Memorandum by Inter-Capital and Regional
Rail Ltd (RES 4)
REGIONAL EUROSTAR SERVICES
1. INTRODUCTION AND
Inter-Capital and Regional Rail Ltd welcomes
the opportunity to submit background evidence to the Transport
Sub-Committee on the provision of Eurostar services north of London,
the viability of which it has been reviewing for the Deputy Prime
Minister. This paper outlines the present situation, the operational
issues involved, describes the characteristics of the market and
the approach adopted in the study. The conclusions of the analysis
have now been submitted in confidence to the Deputy Prime Minister,
and it is understood that he intends to communicate these to the
House before the end of the year.
Eurostar Train Sets are high speed International
trains built to operate between the UK and mainland Europe through
the Channel Tunnel; they comprise Regional Train Sets (which
were designed and built to be capable of operating beyond London)
and Intercapital Train Sets (which are not generally capable
of operating beyond London). Eurostar train sets were planned
and procured by the British Railways Board (BRB) prior
to the establishment of London & Continental Railways.
Regional Eurostar services (which do
not currently operate) refer to any services which may in future
link Paris/Brussels with destinations beyond London; Intercapital
services currently operate between London and Paris, and London
London & Continental Railways Ltd., (LCR)
is the private grouping of eight companies which in 1996 won the
concession to operate Eurostar and finance, build and operate
the Channel Tunnel Rail Link (CTRL).
Eurostar UK Ltd., (EUKL) is a subsidiary
of LCR which together with the national railways of France (SNCF)
and Belgium (SNCB) forms an international grouping under EU Regulation
91/440 to operate the Eurostar train services.
Inter-Capital and Regional rail Ltd. (ICRR)
is the company comprising the Consortium of National Express Group,
SNCF, SNCB and British Airways, which as been awarded the contract
to manage the EUKL business until 2010 by LCR.
Railtrack is the UK infratructure provider for
the current Eurostar operation in Great Britain and has agreed
access rights with EUKL for the Regional Eurostar services originally
proposed on East Coast Main Line (ECML) to Newcastle. Edinburgh
and Glasgow and on West Coast Main Line (WCML) to the West
Midlands, and the North West. It has also agreed with the Government
to purchase and operate the first phase of the CTRL, and to plan
the second phase, including links to ECML and WCML. Through the
Channel Tunnel, infrastructure is provided by Eurotunnel, in France
by a public corporation, Réseau Ferré de France
(RFF), and in Belgium by SNCB.
On 3 June 1998, in a statement to the House
on CTRL, the Deputy Prime Minister announced that LCR had selected
the Consortium (now ICRR) to manage the EUKL business. In the
statement he referred to the vision of the Consortium for Heathrow
"as a gateway to Europe for services from across the country."
He also referred to the opportunity to "establish Heathrow
airport as an integrated transport interchange of international
importance, connecting long-haul air services directly to the
European high-speed rail network."
At the same time, he assured the House "that
LCR remains under an obligation to provide the infrastructure
for Regional Eurostar services," and section 2, below describes
the limited work needed to achieve this. He made clear that he
had asked the Consortium to review urgently the feasibility of
Eurostar services to regions beyond London and to report by the
end of the year. Following subsequent discussions, the Consortium
agreed to bring the report forward to an earlier date and it has
now been submitted to the Deputy Prime Minister.
In its Twelfth report on the Departmental Annual
Report for 1998, published, on 17 August 1998, the Committee expressed
criticism that leases for rolling stock for European night services
were guaranteed without a proper examination of the risk that
the service might never operate. The report notes "Eurostar
had since concluded that there was no prospect of such services
being operated profitably," and that the leases had been
terminated; the rolling stock has subsequently been returned to
the manufacturer. In contrast, a number of potential uses have
been identified for the Regional Eurostar sets, should they not
be deployed on the services for which they were originally intended,
and these are described in section 4 below.
1.4 The Objectives of the ICRR
ICRR has entered into a contract with LCR to
manage the EUKL business until 2010 which covers the management
of all EUKL assets and rolling stock including the Regional Eurostar
ICRR has the obligation as well as the financial
incentive under the contract, to maximise the cash flow contribution
from Eurostar services and therefore minimise the requirement
for funding from LCR.
All important decision, including the operation
of new services, have to be made by agreement between EUKL, SNCF
and SNCB. For EUKL, such decisions would require the approval
of LCR and could only be proposed by ICRR and approved by LCR
if both were satisfied that this was the best means of maximising
the cash flow contribution from Eurostar services.
In preparing for taking over the management
of the EUKL business, the ICRR has focused on the Intercapital
services which have significant potential for growth, but which
are currently unprofitable. The loss on Intercapital services
last year was £150 million, but they are expected to generate
a positive cash flow from 2005 onwards. Forecasts made in 1989
predicted passenger traffic through the Channel Tunnel at 13-16
million in 1993, whilst actual traffic in 1998 is now forecast
to be 6-7 million. The Deputy Prime Minister in his statement
to the House on 3 June, 1998 described the original forecasts
as "over optimistic."
In parallel with this review of Regional Eurostar
services, ICRR is also investigating the viability and potential
for Heathrow-Paris services, as a means of extending Eurostar
services, improving Eurostar's cash flow and increasing the role
of Heathrow as an integrated transport hub. (See paragraph 4.1
ICRR, in conjunction with EUKL, is also assessing
the viability of direct services from Watford-Paris which would
use Watford as a hub for connecting services from Scotland, the
North West, North Wales and the Midlands. (See paragraph 4.2 below).
1.5 The Objectives of the Study
The study objectives, agreed with DETR were
Present a fact-based assessment on
the viability of alternative Regional Eurostar Services.
Consider market potential, as opposed
to validating a supply-driven concept.
Test economic performance of alternative
regional services, in the light of expected performance improvements
under the Consortium's leadership.
Evaluate third party proposals (including
Virgin Group's) and determine whether they can be accommodated
within the structure of the CTRL rescue package announced on 3
June by the Deputy Prime Minister.
Report to the Deputy Prime Minister.
The evaluation of Regional Eurostar services
has been carried out on the basis of assessing the commercial
viability for the Eurostar business as a whole, and does not include
any social cost/benefit assessment of the options, nor any assessment
of the effect of the services on economic development or regeneration
in the Regions served.
1.6 The Approach to the Study
The assessment of the viability of Regional
Eurostar services was undertaken by independent consultants, Mercer
Management Consulting Ltd. Mercer has extensive experience of
UK rail economics. It also undertook the economic assessment of
the Intercapital services for ICRR and is evaluating a possible
The review looked at the incremental costs and
revenue of adding Regional Eurostar services to the existing Intercapital
services between London, Paris and Brussels. The review thus evaluated
the options on the basis of the most favourable economic circumstances
by assuming zero cost for Regional Eurostar train sets and for
track access north and south of London and usage of the Tunnel,
all of which are covered by bulk or minimum use agreements for
all Eurostar services. It also takes advantage of integration
with the existing Intercapital services in respect of operating
costs, management overheads and marketing. Track access rights
north of London and the regional train sets themselves have a
potential opportunity cost for EUKL. With the consent of the Secretary
of State, paths north of London could be "sold" back
to Railtrack, and the train sets could be leased to third party
operators on domestic routes if Regional Eurostar services are
2 THE CURRENT
Seven 14-car Regional Eurostar train sets were
procured by BRB in 1991 at a cost of £180 million to provide
services beyond London, and were delivered during 1995-96. They
are shorter than the 18-car Intercapital trains and have other
technical differences allowing them to run north of London. The
trains are extremely complex, with the capability to operate with
four different electrical supply systems and four different signalling
systems. An extended programme of commissioning and testing has
been undertaken which has revealed evidence of electronic interference
with signalling equipment induced by the new trains, and modifications
have been required to prevent this.
The trains are designed as two seven-car articulated
half-sets for ease of maintenance, and therefore could be re-formed
permanently as 14 shorter trains in order to increase the number
of sets available and therefore the frequency of Regional Eurostar
services. Channel Tunnel safety requirements mean that a power
car must be provided at either end of the train and a driver's
cab is required at each end to allow the trains to be driven in
either direction. Fourteen additional power cars with driving
cabs would therefore need to be provided at a cost of £70
million and would take two to three years to design, build and
The train sets were specially built for the
Regional Eurostar services, and in the UK their use would, in
practical terms, be limited to the ECML and WCML.
Two of the seven Regional Eurostar sets are
currently available for service, while three further sets could
be made available for traffic relatively quickly. The remaining
two require several months' work to replace components and to
bring them back up to standard for passenger use after being stored
for several months. The cost of improving the regional sets has
already been provided for by EUKL. All seven could be made available
by the second half of 1999.
Eurostar Intercapital trains currently operate
from Waterloo International to Paris and Brussels. Links between
the rail networks south and north of the Thames are limited, and
to reach destinations beyond London, Regional Eurostar trains
would have to use the West London Line. This runs via Kensington
Olympia and provides direct access to the WCML and, via the North
London Line to the ECML: these two connecting routes have already
been upgraded and electrified for Regional Eurostar services.
Access to Heathrow would require use of a short existing connecting
line from Willesden Junction to Acton, where trains would join
the main line from Paddington to Heathrow.
The programme of rolling stock testing referred
to in 2.1 above is close to completion on WCML, and services on
the WCML could start in 1999. On the ECML, testing has been completed
only over 100 miles of the 450 mile route between London and Glasgow,
and further work is required to secure the required Railway Safety
Case, particularly north of York. Together with work required
at stations, this would mean that services to the North East and
Scotland could not start until 2000.
Infrastructure and rolling stock modifications
required for operation to Heathrow mean that the earliest practicable
starting date for this service is 2001-02.
2.3 Train Paths
Train paths on the rail network have already
been negotiated with Railtrack for services north of London and
with Railtrack and Eurotunnel between London and Calais. The timetable
shown in Appendix One is based on these paths and is based on
the train service plan proposed by BRB when the Regional Eurostar
sets were procured. Additional or changed paths would require
negotiation with Railtrack and Eurotunnel.
In France, paths for Regional Eurostar services
were reserved, but with the delayed introduction of Regional Eurostar
services, some paths have been reallocated to other services,
such as that between Waterloo International and Marne-la-Vallée
(for Eurodisney). Whilst capacity still exists on the high speed
line between Lille and Paris, one of the busiest high speed lines
in France carrying trains to Brussels, Amsterdam, Cologne and
North East France, paths would now have to be re-established with
Regional Eurostar services would serve 18 stations
north of London. Agreement of access rights and development of
stations on the West Coast Main Line has largely been completed,
whereas the majority of stations on the East Coast Main Line require
some minor alternations prior to running a Eurostar service, particularly
north of Doncaster.
2.5 Security, customs and immigration
The regime for security, customs clearance and
immigration for Regional Eurostar services has largely been agreed
between EUKL and the relevant authorities. The principal change
before Regional Eurostar services can start running is the extension
to Kensington Olympia of the "international corridor"
which is currently established between the Channel Tunnel and
Waterloo. This would allow Kensington Olympia to be treated as
the point of entry to the UK, with immigration controls carried
out on the train and customs clearance on arrival at Kensington
3. THE REGIONAL
3.1 Alternative Services from the UK Regions
Connecting services using high speed trains
were introduced in May 1995 connecting to Intercapital Eurostar
services at Waterloo. One service each way was operated on WCML
and one on ECML. The services were available only to international
passengers connecting at Waterloo, with through tickets at low
add-on fares (£10-£20 return). Despite this, only some
30 to 40 passengers travelled each way daily on the East and West
Coast services respectively, equivalent to a load factor of 8-10
per cent. Services ceased in January 1997.
Looking at other modes, there are relatively
few examples of through services being offered to Paris, from
regions beyond London. Many regional airports offer services to
Paris, but involving interchange at the Eurohub at Birmingham
International Airport, although Manchester and Edinburgh have
direct flights. Similarly, the Eurolines consortium offers scheduled
coach services between regional originating points, Paris and
Brussels, but a change of vehicle is required at Victoria Coach
Station. In the case of both air and coach, demand is not sufficient
to justify direct services.
3.2 The Market for Regional Eurostar
Within the total Cross-Channel market in 1996,
there were 7.4 million single trips between the regions of Great
Britain and Paris, North East France and Belgiumthe area
that could be served by Regional Eurostar. This comprises primarily
leisure travellers resident in the UK with widely spread originating
points. It is not dominated by any one mode, as shown below:
|Regional Market by mode
|Mode||1996 single trips (millions)
|1 Via Intercapital Eurostar.
However, rail is not competitive for many of these journeys,
only a small proportion of which are likely to be attracted to
Regional Eurostar services. In particular, Regional Eurostar is
less competitive where:
Journey time, frequency or fares are unattractive
(see 3.3-3.5 below).
Arrival times in Paris may not meet the requirements
of business travellers, or allow business trips to be completed
the same day, as is possible by air.
Coach is being used for local shopping or sightseeing
trips at the destination.
Car offers a lower cost for families or groups,
and is convenient for local trips at the destination as well as
for carrying luggage.
Travellers live outside the catchment area of
3.3 Regional Services-Journey Times
The market assessment undertaken was based on the International
Passenger Survey and the Civil Aviation Authority survey. The
combined database provides detailed information on trips between
origins in the UK and destinations in western continental Europe
and is based on the latest survey, 1996, updated to reflect 1997
Regional Eurostar's share of the regional market would be
dependent on its competitive position against other modes (rail,
air, coach or car) on journey times, frequency and fares which
are the main criteria passengers typically use to decide on their
mode of transport. As shown in Table 2, Regional Eurostar services
are relatively uncompetitive with air on both journey time and
frequencies (Table 3), and with coach on fares (Table 4). A full
comparison of journey times and frequencies is set out in Appendix
Some comparative journey times are shown below:
|Sample Journey Times
|To Paris from||Air||Regional Eurostar1
||Rail (via London)2||Coach3
|Birmingham||1 hr 13 mins
||4 hrs 58 mins||5 hrs 1 min
||13 hrs 0 min|
|Manchester||1 hr 20 mins
||6 hrs 47 mins||5 hrs 55 min
||16 hrs 55 min|
|Glasgow||2 hr 48 mins
||9 hrs 23 mins||8 hrs 52 mins
||18 hrs 15 mins|
|1 Journey times would be reduced by 20 minutes on completion of CTRL 1 and between 45 and 60 minutes on completion of CTRL 2.
2 Rail feeder to London, cross-London connection and Eurostar from Waterloo.
3 Coach journey times include a change at Victoria Coach station in London.
Between London and Paris journey times by rail and air are
broadly similar, and rail is competitive from points within the
London area to Paris. Beyond London, the journey time differential
between rail and air grows, and from Glasgow, for example, rail
takes approximately three times as long as air.
3.4 Regional ServicesFrequency
With a lower population density north of London and less
competitive journey times, projected levels of demand are unlikely
to be able to support as high a frequency of service as that available
on the Intercapital services from Waterloo International, as a
result, the frequency of Regional Eurostar services is likely
to be much lower than existing rail, air and coach services. Table
3 compares frequencies of the different modes for serving the
Regions; Eurostar frequencies are based on the original BRB proposal.
|Number of services per day (each way)
|To Paris, from||Air||Rail|
|1 Rail frequencies via London are constrained by Intercapital frequency and departure times.|
2 Scheduled plus package services. All services require a change at Victoria Coach Station.
3.5 Regional ServicesFares
The potential earnings of Regional Eurostar services are
constrained by this weak market position. Whilst existing Intercapital
Eurostar tickets are priced in line with similar air tickets,
with a strong business travel element, Regional Eurostar services
would not have the frequency or journey time advantage to do this,
and fares would have to be pitched closer to coach, with a high
proportion of leisure travellers travelling at reduced fares.
Longer journey times and lower frequencies also affect the
level of fares that can be charged. Current Eurostar fares from
the Regions (i.e., for rail to London and Eurostar Intercapital
service to Paris) are 10-20 per cent below equivalent air fares.
At the same time, Eurostar is not competitive with low-price coach
fares. As Table 4 shows, coach fares are 20-50 per cent of Eurostar
|Comparative Return Fares
|£||Fully Flexible £
Against this background, it is clear that Regional Eurostar
is likely to gain only part of the potential market due to its
3.6 Effect of Channel Tunnel Rail Link (Phases 1 and 2)
The completion of the first phase of CTRL would reduce the
journey time of Regional Eurostar services by some 20 minutes,
but would have no other effect on the route they followed across
London. Completion of Phase Two of CTRL (CTRL2) would provide
a further time saving of some 15 minutes to London but would have
a rather greater effect for Regional Eurostar services. The time
savings on completion of CTRL2 are expected to be of the order
of 45 minutes to and from the WCML and 60 minutes for the ECML.
This would have a significant effect on demand for Regional
Eurostar services, and their financial performance.
3.7 Other Approaches to the Regional Market
Through Regional Eurostar services are not the only way of
improving access from the UK regions to Europe. Feeder services
form the Regions to Waterloo connecting with regular Intercapital
Eurostar services, would provide an easier interchange and avoid
the cross-London connection for passengers. However, the services
would suffer from long journey times and low frequency, and would
not be competitive with existing rail services, as demonstrated
by the earlier experiment detailed in 3.1 above.
Feeder services to Heathrow would involve similar problems
in terms of journey time and frequency as the Waterloo feeder
services and would be constrained by limited capacity at the current
Heathrow stations for connecting services.
As described in section 4.2, feeder services to Watford Junction
for WCML passengers could connect with a Watford-Paris Eurostar
services. Services on the route from the West Midlands and the
North West are frequent (over 20 a day from Manchester, 33 from
Birmingham). They are also fast, with further speed improvements
planned with the WCML line upgrade and tilting trains. Interchange
at Watford would be straightforward, would avoid crossing London
and could provide high quality facilities for connecting passengers.
Improvements in cross-London connections for existing rail
services is an area which is already under review by the management
of Eurostar. Discussions have started with GNER over a dedicated
coach link between Kings Cross and Waterloo which would provide
regional passengers with a seamless transfer with Eurostar Intercapital
services. Similar connections could be provided from Euston, Paddington
or Liverpool Street
3.8 Domestic Passengers
The economics of Regional Eurostar services might be improved
if they were able to carry domestic as well as international passengers,
filling capacity that would otherwise be empty. There are two
impediments to carrying domestic passengers on Regional Eurostar
The cost of security clearance of passengers joining
the southbound services prior to reaching the final stop before
the Channel Tunnel, and the practical difficulty of doing this
where domestic and international passengers are carried together.
The constraint of "moderation of competition"
introduced to protect franchise operators, which in the case of
Virgin Trains' West Coast franchise operates until 2015.
Initial analysis revealed that the potential of domestic
revenue was limited. Since Regional Eurostar services have more
stops, they are inevitably slower than the domestic services.
For some passengers, Kensington is a more attractive destination
then Euston or Kings Cross, and could prove attractive to gain
leisure passengers wishing to come to London (e.g., Earls Court/Olympia).
It is estimated that such opportunities would result in domestic
revenue of only some £1.5-3.5 million a year being earned
by Regional Eurostar services. This figure would be diluted following
the introduction of higher speed tilting trains on WCML.
4. OTHER POTENTIAL
4.1 HeathrowParis Services
ICRR is also investigating the viability and potential of
Heathrow Eurostar services to Paris, which are likely to overlap
with Regional Eurostar services in terms of market, operations
and use of assets. The objective would be to establish Heathrow
airport as an integrated transport interchange of international
importance, connecting long-haul services directly to the European
high-speed rail network.
In serving Heathrow airport, a number of new markets would
passengers connecting from regional air routes,
particularly from airports which do not have regular, scheduled
direct flights to Paris, such as Glasgow.
passengers connecting from long-haul flights,
providing a high quality link to Lille, Paris and Brussels as
an alternative to air;
passengers from West London, Surrey and Berkshire
who have good access by public transport or car to Heathrow.
Such a service would complement the Intercapital service
from Central London and help to take pressure off the busy air
corridor between Heathrow, Paris and Brussels.
Work to date suggests that the service could be financially
attractive, but also would require considerable investment. Conclusions
on the justification for such investment should be available in
January 1999. If launched, the services would fully utilise the
seven regional train sets.
4.2 Combining Regional and London Area Demand
As indicated in section 3 above, Eurostar services are more
competitive from the London area than from regions further north,
and the Intercapital service has secured a 60 per cent market
share between London and Paris. Many passengers however, find
access to airports in the London area easier than to Waterloo
or Ashford International stations. Both Watford Junction and Kensington
Olympia are well located for large parts of London and south east
England and Eurostar services from these two stations would be
relatively attractive in terms of journey time compared with existing
rail and air services. On this basis, ICRR is conducting a review
of the potential of Eurostar to attract travellers from the M25
belt to a Watford-Paris Eurostar service.
Services from Watford and Kensington would be quicker for
about 40 per cent of existing Eurostar Intercapital business passengers
and 25 per cent of leisure passengers. Overall, about 30 per cent
of current air passengers might be attracted to such a service.
If Regional Eurostar trains were to serve Kensington, the
development of facilities for 1-2 million passengers a year would
be required, particularly better passenger amenities and capacity
to provide security checks prior to departure of trains. There
is only one platform at Kensington that can accommodate Eurostar
trains, and this is also used by frequent domestic services operated
by Silverlink, Connex and Virgin.
Investment in passenger facilities and security checking
equipment would be required if Eurostar services were to start
and terminate at Watford with the transfer of significant numbers
of passengers from regional feeder services.
The review has considered both the regional market, referred
to in section 3 above and the London area market, together with
the costs involved in serving Watford and Kensington.
4.3 Other uses
If Regional Eurostar services were not able to fulfil the
terms of the contract with LCR described in 1.4 by maximising
cash flow for EUKL other options for the use of the Regional sets
would need to be considered. Apart from those considered in 4.1
and 4.2 above, the options include:
(1) Leasing of the Regional assets to a domestic train
operating company (e.g., Virgin or GNER).
(2) Leasing of the Regional assets to an international
train operating company.
(3) Sale of the Regional rolling stock to the highest
(4) Deploying the regional sets on the London-Brussels
Intercapital service to allow Intercapital sets to be used more
productively on other services.
1. ICRR has an obligation and a financial incentive under
its contract with LCR to maximise the cash flow related to the
Eurostar business (which is currently losing £150 million
2. Experience with Eurostar Intercapital services has shown
that initial forecasts were highly optimistic; current passenger
volumes are 6m-7m per anum, compared with an original forecast
of 13-16m for 1993.
3. An earlier experiment in 1995-97 with fast regional services
using non-Eurostar rolling stock but connecting with Eurostar
at Waterloo failed to attract sufficient demand to justify its
4. The benefits for the majority of potential regional travellers
on direct Regional Eurostar services are relatively low. Journey
times are significantly worse than air and in some cases are worse
than existing rail services via Waterloo. The frequency is likely
to be much lower than both air and existing rail services because
of low and dispersed demand.
5. No significant operational or technical constraints exist
that would prevent Regional Eurostar services commencing in late
1999 on the WCML and 2000 on the ECML.
6. For a Regional Eurostar service to be launched, approval
will have to be obtained form LCR, SNCF and SNCB.
7. Completion of CTRL2 will cut up to 60 minutes from the
schedule of Regional Eurostar services and is likely to increase
levels of demand significantly.
8. Carrying domestic passengers is constrained by security/immigration
considerations and by regulatory protection for existing domestic
9. Evaluation of a Heathrow Eurostar service is continuing,
and a Watford service is being considered, both of which could
provide good access from regions served by WCML via domestic feeder
services to Watford.
10. Passengers on scheduled regional services by air and
coach to Paris are generally required to change at Birmingham's
Eurohub or at Victoria coach station.
20 November 1998
|Appendix One: BRB Proposed Regional Services
|Birmingham New Street||07.55
||14.58||Birmingham New Street
Birmingham-Paris service taken from revised EUKL proposal.
|Appendix Two: Comparison of Journey Times/Frequency
|On-board journey time to Paris||
||Frequency (one direction)|
1 Peterborough air frequency only includes Luton airprot. Stansted may also be accessed from Peterborough (further four flights).
2 London-Paris frequency: 20 services per day.
3 Includes access across London but excludes any interchange penalty.
OAG. Virgin, Autoroute, Eurostar, LEK estimates.