different/simpler form of visa).”

Can you explain what you mean by this? Even before the end of the transition period in December, the UK and Schengen zone had separate entry requirements as far as non-EU citizens were concerned.

What will fall (over quite a long time admittedly) are the numbers of people who commuted between the three countries for work/living purposes because UK/EU citizens now face a time limit on how many days they can spend in each, and restrictions on what type of work they can do.

 

[Gag Halfrunt]

I think that @daodao was including British travellers in "non-EU tourists".

 

[zwk500]

However, the extraordinary circumstances of Covid have coincided with the long-term change of Brexit. This will reduce business travel between the UK and the EU, particularly to/from Brussels, the EU capital and one of Eurostar's principal destinations. Brexit will also impede travel for non-EU tourists due to the requirement for Schengen visas or visa-waivers (an odd term as I presume they are just a different/simpler form of visa).

Funnily enough, the fastest growing market for Eurostar was North American passengers, and given the UK was already outside Schengen Brexit doesn't really change their considerations. British tourists who travel by Eurostar are unlikely to get near the visa-free time period, and Eurostar's far more streamlined immigration controls will be an attractive factor over flying. After all, the need for a visa or visa-waiver (a visa-waiver is distinctly not a form of visa, it's a declaration that you meet the requirements to be exempt, btw) doesn't put UK tourists of the US in significant numbers.

The need to retain Eurostar is lessened post Brexit now that the EU considers the UK to be a third country, and hardly a friendly one. When countries disengage with one another, international travel between them tends to decline. One example is the reduction in passenger rail services across the EU's eastern frontier, between the Baltic states/Poland and Russia/Byelorussia, over the last 30 years.

The EU will remain a key trading partner of the UK, and UK tourists who are not in any danger of exsceeding the time limit will still want to visit Europe. The comparison with Russia is not really valid as it involved those countries swapping from one economic market to a totally separate one.

 

[BahrainLad]

I think that @daodao was including British travellers in "non-EU tourists".

Very good point!

 

[Gag Halfrunt]

Looking again more carefully I see that @daodao actually wrote "non-EU tourists (including UK citizens)".

 

[zwk500]

Looking again more carefully I see that @daodao actually wrote "non-EU tourists (including UK citizens)".

Looking more carefully still I think that may be a later edit for clarification.

 

[Gag Halfrunt]

Indeed.

 

[daodao]

The EU will remain a key trading partner of the UK

The BBC reported today that:

"UK exports to European Union drop 40% in January (2021)"

and that:

"Data showed that imports of EU goods into the UK dropped by 28.8% (in January 2021)."

UK exports to European Union drop 40% in January

Official figures show a sharp drop in trade in goods with the EU as the Brexit transition period ended.

www.bbc.co.uk

January 2021 is just the first month after the real Brexit occurred.

While some of the decrease may be temporary, due to the complexity of trading between the EU and a third country, once existing contracts come to an end there may be a further decline. All this reduces the need for business travel via Eurostar.

 

[zwk500]

The BBC reported today that "UK exports to European Union drop 40% in January (2021)" and that "Data showed that imports of EU goods into the UK dropped by 28.8% (in January 2021)." January 2021 is just the first month after the real Brexit occurred.

UK exports to European Union drop 40% in January

Official figures show a sharp drop in trade in goods with the EU as the Brexit transition period ended.

www.bbc.co.uk

While some of the decrease may be temporary, due to the complexity of trading between the EU and a third country, once existing contracts come to an end there may be a further decline. All this reduces the need for business travel via Eurostar.

The overall volume is likely to be less, yes. But that doesn't mean there won't be enough demand to sustain a train service.

However we won't really know the effect of Brexit (which is a continuous process, still ongoing, not an event) for another 12-18 months at the minimum. We're not quite at the UK-EU Economic relations phase yet.