6.57 office to Paris

While private-sector Eurotunnel fights for its life, the state- backed Eurostar gets up a head of steam
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The Independent Online
WATERLOO International looks like a 1950s vision of the future, with its curving passenger concourse and exposed steel and glass fittings. Even the baggage-carts sport flared wheel-guards reminiscent of mid-century styling. You almost expect to see chrome fins rising majestically from the sleek Eurostar locomotives.

Early on a Tuesday morning, the terminal is quiet. The passengers waiting for the 6:57 to Paris talk among themselves in hushed tones. Most have luggage stacked high on their carts, but a significant number carry only briefcases and perhaps overnight bags. These are the business passengers - the ones for whom Eurostar marks a radical departure. Eurostar may be a novelty for tourists, but the trains are proving to be a new way of life for cross-Channel commuters.

The success of the Waterloo-to-Gare-du-Nord passenger rail service stands in sharp contrast to the financial troubles of Eurotunnel. The private company that built one of the greatest engineering wonders of the century was last week forced to suspend interest payments of pounds 2m a day on pounds 8bn of junior debt.

Meanwhile, Eurostar, operated by the state railway monopolies in Britain, France and Belgium, has been steadigetting up steam since it opened in November. It made pounds 10.3m in pre-tax profits in the year to March. Load factors, the percentage of seats sold, are around 70 per cent, respectable when compared to airlines. More important, of the more than 2 million passengers it has carried since the service opened, 375,000 have been high-paying first-class travellers. With capacity for up to 210 first- class customers in six of the 20 carriages on each train, each can carry as many people first-class as a Boeing 767 can in total. Eurotunnel would dearly love to have a slice of that success, but when it set up the deal with the railways, it was outsmarted, and is now struggling to renegotiate.

A stroll through the carriages of train No 9004 immediately reveals one reason for the interest from businesses. The clickety-click of laptop computer keyboards and the quiet burr or strident ring of mobile phones fills the air even before the train begins moving.

Briefcases are emptied on to hinged tables beneath pink table lamps, as executives, managers, and sales reps review their files. Newspapers, provided free as you enter by stewards in canary-yellow jackets, rustle to financial pages. The train is as much an office as a means of transportation.

As Eurostar chugs out of Waterloo - lagging, it must be admitted, behind Network SouthEast commuter trains on the adjacent tracks - work is well under way. This early in the morning, most of the passengers are British and male, although one young French statistician, Sabina Mengin, was on board after spending a weekend with her boyfriend in London. Several advertising executives - including two from Young & Rubicam, Eurostar's agency - are on their way to make presentations. A senior manager with ED&F Man is going to the commodity broker's new Paris office for the fifth time.

Management consultant Albert DeLauro is writing business letters. Later, he will go through his notes for a Paris meeting with an energy company he is helping to restructure. In the last year, he has become a devotee of the train, making between two and three dozen round trips, which is still only a tiny fraction of the 300,000 or so air miles he logs annually. He appears relaxed, dressed in a blue and white striped shirt and paisley tie, with a class ring from Cornell University prominent on his left hand.

"Air is faster, but the plane trip is chopped up into 30- minute segments," he says in a deep San Francisco accent. "Here you get three straight hours to work and you avoid the check-in hysteria. While I'm still in the UK I can use my portable phone - You absolutely can't do that in the air - and if you have a PC on a plane, you can't use it till you're above 10,000 feet."

For those in the economy carriages, the story is a little different. Cheaper fares are available by sea or air, and the alternate routes can be more enjoyable. Duty-free shopping is a big attraction on the ferries, whereas the short flights to Paris provide typical airline entertainment. On Eurostar, the passengers have to amuse themselves, and the only food service is from a trolley or the buffet car. And, as one put it in a postcard home recently, the view travelling through the tunnel itself is dull.

Once the novelty wears off, many of the excursion cust omers could easily switch back to conventional methods of visiting France. So Eurostar's future success is likely to depend increasingly on business passengers. They are expected to be more loyal. Whereas economy fares tend to be higher than the best equivalent airline prices available, the railway's first- class fares, at pounds 195 for a round trip to Paris, are cheaper than the best pounds 205 business-class price from British Midland.

The fields and orchards of Kent slide gracefully by. Guy Facius, another management consultant, explains that even though it costs far more than a cheap flight from a bucket shop, that is not a deterrent. "I've taken it every week for eight weeks," he said. "It is more expensive, but I wouldn't be taking advantage of cheap fares on aeroplanes anyway, because I need the flexibility to change my mind."

The profile of Eurostar customers may seem obvious now, but it was far from that when the passenger service negotiated its contract with Eurotunnel.

Expecting the trains to pick up the backpackers who used to go as foot passengers on the ferries between Dover and Calais, Eurotunnel agreed to a fee per head. Large volumes, it reckoned, would compensate for relatively low margins.

But in a rare instance of state monopolies showing more savvy than a private venture, the state railways that own Eurostar turned the tables.

By gearing its fares to encourage business-class passengers at top whack, and ig- noring the temptation to launch a price war in economy, Eurostar has maximised its return. That must be a relief to airlines such as British Midland, which had feared deep discounting would damage the lucrative London-Paris earnings stream. The tunnel operator is currently fighting to change the deal through arbitration. And when Eurotunnel's co-chairmen, Sir Alastair Morton and Patrick Ponsolle, announced a moratorium on repaying its pounds 8bn debt on Thurs- day, they said the railways were not using the tunnel enough, a complaint thought to include Eurostar's low-volume strategy.

The windows darken and the 6:57 begins the almost imperceptible descent into the tunnel for the 20-minute crossing. The mobile phones stop working. John Whittaker, a solicitor with Clyde & Co, a London firm specialising in trade insurance, is toying with the plastic napkin ring from the complimentary breakfast. He has already phoned his colleagues, and is now looking through files for a client meeting. "I'm based in Singapore and come back four times a year. After 16 hours on an aeroplane eight times a year, not to mention all the other

trips, this is a nice break. My firm did a seminar in Paris recently, and all 15 of them went by train." Asked what he thinks of the service, Mr Whittaker reserves judgement. "It's my first trip on Eurostar, and it's not over yet."

He was lucky - the 9004 arrived on time that day. But by far the biggest complaint about the service is that it is often delayed. A string of technical failures, capped with a four-day strike last month by French drivers demanding a pounds 5.15 per day bonus, have soured the company's public image.

Eurostar says its worst delay was five hours and that 90 per cent of its trains arrive on time - by which it means within 14 minutes of scheduled arrival. Still, it has paid out more than pounds 2m in refunds and free tickets to delayed passengers. Mr DeLauro says this summer had been particularly bad, but excuses the company on the grounds that it is still going through the teething stage.

When sunlight returns to stream through the windows on the French side of the tunnel, Simon Chandler is talking about one of his acquaintances who was stuck for 58 minutes within sight of Waterloo. Mr Chandler is director of international information systems for Warner Brothers. With Nick Lansbury, one of the company's computer analysts, he is heading to Paris to install new advertising and publicity software at the regional office.

Horror stories about delays have not deterred him from taking to the rails, and as the 6:57 begins the high-speed part of its journey - up to 300 km/h - he seems impressed. "See," he said, "You can already feel we're moving faster." The fact that the English portion of the route won't be high-speed for years does not seem, despite plenty of publicity, to be a hot issue.

The problem that does discourage Mr Chandler is the relatively low frequency of trains. Eurostar has nine departures a day for Paris now, up from two a day when it started. Various airlines offer nearly 60 flights a day from London to Paris. "When I first checked, they weren't running as many trains," he says. "I knew if I missed my return train I'd be stuck in Paris overnight."

French poplars stream past as the 9004 covers the last and longest leg of its outbound journey: a brief stop at Lille, then onward to the Gare du Nord in the centre of Paris. Eurostar, unlike Eurotunnel, seems sure to go the distance. The private-sector operating company is saddled with mountains of debt and is in a fierce battle for the mass market against seasoned competitors P&O and Stena Sealink. Eurostar, on the other hand, is backed by three state monopolies (at least until the British part is given to the company that wins the contract to build a high-speed link across Southern England.) More important, its convenience means it does not have to indulge in deep discounting with airlines for the high end of the market.

Even if Eurotunnel were forced to restructure with a debt-for-equity swap, that would not hurt Eurostar. It would, however, "be the worst possible outcome for its competitors," argues Mr Facius shortly before the 6:57 puffs to a halt in Gare du Nord two minutes early and exactly three hours after leaving Waterloo. A debt-free and more competitive Le Shuttle - the service operated by Eurotunnel - would increase pressure on ferry and airline economy services, he says. And if airlines reacted to falling volumes by cutting capacity, Eurostar would be the natural beneficiary.