Eurostar Needs Competitors to Power High-Speed Rail Renaissance

Mint

18 hours ago

(Bloomberg Opinion) -- Disembarking from the Eurostar international rail service beneath the magnificent arched roof of London's St Pancras station always gives me a thrill. Whooshing through a 31-mile (50-kilometer) tunnel beneath the English Channel and arriving in the heart of Britain's capital less than two and half hours after leaving Paris makes the stress of flying and the associated burning of hydrocarbons feel uncivilized.
And yet, my pleasure is sometimes tinged with disappointment: about Eurostar's sometimes high fares, crowded departure lounges and the limited number of direct international connections. Happily, there's a fix for these issues: increased investment and greater competition.
Eurostar Group Ltd., the sole provider of high-speed passenger rail services between the UK and the continent, this week announced plans to directly connect London with Frankfurt and Geneva, enabled by a €2 billion ($2.3 billion) expansion of its train fleet, and with each journey taking around five hours. As a British-German national, I'm delighted about these new travel possibilities, albeit they won't begin until the early 2030s.
But I'm even more excited about what potential rivals are up to: Around half a dozen challengers have lately expressed interested in providing high-speed international trains to and from London, including Richard Branson's Virgin Group, a partnership between startup Gemini Trains and Uber Technologies Inc., as well as Italian state railway company FS Group, owner of Trenitalia.
These upstarts are responding to customer willingness to accept longer train journeys as well as efforts by Eurotunnel and London St Pancras Highspeed, operator of the UK's fast rail link and the stations along the route, to simplify regulatory approvals and make access less costly; Eurotunnel concession holder Getlink SE says it's halved the time to market for new entrants to just five years, for example.
Eurostar, which is majority owned by France's state rail company SNCF, told me it welcomes competition and views increasing demand as an opportunity, not a threat. Its cross-Channel operations made a net profit of £122 million ($165 million) in 2023 on revenues of £1.28 billion.
Yet coming after a long period of stagnation — Eurostar carried 11.2 million cross-Channel passengers last year, only slightly more than in 2019 — its expansion risks being construed as a land grab that stymies rivals' efforts to break its 30-year monopoly.
The problem isn't a lack of railway capacity: the tunnel and connecting rail networks were designed to handle more than 20 million passengers a year, according to Getlink. However, the east London maintenance depot Eurostar leases from the British government is too small to support its growth plus the new players hoping to enter the market.(1)
It's imperative, then, that collectively these companies and the government find a way to expand the Temple Mills depot or quickly develop alternative facilities, because otherwise passengers will be denied the benefits of rail liberalization.
Two high-speed rail operators now compete in Italy and three do so in Spain, for example, and unsurprisingly such competition typically leads to lower ticket prices, while boosting passenger volumes and service quality. Eurostar's financial accounts warn that the arrival of potential competitors 'would result in a loss of market share and likely lead to lower pricing and reduced profitability.' Yet when a standard London-to-Paris return on Eurostar this weekend costs around $500, I reckon a fare war is overdue.(2)
(In fairness, much cheaper seats are available if you book in advance or are prepared to be flexible about travel times; one also shouldn't forget customers can bring two large pieces of luggage for free, unlike on the plane.)
Competition might encourage Eurostar to up its game. Having commenced services in 1994, its original target of 10 million annual cross-Channel passengers was only reached in 2013, 15 years behind schedule. Today, it only travels to a handful of destinations directly, including Paris, Lille, Brussels, Rotterdam and Amsterdam. The upshot is that while Eurostar accounts for around 75% of the total air and rail travel between the UK and French capitals, overall far more passengers fly to Europe compared with those using its services.
Eurostar's limitations partly reflect more than £700 million of losses incurred during the first two years of the Covid-19 pandemic, when it was denied a British government bailout and was forced to increase commercial borrowings. Eurostar merged with another high-speed rail firm, Thalys, in 2022, and the group's total bank debt at the end of 2024 was €650 million. The shareholder structure is shown below:
Eurostar raised prices and cut non-core services to repair its finances: Connections to Disneyland Paris and the south of France were scrapped, while stations at Ashford and Ebbsfleet in south-east England and Calais in northern France were closed.
Compounding its problems are the more rigorous post-Brexit border checks that have made St Pancras increasingly congested; regular fare passengers are advised to turn up 75 minutes before departure, negating some of the advantages compared with taking the plane.
Fortunately, London St Pancras Highspeed, which owns the terminus, reckons processing capacity could be more than doubled by adding more security lanes and expanding waiting areas, which would enable customers to turn up much nearer to the departure time and free up room for competing services. Alternatively, new entrants may be able to use London's Stratford International railway station (which, despite the name, currently doesn't currently offer cross-border routes).
New services likely won't arrive overnight: Most potential entrants haven't placed train orders yet, and adapting stations like Stratford and Frankfurt so they have the requisite passport and baggage controls will take time.
And notwithstanding the greater availability of subsidies and lower track-use charges, breaking Eurostar's monopoly won't be cheap: Virgin is looking to raise £700 million to fund its international service, while FS Group plans to invest €1 billion, for example.
Still, with investor backing and a concerted effort to address bottlenecks, I'm hopeful international rail passengers will in a few years spot trains with different liveries in London, poised to depart for new destinations and offering lower prices. Now that would really feel like progress.
More From Bloomberg Opinion:
(1) The Office of Rail and Road regulator has said there's 'room for at most one new operator, or for Eurostar to grow.'
(2) A Transport & Environment study found Eurostar is almost twice as expensive as the average European operator per kilometer of travel, which is partly a reflection of the high access charges it pays.
This column reflects the personal views of the author and does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Chris Bryant is a Bloomberg Opinion columnist covering industrial companies in Europe. Previously, he was a reporter for the Financial Times.