Review of regional Eurostar services: summary report

Publisher:Department for Transport
Publication type:Report
Published date: 31 January 2006
Mode/topic:Rail, Rail value for money

Section 40 of the Channel Tunnel Act (1987) required British Rail to prepare a plan to secure the provision or improvement of international through services serving various parts of the United Kingdom, and an increase in the proportion of passengers and goods carried between places in the United Kingdom and places outside the United Kingdom that is carried by international through services. In response, the company that is now Eurostar (U.K.) Limited invested £180 million in seven trains and £140 million in track improvement, with the aim of offering a direct service to the continent for passengers from the United Kingdom regions.

The proposed Regional service has been the subject of debate among members of the public, national and local government and interest groups ever since. It has also been the subject of reports from, among others, the British Railways Board, Inter-Capital and Regional Railways Limited, and the Virgin Group.

In June 1999, the Department of the Environment, Transport and the Regions (DETR) commissioned Arthur D. Little and its expert advisers to produce a definitive report on whether Regional Eurostar could be a viable operation for a free-standing operator and, if not, whether its introduction could be justified for social, environmental or other reasons.

We have consulted local authorities, the public and regional interest and rail pressure groups, and assessed the financial, social, economic, and environmental impact of running a Regional service. We have also compared the financial results of running Regional Eurostar with those of leasing trains to domestic operators and returning surplus paths to Railtrack plc. Since our study began, a domestic train operator has proposed to lease some of the Regional Eurostar trains.

On purely financial grounds, we conclude that Regional Eurostar would not be viable. Journey times by train from the regions to continental destinations are longer than journeys by air and, in many cases, longer than by domestic rail links to Inter-Capital Eurostar. Fares on the service would need to be low to attract the leisure passengers most likely to use it, but the Regional service could not easily compete on price with lower cost alternatives, in particular the increasing number of low cost airlines. The service is unlikely to attract many business passengers, most of whom are already well served by air.

Our detailed examination of all the options proposed to date showed that, on broad operational and commercial criteria, the least loss-making service would be a daytime, year round service on the West Coast Main Line and East Coast Main Line railways introduced after 2007, when proposed line upgrades are complete. Details of the feasible routes and schedules appear in the later chapters of the report.

Introducing a Regional service would offer some non-financial benefits. In the opinion of the regional groups we consulted, for example, acquiring an address on the European rail network would be of value. We conclude, however, that any social, environmental or other non-financial benefits from the introduction of a Regional service would be too small to compensate for failure to make a profit.

Leasing the Regional Eurostar train sets and paths for domestic use would be more cost effective than operating the Regional Eurostar service, and would benefit travellers by providing additional capacity on the congested West Coast and East Coast Main Lines. On balance, therefore, leasing the Regional Eurostar trains to a domestic operator and returning the train paths is a more attractive way forward.



In June 1999, the Department of the Environment, Transport and the Regions commissioned Arthur D. Little to make an objective and comprehensive analysis of the costs and benefits of the options for Regional Eurostar services.

With support from Oscar Faber, Halcrow Rail and our expert advisers, Professor Roger Vickerman and Professor Rigas Doganis, we have assessed the options against a range of financial, social, economic and environmental criteria. We have also carried out extensive consultations with interested parties, analysed the market for Regional Eurostar services and the competition it would face, and developed a long list of service options. After shortlisting the feasible options, we analysed the more promising in detail to determine whether they would be financially viable and what social and environmental benefits they might bring. We then compared the financial impact of each of the shortlisted options with that of using the trains and track originally proposed for Regional Eurostar for other purposes.

We acknowledge the inputs and assistance provided by a range of organisations and individuals, including representatives of official bodies, the rail and travel industry, and local and regional government and associations, and others with a strong interest in regional development and transport. We are especially grateful for the assistance, information and advice provided by Eurostar (U.K.) Limited, Inter-Capital and Regional Rail Limited, the Virgin Group and their advisers, and Railtrack plc.

This report documents the results of our analysis. The Terms of Reference appear as Attachment 1. The appendices, bound separately, detail our analyses and consultations.

Chapter one – Regional Eurostar: The story to date

Section 40 of the Channel Tunnel Act (1987) obliged British Rail to prepare a plan with the aim of securing:

  • The provision or improvement of international through services serving various parts of the United Kingdom; and
  • An increase in the proportion of the passengers and goods carried between places in the United Kingdom and places outside the United Kingdom that is carried by international through services.

Since then, Regional services have been the subject of numerous reports and proposals.

The Original British Railways Board Proposal: in response to Section 40, the British Railways Board (BRB) published International Rail Services for the United Kingdom, dated December 1989, outlining its plans for a Regional Eurostar passenger service. On the basis of an analysis of the potential market and the operational and technical constraints, the BRB outlined plans for day services along the West Coast Main Line (WCML) to Manchester and the East Coast Main Line (ECML) to Edinburgh; it also proposed to operate night services to Edinburgh, Glasgow, Swansea and Plymouth.

Investment in Train and Track: following the report, European Passenger Services now Eurostar (U.K.) Limited (EUKL) the British Rail subsidiary designated to manage the international services, ordered seven Eurostar trains for use on regional routes, at a cost of£180 million. All the trains were delivered by 1996. £140 million has also been invested in upgrading the two main lines for the trains and providing access to them. While Inter-Capital Eurostar services began in 1994, no Eurostar services have ever been run north of London. A daily rail service to Waterloo International for international passengers travelling from cities north of London to connect with Inter-Capital Eurostars began in May 1995, but was stopped in January 1997.

Attention Diverted to Inter-Capital Priorities: in February 1996, London and Continental Railways (LCR) won the right to finance and operate the Channel Tunnel Rail Link(CTRL), the new high-speed railway linking the Channel Tunnel and St. Pancras. The first stage (CTRL1), due to be completed in 2003, will provide a high-speed link part of the way to Waterloo; the second stage (CTRL2), due to be completed in 2007, will provide high-speed track via Ebbsfleet and Stratford to a new international terminus at St. Pancras. As a result of lower than forecast Inter-Capital Eurostar traffic, however, LCR ran into financial difficulty. In January 1998, as part of a deal with the Government to solve the problem, LCR decided to award a contract to run EUKL to a third party. Two companies tendered for the contract: the Virgin Group (Virgin) and Inter-Capital and Regional Rail Limited (ICRR). The contract, for the operation of EUKL services to 2010, was awarded to ICRR and signed in November 1998.

Night Services Ruled Out

In 1997, European Night Services Ltd. ruled out the night services that BRB had originally proposed, and the train sets were never made operational.

The Virgin Report

In June 1998, in response to an indication in ICRRs bid that Regional services would not be viable without public subsidy, Virgin proposed to the DETR that it should operate a Regional service at its own risk. At the beginning of the following year, Virgin analysed the market and technical potential of such a service, including a service terminating at Watford that would provide an easy interchange to the WCML and ECML. The Virgin reports conclusions were similar to ICRRs on the limited size of the market for Eurostar services outside London and the South East of England. It took the view, however, that the introduction of Regional services would offer a net gain for Inter-Capital Eurostar, since many customers would be new customers rather than simply people transferring from Inter-Capital Eurostar. During our study, Virgin informed us that it may not be feasible to offer the services it proposed.

The Fast Tracks to Europe Alliance (FTEA) Reports: FTEA, a group representing local authorities and private rail organisations with a strong interest in Regional Eurostar, published two reports in favour of Regional Eurostar services. The first report, The Impact of CTRL on the Regions North of London (July 1998), saw economic, social and environmental benefits in a link from the United Kingdom regions to Europe. It took the view that after the heavy investment in trains and path clearing, abandoning the plan would be wrong, and that failing to provide a regional service would mean breaking a promise to the Regions. The second report, published in January 1999, was a critique of the ICRR report. It concluded that ICRR had underestimated both current demand for Regional Eurostar and the rate at which demand would grow. It also suggested that the proposed Government review should examine the feasibility of splitting trainsets and carrying domestic passengers.

The ICRR Report: in response to a request from the Department of the Environment, Transport and the Regions (DETR), ICRR reviewed the commercial viability of Regional Eurostar services. Its report, published in November 1998, evaluated options for the provision of day services based on the original BRB proposals. ICRR examined the market potential of each of the options and assessed related operational, technical and legal factors. It also examined the potential of Watford and Kensington Olympia as additional stations.

The report concluded that direct Regional Eurostars to destinations north of London are not commercially viable on a cash basis at least until completion of both phases of the Channel Tunnel Rail Link.

Specifically, the authors suggested that journey times might be too long to attract a significant share of business travellers away from air, and that the service might be too expensive or too infrequent to compete directly with low-cost air and coach for the leisure market. They also suggested that mixing domestic and international passengers to add revenue to the domestic part of the train journey could pose operational problems in view of security requirements.

ICRR took the view that a Paris service terminating at Watford, possibly via Kensington Olympia, with domestic feeder services from the Regions, could be the most effective way of providing Eurostar services between the Regions and Paris.

The Select Committee Report: in January 1999, the Environment, Transport and Regional Affairs Select Committee published a report on Regional Eurostar services. The report was based on evidence presented at House of Commons hearings by the Government, LCR,ICRR, Virgin, Railtrack, the FTEA, the Chartered Institute of Transport and other interest groups. The Committee took evidence on the economic, social and technical implications of the various options.

The report recommended that the Government review should cover the following subjects:

  • The original proposal for Regional Eurostar services, and in particular Section 40 of the Channel Tunnel Act (1987), and the investment already made in train sets and path clearance.
  • The market potential of, and technical obstacles associated with, operating Regional Eurostar, including the use of Kensington Olympia, Watford and Heathrow.
  • The analyses presented by the interest groups, including the Virgin Groups business plan for Regional Eurostar.
  • The possibility of carrying domestic passengers as well as international passengers.
  • The impact of CTRL1 and CTRL2.
  • Consideration of EUKLs obligation to maximise the revenues flowing from it to LCR.
  • The possibility of leasing the regional trainsets on a short- or long-term basis if a firm decision about Regional Eurostar services could not be reached.

The Governments Response: the Governments response to the Select Committee report was published in March 1999. The Terms of Reference for this review by consultants commissioned by the DETR are based on that response. The Department invited the consultants to consider a wide range of options for Regional Eurostar services, including all those mentioned in previous reports, and to assess the costs of implementing each option before and after CTRL.

After a competitive tender in response to the Terms of Reference, Arthur D. Little, with Oscar Faber, Halcrow Rail and expert advisers Professor Roger Vickerman and Professor Rigas Doganis, was appointed in June 1999.

Table 1 shows the milestones in the story of Regional Eurostar.

Table 1: Milestones
Date Event
1987 The Channel Tunnel Act gains royal assent; Section 40 requires British Rail to prepare a plan to address the issue of international rail travel from the regions.
December 1989 Publication of BRB response, International Rail Services for the United Kingdom, outlining proposed Regional Eurostar services.
December 1991 Seven Regional Eurostar trains ordered (delivered 199596).
May 1994 Opening of the Channel Tunnel.
November 1994 Introduction of Inter-Capital Eurostar services from London Waterloo.
May 1995 Introduction of a daily domestic rail feeder service for Eurostar passengers to cities north of London, with cheap add-on fares; service was stopped in January 1997.
February 1996 The right to finance and operate CTRL won by LCR.
April 1998 Bids invited for the operation of Eurostar under management contract to EUKL.
June 1998 The management contract awarded in principle to ICRR.
June 1998 Virgin proposal submitted to the Government.
July 1998 Publication of the FTEA report: The Impact of CTRL on the Regions North of London.
November 1998 Publication of the ICRR report on Regional Eurostar services.
November 1998 Contract signed with ICRR to provide all Eurostar services.
January 1999 Publication of FTEA critique of the ICRR report.
January 1999 Publication of the Select Committees report on Regional Eurostar services, examining evidence from interest groups, and outlining recommendations for Government review.
March 1999 Government response to the Select Committees report, outlining the key features of the Terms of Reference of this study.
June 1999 Arthur D. Littles study commissioned.
2003 CTRL1 due for completion, with potential savings of up to 20 minutes on Regional Eurostar journeys.
2007 CTRL2 due for completion, with potential savings of up to 50 minutes on Regional Eurostar journeys and opening of St. Pancras as an Inter-Capital Eurostar station.
Source: EUKL, BRB, ICRR, Virgin, House of Commons, FTEA

Chapter two – The challenges

The success of high-speed rail in continental Europe is often quoted in the debate on Regional Eurostar. Since the 1980s, for example, the Paris Lyon services and the Madrid Seville service have been taking more than 50 per cent of their respective travel markets. And Inter-Capital Eurostar now has 60 per cent of the rail and air market between London and Paris/Brussels.

Regional Eurostar, however, faces a different set of challenges from the other services. The market for Regional Eurostar beyond the south of England is limited, and competition from air, domestic rail links, Inter-Capital Eurostar and coach is strong, with services already available to meet demand. Outside the south of England, Regional Eurostar journeys will be long and, with only seven trainsets, the service will be infrequent. Inconsequence, its appeal to business travellers prepared to pay full price and first class fares will be limited. At the same time, its high fixed costs will restrict its ability to compete with low-cost airlines for the more cost-conscious leisure market.

We explore these challenges below.

A. Limited market

Traffic between the United Kingdom and continental Europe has been growing at over 5 per cent a year since 1991. Nearly 60 per cent of that traffic, however, is to or from Greater London and the South East of England. The core addressable continental markets for Regional Eurostar Paris, northern France and Belgium are also growing, but they represent only 22 per cent of total cross-channel air and Inter-Capital rail traffic, the main competing modes to Regional Eurostar. Travel from the United Kingdom regions to Paris, northern France and Belgium is a small proportion of the total, suggesting that the core market that Regional Eurostar could address is also limited: in 1998, it amounted to 6.8 million trips a year, Figure 1.

1. Cross-Channel Travel Market Is Large And Growing

The number of single trips to and from the United Kingdom and the main continental markets by all transport modes totalled 81 million in 1998, up from 74.4 million in 1996. Seventy-nine per cent of 1998 trips were for leisure, 21 per cent for business. United Kingdom residents travelling to the continent made up 70 per cent of the traffic overall. The recent growth in number of trips has been driven mainly by:

  • New low-cost airlines, competitive scheduled flights and cheap, direct flights to new leisure destinations.
  • The introduction of Eurotunnel and Eurostar, with the resulting increase in competition from ferry companies and air.
  • Economic factors: economic growth and the strength of sterling.
  • Consumer trends: shorter, more frequent holidays, weekend breaks and shopping trips.

Figure 2 shows the compound annual growth rate of total cross-channel traffic from 1991 to 1998.

Traffic will continue to grow with increases in disposable income, and closer economic ties with Europe: the short-break market will grow faster than other segments.

In view of proximity to the continent, high population density, and high rates of business and leisure travel, Greater London (32 per cent), and the South East of England (26 percent) account for 58 per cent of cross-channel traffic, Figure 3.

2. Paris, Northern France And Belgium Are Core Markets

All the proposals for Regional services assume that the services will link the United Kingdom regions to Paris and northern France and Belgium via a stop at Lille. In view of the journey times, the viability of direct services to destinations beyond France and Belgium is questionable. City centre to city centre journeys from Manchester to Cologne, or Manchester to Amsterdam, for example, would take about 10 hours. On Inter-Capital Eurostar, which has shorter journey times than Regional Eurostar would have, only four per cent of travellers are from European countries beyond France and Belgium, suggesting that long journey times are unacceptable, Figure 4.

According to the International Passenger Survey (IPS) and the Civil Aviation Authority(CAA), the primary sources for information on United Kingdom international traffic, France and Belgium accounted for 44 per cent of total cross-channel traffic in 1998, Figure 5.

Regional Eurostar is less likely to capture traffic beyond Paris/Brussels/Lille, as the journey time would be longer and the air offering is more competitive. Paris, northern France and Belgium account for almost 40 per cent of total cross-channel passengers, largely as a result of the heavy concentration of passengers on foot, coach and car taking day and short-break ferry trips to northern France. They account for only 22 per cent of the air and rail part of the market.

3. Travel Between London And The South East And France And Belgium Is A Large Proportion Of The Market

Travellers visiting from the United Kingdom make up 70 per cent of total trips between France and Belgium and the United Kingdom; travellers from London and the South East make up a high percentage of that total. From outside London and the South East, the number of journeys per head per year is low, Figure 6.

For visitors from the continent, London and the South East are the main business and leisure destinations, attracting over half of all visits. The total number of trips to and from France and Belgium and each United Kingdom region is shown in Figure 7.The limited market outside London and the south east of England represents a major challenge to Regional Eurostar. Even the largest regional market, the Eastern Region which includes Hertfordshire, Bedfordshire and Essex, accounts for only 9.3 per cent of total travel to/from France and Belgium. The difficulties that Inter-Capital Eurostar has had in reaching breakeven underline the challenge. In 1998, Inter-Capital Eurostar carried more than six million passengers, 60 percent of passengers travelling by air and rail between London and Paris/Brussels. Despite serving the large markets in London and the South East, Inter-Capital Eurostar made a loss.

4. The Market That Regional Eurostar Could Address Is Limited

The core market for Regional Eurostar in the United Kingdom excludes London and the South East, which are addressed by Inter-Capital Eurostar. The South West, Wales and Northern Ireland are also excluded since they cannot be reached by Regional Eurostar trains on electrified track. On the near continent, southern France is not part of the core market owing to the long journey times. Two other segments are also not part of the core markets: the private car segment (which accounted for 43 per cent of traffic between the United Kingdom and France and Belgium in 1998) because it meets different needs from rail and air; and the day-trip market by air or coach because the journey times from the regions to Paris, northern France and Belgium are too long for day trips to be feasible. Removing these segments reduces the core addressable market from 15 million single trips to 6.8 million.

Regional Eurostar will therefore be competing principally for the overnight stay travel market between the United Kingdom regions and Paris, northern France and Belgium that is currently served by air, coach and Inter-Capital Eurostar with domestic rail connection. The size of this market in 1998 was 6.8 million single trips, Figure 8.

B. Strong competition

The regional transport environment has changed since the publication of the Channel Tunnel Act in 1987, as new low-cost airlines and more scheduled airlines, such as Air France, Sabena, British Midland and KLM, have entered the market on many routes. With competitive fares, high frequencies and low operating costs, airlines offer a hard-to-match service for both business and leisure travellers. Domestic links to Inter-Capital Eurostar attract many travellers, and the most price-sensitive end of the market is captured by the highly cost-competitive coach operators.

Air accounts for 51 per cent of the total cross-channel market, Inter-Capital for 8 per cent and car for 26 per cent, Figure 9.

1. Competition From Regional Air Services

Regional airports in the United Kingdom are taking a greater share of traffic on European routes, growing faster than the market as a whole: between 1996 and 1998, Paris traffic grew at around 10 per cent a year and Brussels traffic at over 35 per cent a year. The share of United Kingdom Paris air traffic captured by regional airports increased from 29 percent in 1996 to 34 per cent in 1998, and that of United Kingdom Brussels air traffic from33 per cent to 44 per cent, Figure 10. The increase was due in part to Inter-Capital Eurostar taking market share from air in the South East. Regional airports are gearing up for growth, for example by expanding terminals and improving rail access. The Governments policy (as set out in the Integrated Transport White Paper) is to encourage the growth of regional airports to meet local demand for air travel where growth is consistent with the principles of sustainable development.

In a growing overall travel market, the new scheduled and low-cost airlines serving regional routes are driving the growth of air travel. More scheduled airlines are offering services on regional routes, including services on routes that used to be served only by British Airways or British Midland. At the same time, low-cost newcomers are attracting regional travellers: easyJet, for example, with its second United Kingdom base at Liverpool Airport, offers flights to Amsterdam, Barcelona, Nice, Geneva and Malaga and is aiming to expand. Go is rumoured to be interested in starting services from Manchester Airport and Ryanair offers two services a day between Glasgow and Paris.

As new airlines enter the market, fares are becoming increasingly competitive, with airlines cutting leisure fares on most regional routes. The leisure fares from Glasgow to Paris, for example, have fallen significantly; Ryanair offers return fares at £67, Air France at £70 and British Airways at £135. Prices are likely to go on falling as competition intensifies and passengers become more cost conscious. In many cases, fares start to drop as soon as more than two carriers enter the market, for example on the London Glasgow route, Figure 11. Increased competition on a regional air route to Paris is likely to have the same effect.

Average business fares have also declined. More business travellers are choosing to travel on restricted fares from low-cost and other airlines as companies seek travel cost economies, especially for shorter routes. As a result, low-cost airlines are beginning to service business-dominated routes, such as London to Düsseldorf or Frankfurt (via second tier airports). On balance, we expect air fares to continue to decline as airline competition increases; possible rises in fuel taxes and landing fees are unlikely to have a major impact.

The new 50- and 100-seater jet aircraft on several regional routes are enabling airlines to offer flight frequency as an additional attraction, while giving them the flexibility to adjust capacity to demand. In contrast, Regional Eurostar, with 550 seats to fill on each train, could offer a low frequency service only.

2. Competition From Inter-Capital Eurostar

Inter-Capital Eurostar is attractive to travellers in London and the South East, offering a frequent city centre to city centre service with competitive fares and journey times. Eurostar currently offers up to 21 departures on Friday and 18 on Monday to Thursday from Waterloo to Paris. It also offers 10 departures a day to Brussels.

The journey time to and from city centres on both routes is competitive with air: station-to-station times are 3 hours to Paris and 2 hours and 40 minutes to Brussels. The completion of CTRL1 and CTRL2 will reduce travel time by up to 20 minutes and40 minutes respectively.

Inter-Capital Eurostar also serves those parts of the regional market that have access to London by rail: in 1998, over 600,000 trips between United Kingdom regions outside London and the South East and the continent included connection with Inter-Capital Eurostar. The difficult interchange with Waterloo from other London stations makes Inter-Capital Eurostar unattractive, however, for many travellers from the regions. On arrival at Kings Cross, Euston or another main line station, passengers have to make the time-consuming and inconvenient transfer across London by Underground or taxi to Waterloo.

The completion of CTRL2 in 2007, and the opening of St. Pancras as an international terminal, will save transfer time and offer a more convenient interchange via an underground ticket hall from the ECML and a shorter link from Euston for passengers from the WCML. This will make Inter-Capital Eurostar a more attractive option for passengers from north of London.

3. Competition From Low-Cost Coach Services

No scheduled coach services run direct from the United Kingdom regions via cross-channel ferry to the continent. Eurolines, the main operator, routes all coaches via London, where passengers have to spend one to two hours in transit. Journey times are long eleven-and-a-half hours or so from Birmingham to Paris via London but fares are low: £62 weekend return from Birmingham to Paris (student fares are £57). Scheduled coaches, therefore, attract travellers for whom saving money is more of a priority than saving time, for example, students, backpackers and the elderly.

Single cross-channel trips by scheduled coach in 1998 amounted to 700,000. Seventy percent of them were to or from London and the South East; these passengers might therefore choose to travel by Inter-Capital Eurostar instead. To attract coach traffic from other regions (30 per cent of the total), Regional Eurostar would have to offer fares comparable with the coach operators.

The cross-channel inclusive tour coach market was estimated at 5.8 million single trips in1998. The market is highly fragmented, with a large number of operators. Customers are less price sensitive than those on scheduled coach services; the key customer segment is mature travellers, most of them retired or semi-retired who tend to choose coach because of the convenient pick-up and drop-off service, and because of the sociable travel experience.

Coach tour operators are beginning to offer packages that combine coach with rail or air travel for part of the journey. A Regional Eurostar service could capture some coach business in view of the time saving that it would offer for passengers from the north. Coach operators such as Shearings that already use Inter-Capital Eurostar in package tours to France and Germany have had a reasonable response from customers for those tours.

4. Private Vehicles Serve A Different Market Segment

Regional rail services are unlikely to attract a significant share of the cross-channel car market.

Car users and public transport users (air, coach and rail) form distinct markets. Much of car use is by people touring between the United Kingdom and the near continent who want to have the car available throughout their stay. Many car users want room for luggage, equipment or purchases, and many travel with family, friends or colleagues. For these travellers, public transport is unlikely to be an attractive option.

Research on Inter-Capital Eurostars market supports that view. From 1994 to 1998, when Inter-Capital Eurostar gained 12 per cent market share, with nearly six million trips in 1998, the share of car travel between the United Kingdom and France and Belgium rose from 40 per cent to 43 per cent. Inter-Capital Eurostar won its share from air, coach and foot passengers. In EUKLs market research on the travel mode that passengers on Inter-Capital Eurostar might have chosen had Eurostar not existed, only seven per cent chose car. Sixty-five per cent said air. Our focus groups concluded that at the proposed fare levels, few current car users would be likely to be attracted to the Regional Eurostar service even if it did meet their needs. Crossing the Channel with a car and four people from the Midlands to Paris, for example, would cost £220£280 including fuel, depending on the crossing and the type of car. Even assuming low fares, the same group would have to pay £290£425, depending on type of ticket and distance and transport to the nearest station, for the Regional Eurostar trip.

C. Potential competitive disadvantages

Regional Eurostar could have advantages over other travel services in convenience of city centre to city centre travel, but would have three disadvantages. First, distances between the Regions and Paris are long, and the trains speed in the United Kingdom, except on CTRL, is limited (and will start to fall behind domestic speeds); journey time savings from CTRL will benefit Inter-Capital Eurostar equally. Second, owing to the limited number of trainsets, service frequency will be lower than air, at least in major regional cities, and lower than Inter-Capital Eurostar. And third, Regional Eurostar is not a low-cost operator, limiting its freedom to compete on price.

1. Long Distances At Slow Speed

The first disadvantage from Regional Eurostars point of view is that the distances from the United Kingdom regions to Paris or Brussels are long: 800km from Manchester to Paris and1,230km from Glasgow to Paris. Train speeds will be limited to a maximum of 201kph(125mph) in the United Kingdom until CTRL is available, when speeds from London to the Channel Tunnel can be increased. As a result, journey times will be long, especially in comparison with journey times by air.

Allowing for realistic transfer times, journey times by Regional Eurostar will be about the same as those via domestic rail and transfer to Inter-Capital Eurostar. Regional Eurostar will also be limited to lower speeds than main line domestic services, when these are upgraded north of London, and before CTRL2 is completed Regional services will have to travel around London on the slow North London or West London Lines.

Figure 12 compares typical journey times between cities in the United Kingdom regions(Birmingham, Manchester, Newcastle, York and Edinburgh) and Paris now and after 2007,when CTRL2 is open. It also shows comparable times using Inter-Capital Eurostar via London, allowing for access to the nearest airport or rail station, including any interchange en route. Times from Watford, a possible Regional Eurostar station, are also shown.

Journey times on Regional Eurostar are longer than those by air; the journey on a domestic train to London with a change to Inter-Capital Eurostar takes about the same time or longer on current schedules, mostly shorter after 2007. Passengers might want to use the Regional service, however, to avoid having to change trains, or if fares were lower.

Figure 13 shows distance and speed along sections of the line from York to Paris now and after 2007. Using CTRL2, and avoiding the route via Kensington Olympia round London, will save 50 minutes after 2007.

CTRL1 will reduce journey times to and from the United Kingdom regions by 20 minutes after 2003, but Regional Eurostar services on the WCML will still need to connect with the Channel Tunnel via Kensington Olympia, and those using the ECML will need to use the North London Line between Holloway and Willesden. On completion of CTRL2, the routing of trains on to the second section of the CTRL will be via Stratford and St. Pancras (obligatory for the ECML, optional for the WCML).

The time savings for the WCML are about 15 additional minutes (35 in total). Given the expected heavy loading of the WCML with domestic rail services, however, the paths required to achieve these savings may not be available. With direct access to CTRL2 and less congestion, services on the ECML could save up to 30 minutes (50 in total).

2. Low Frequency

The second competitive disadvantage for Regional Eurostar is that it will be a low frequency service. Earlier studies showed marginal financial results from the use of seven trainsets. We have, therefore, concentrated on options based on running the services with the existing trains, rather than those that include investing in additional trainsets to increase frequency.

To allow for maintenance and back-up, only five, or at peak six, of the seven Regional Eurostar trainsets can be in operation on a given day. Each train can operate two one-way services between the North and the Midlands and Paris in a day but cannot make a roundtrip daily service from Scotland. Alternatively, with suitable scheduling, each train could also run three (and, after CTRL2, four) one-way services to/from Watford.

Frequency will be limited by three factors:

  • The availability of paths on key segments of the track in the United Kingdom and France and through the Tunnel, and feasible running speeds for the journey. Paths reserved for the original BRB proposed service are still available. Additional paths will be difficult to obtain.
  • Turnaround time: in an emergency, the trains can be cleared and made ready for the return journey in 3040 minutes, but 60 minutes is a more reasonable working assumption.
  • The availability of maintenance and overnight stabling: in the United Kingdom they are available at the North Pole depot a few miles west of Paddington, at Manchester and at Glasgow; in France, they are available at Le Landy depot, near Paris.

Taken together, these factors suggest a range of possible daily service frequencies using the existing trainsets: five for near-national coverage, six in the Midlands and seven near London.

3. High Cost Base

The third competitive disadvantage that Regional Eurostar will face is the cost of operation, particularly in relation to low-cost airlines. Their costs are currently lower than those of Inter-Capital Eurostar, which in turn are about the same as those of the scheduled airlines.

Table 2 shows our breakdown of the cost components of Regional Eurostar and a low-costair line, excluding marketing and sales. Some cost components are not directly comparable: for example, track access is an annual fixed charge for Regional Eurostar in the United Kingdom, while a landing and take-off charge is levied for every flight.

Regional Eurostar has a higher cost per passenger than a low-cost airline, and higher fixed costs. Variable costs per passenger are also higher on Regional Eurostar owing to the high Eurotunnel variable transit costs.

These conclusions are based on costs excluding those of CTRL, which are broadly independent of whether Regional Eurostar is operated. For comparison, we estimate that a traditional scheduled airline would have a fully allocated cost per passenger similar to Regional Eurostars, while a low-cost airlines would be half.

Table 2: Main Cost Components Low-Cost Airline and Regional Eurostar
Cost Component Low-Cost Airline Regional Eurostar
Fixed infrastructure charges related to existence of service Fixed station costs and depreciation
Transport system costs charged to service Aircraft ownership cost and related airport base and facilities Crew maintenance Trainset ownership cost (based on current value)Crew maintenance
Administration costs General and administrative costs General and administrative costs
Variable costs per flight or service Crew
Airport landing and take-off charges
Other airport usage costs
Other operating costs
Passenger embarkation and security staff
Track access*
Variable costs per passenger Passenger embarkation and other airport charges On-board catering Eurotunnel variable transitcosts**
* Estimate by service
** After the end of the minimum usage period
Source: ADL analysis

Chapter three – Views from the consultations, focus groups and interviews

After years of debate, Regional Eurostar still arouses strong feelings, as our consultations, focus groups and interviews have confirmed.

We held 12 regional consultations, with local politicians and officials and representatives of transport, business and tourist bodies and other regional organisations. Broadly, the people we consulted with are in favour of a Regional Eurostar service, at least in principle. People in our focus groups in Scotland, the North West, Yorkshire and the Humber, the Midlands and the South East were slightly less enthusiastic about the prospect. The groups were made up of members of the public who travel for business and pleasure, and people from the travel trade; we also interviewed people representing airlines, regional airports, coach companies, travel agents and tourist organisations.

Although there were some differences of opinion, the consultation and focus groups agreed that if a regional service is to be introduced it should be a direct service. Participants saw such a service as offering various benefits:

  • Improving travel options for specific passenger groups, including families, the elderly,and inbound tourists.
  • Making use of the train and network improvements that the service was meant toexploit.
  • Putting an address on the European rail network.
  • Offering environmental benefits.

As we explain below, we believe that some of the perceived benefits may be overstated, while others could be gained from action unrelated to Regional Eurostar. These strongly held views do, however, need to be taken into account.

A. Improving travel options for specific passenger groups

With attractive ticket pricing and reasonable journey times, Regional Eurostar would enhance the travel options for passengers to the continent. At the moment, travel between the United Kingdom and the near continent is difficult or uncomfortable for some groups. Market research carried out for Virgin and for Strathclyde Passenger Transport Authority confirms the interest in through services. The Regional Eurostar service could offer advantages over other means of travel:

  • Uninterrupted journey, avoiding interchanges and transfers, especially across London.
  • More space for passengers and luggage, improving the travel environment.
  • More relaxed access procedures, with less congestion.
  • Direct travel from city centre to city centre.
  • Good amenities on board.
  • Interchange with the continental rail network for destinations not served by air or coach.
  • Through-ticketing and through-pricing.

These advantages make the service potentially attractive to some groups, as shown in Table 3.

Table 3: Groups for Whom Regional Eurostar Could Offer Benefits
Group Advantages Perceived
Families More convenient than air travel (on-boardimmigration procedures, no luggage collection,a better environment for children).
Elderly Convenient, city centre to city centre journey.
Travellers for whom time is not a primary concern Opportunity to appreciate the travel experience.
Groups Opportunity to socialise and enjoy the travelexperience.
Tourists coming to the UK Opportunity to reach their destination withouthaving to change; many tourists see changing inLondon as a barrier.
Business travellers Undisturbed time for working on the train.
Source: ADL research

B. Making use of the train and network improvements

Regional interests and lobbying groups across the country stressed the need to make use of the purpose-built Regional Eurostar trains and specially prepared track. In their view, common-sense and practical economics dictate that the investment should be exploited. Various speakers pointed out that most of the cost of putting the trainsets into service has been incurred already.

We understand these sentiments. In our view, however, as discussed below, the investments in trainsets and track improvements are sunk costs that should not influence the way forward now; the decision should be driven by the future costs and benefits of Regional Eurostar services. And, as discussed in Chapter 6, the trains and contracted paths on the network could be used for domestic services.

1. Purpose-Built Trainsets And Paths Are Ready

In December 1991, the British Rail subsidiary that is now EUKL ordered seven Regional Eurostar trainsets at a cost of £180 million. The trainsets were delivered in 1995 and 1996,but have not been used for Regional Eurostar services. According to Eurostar, five of the trainsets could be made available for use in the next 6 months; the need to replace essential components on the others would keep them out of service for 9 to 12 months.

An investment of £140 million has been made to accommodate Eurostar trains, some domestic rail tracks have been cleared and some electrification work has been done. The stations along these lines have also been adapted for Regional Eurostar, for example by lengthening the platforms.

2. Action Would Relieve Frustration That Nothing Is Happening

Many people believe that regional cross-channel passengers have gained nothing from the national investment in the Channel Tunnel; indeed, some believe that the perceived unfairness of the situation is increasing the north-south division. Many also feel strongly that, since the trainsets and track improvements have been paid for at least in part by Treasury funding from national tax revenues, the benefits should be widely shared. Some point out that, in the vote for the Channel Tunnel Act, regional MPs claimed that they were promised that the benefits of the Channel Tunnel, including the provision of through passenger services, would be national. Since regional travellers can join Inter-Capital at stations in London or the South East, they have gained some benefits. But many interested parties believe that some action would be better than no action, and that almost any regional service, however limited, would be better than none. We understand and appreciate these views and have taken them into account in our search for viable options.

3. Operating The Service Would Offer Evidence Of Demand

Many people believe that making an accurate forecast of demand before the service is in operation is impossible. In our regional discussions, many speakers pointed out that previous attempts to attract regional demand whether by the now discontinued international feeder trains serving Waterloo or through subsequent marketing of the Inter-Capital Eurostar services in the regions had been so low key that the low take-up was not surprising. They maintain that the introduction of a well publicised and marketed service would be the kick-start that Regional Eurostar needs to attract the latent demand that they believe exists. Running a service would provide additional valuable information on demand.

4. But The Investment To Date Is A Sunk Cost

The £320 million investment to date (£180 million for trains and £140 million for path clearance) is a sunk cost. It should not therefore drive future decisions. The focus now needs to be on how best to use the assets created to generate returns, whether by running Regional Eurostar services or for other purposes. The trains and paths now reserved for Regional Eurostar could be used for domestic services, generating benefits for United Kingdom travellers and for EUKL, the owner of the trains. A minority view in the consultations was that domestic use of the trains would be better than no use at all.

In Chapter 6, we compare the alternative uses and their benefits with the benefits of using the trains and paths for their original purpose.

C. Putting an address on the European network

With few exceptions, regional interests are strongly in favour of a direct Regional Eurostar service. Over the last 10 years, the original vision for the service has been modified, with the growth of competing modes for continental travel, especially low-cost airlines. However, a direct service, even if it is low frequency, remains the favoured option.

People in all regions see having an address on the European rail network as important ifthe regions are to compete effectively within Europe. Many interested parties also believe that Regional Eurostar will stimulate the economy. On practical grounds, they believe that having both rail and air connections will increase the reliability of the travel service.

The groups recognised that the length of journey times from north of Birmingham and Peterborough would deter most business travellers, but saw a low frequency service as acceptable to leisure travellers. Only sleeper services, in their opinion, would have real appeal to business travellers from Scotland and the North. Most business flyers in the groups saw no reason to change modes; of the small number who are afraid of flying, many are equally afraid of travelling through the Channel Tunnel.

Some of the people we spoke to take the view that Regional Eurostars main economic impact would be to bring new leisure travellers into the regions, an important consideration for places in which tourism is important, or to which there is a flow of student and sports-related travel, for example, Birmingham, Manchester, Newcastle and Glasgow. They see these passengers as an important part of demand. As the passenger forecasts in Chapter 5 show, however, we believe that the benefits of Regional Eurostar are in providing another transport option for these travellers, rather than creating new demand that would increase economic wealth.

Suggestions that Regional Eurostar would stimulate the economy are hard to substantiate, with little evidence of pressure for such a service from outside the political and economic development interests. In the focus groups, most people favoured air travel to Europe for business and leisure. Business users see flying as fast and reasonably priced, and most leisure users see it as a special occasion. Almost everyone we spoke to considered length of journey time and price as the main barriers to Regional Eurostar. Starting a price war with the airlines would attract customers but would make it more difficult to offer a financially viable service.

We see no evidence of a link between increasing incoming investment (domestic or international) and the existence of a Regional Eurostar service. None of our regional meetings has shown any evidence that growth in economic activity or regeneration(e.g. inbound investment) or even tourism is linked to the introduction of a Regional Eurostar service. Nor have we seen evidence of market pressure for the service, or evidence that its absence stops people visiting the United Kingdom regions.

We see a contradiction, moreover, between the desire for an address on the network and the frequently expressed view that leisure travel, mainly outbound from the United Kingdom, should be Regional Eurostars target market. If Regional Eurostar is to be primarily a leisure and tourist service, with a limited business role, the economic arguments for it are weakened. In our view, the benefits of an address on the network are mainly to do with image and presentation, rather than meeting an essential travel need or generating economic growth.

D. Offering environmental benefits

Many of the interest groups we consulted asserted that through-rail travel is more beneficial environmentally than air or coach travel. This point of view is based on the inherently lower emissions and lower pollution from electrically powered rail. In Chapter 5, we evaluate the environmental impact of the Regional Eurostar option selected.

Experts agree that rail is inherently more environmentally friendly than air. The assessment of environmental impact, however, needs to take into account the number of passengers on the train; it will also depend on whether the passengers on board would have travelled by another mode, and if so which one, had Regional Eurostar not been available. Transferring travellers who would have used domestic rail services to connect to Inter-Capital Eurostar to Regional Eurostar is unlikely to give a net benefit. The environmental case for Regional Eurostar, therefore, depends on the service operated and the number of new rail passengers carried.

Chapter four – Feasible service options

Options for Regional services proposed over the years have varied by route (WCML and ECML, Great Western) and regional coverage (to the North, to the West, to the South East only), and by interchange points: north or west of London. Within each option, operational variations have also been proposed: whole trainsets (14 carriages) or split (two seven-carriage trains); day or 24-hour service; stations at which the trains stop and how often; whether they pick up domestic passengers for parts of the journey.

In this chapter, we outline the options for Regional Eurostar, describe the screening process that we applied to shortlist them, and describe the options that survived the technical feasibility screen. We also discuss how the service should be operated, including termini and stops, the schedules that make most commercial sense on these routes, and when to start the service. At the end of the chapter, we describe the shortlisted options that we examine in detail in Chapter 5. Figure 14 summarises our approach.

A. Feasible routes for regional Eurostar

To leave out no reasonable suggestions, we started by listing all the possible route options and all the variations within them. We then screened the options against technical criteria to create a shortlist.

1. The Long List Of Routes

The long list of routes was made up of:

  • Options based on the original BRB proposal and on ICRR, EUKL and Virgin proposals.
  • Options proposed during our consultations and discussions.
  • Options arising from internal discussions with our industry experts.

We grouped the options by regional coverage and by the interchange station with Eurostar, and added two options as links with airports in the south of England. We also considered two continental termini: Paris and Brussels, Table 4.

Table 4: The Long List of Routes
Regional coverage:
North of England and Scotland (Manchester and Glasgow or Edinburgh) North of England(Manchester and Newcastle) North of England (Leeds and Liverpool) Midlands (Birmingham)South West (Swindon, Bristol and South Wales) International services terminating in the
South East (at Cambridge, Brighton, Southampton, and Bournemouth)
North of London M25 (Watford and/or Stevenage/Potters Bar) West of London (Reading)
Airport link:
Heathrow Gatwick
Continental destination:
Paris Brussels
Source: ADL and industry sources

a. Regional coverage.

The original concept for Regional Eurostar, as indicated in Section 40 of the Channel Tunnel Act, was to provide direct services to the United Kingdom regions. Routes proposed vary by regions to be served.

North of England and Scotland (Manchester and Glasgow or Edinburgh): The original BRB proposal was to use the seven trainsets for day services on the WCML to Manchester and on the ECML to Edinburgh.

The Virgin Group proposed additional stops at Watford, Kensington Olympia and Ashford to the day services above and additional services terminating at Watford. ICRR considered a stop at Kensington Olympia as well as Watford. Both included Glasgow as an extension to the day service.

North of England (Manchester and Newcastle): A variant of the BRB proposal is to stop the service at Manchester on the WCML and at Newcastle on the ECML. Shortening the journey would allow the trains to be used for daily round trips, while providing direct services to an extensive part of England. Travellers from Scotland would be able to join the service at Newcastle, which has frequent links with the Scottish regions. A north of England service might also find markets in Liverpool and Leeds. Both are on lines connected to the WCML and the ECML.

The Midlands (to Birmingham only, with transfer to domestic rail at Birmingham New Street or Watford): This option offers maximum frequency of service, with intermediate stops in the south Midlands and South East. At the centre of a manufacturing and service economy with an extensive road and rail network, Birmingham has the potential to generate significant demand. When CTRL2 is in place, Paris and Brussels might come near to a4-hour journey time if suitable paths were available. Both Birmingham New Street and Watford Junction could act as interchange points for passengers to and from a range of locations to the north.

Services to the South West (Swindon, Bristol and South Wales): Suggestions have also been made for services to the South West and Wales, regions not included in earlier proposals. In the proposals from ICRR, Virgin and EUKL, passengers from some parts of central and north Wales can join Regional Eurostar only after long and slow rail or road journeys to Birmingham New Street or Crewe.

International services terminating in the South East: A theme running through some proposals is that the Regional Eurostar service should be concentrated in the South East, the largest part of the market for travel to the continent by all modes, with the heaviest airport and road congestion. Cambridge, Brighton, Southampton and Bournemouth have been mentioned as possible termini.

b. Interchange.

The opening of CTRL2 and St. Pancras will reduce but not eliminate the inconvenience for passengers from the regions of having to cross London to Waterloo to join Eurostar. One option for Regional services therefore is to create Regional Eurostar interchange points that are readily accessible from the domestic rail and road networks. We examined two possibilities:

North of London M25 (Watford and/or Stevenage/Potters Bar): EUKL has already looked at Watford as a terminus for an M25 interchange on the WCML. Watford, positioned between the Heathrow and Luton/Stansted catchment areas, is a potentially attractive station for passengers by motorway and rail from outer north west London and the Home Counties. The ECML stations at Stevenage and Potters Bar could attract passengers from north of London; they are close to Luton and Stansted Airports, but Waterloo is not easily accessible.

West of London (Reading): For markets west of London with poor links to St. Pancras and Waterloo, there is support for Regional Eurostar services terminating at a west of London interchange. Creating an interchange on routes that are not electrified would present a challenge: proponents suggest diesel haulage of the Eurostar carriages. Reading could eventually be a west of London interchange, accessible to Regional Eurostar via Great Western electrification and providing an alternative link to Birmingham. It could also be reached by third rail electrification from Waterloo, although the track would need to be specially prepared, and speeds would be low.

c. Airport link.

Long distance rail access to airports has been a common theme in the development of continental airports. Schiphol, Brussels and Charles de Gaulle all have, or are planning, fast international rail access, while Frankfurt, on the new Rhein Main Line, and other airports have wide domestic rail links. We have therefore examined possible Regional Eurostar links between Heathrow and Gatwick Airports and Paris. Several options based on using some Inter-Capital and all the Regional Eurostar trainsets, full or split, have been proposed. The trains could access Heathrow Airport at one of two possible stations near Terminal 4, and eventually at the station planned for Terminal 5.Terminal 5, with its through-platform, would open up an option in the longer term to operate through Eurostar trains from west of Heathrow, for example from Reading via Terminal 5 to Paris. Each of these options would increase the potential for integrated travel using a multi-modal terminal.

A direct Gatwick Paris link has been suggested, but capacity limits at the access junction north of Gatwick and limited potential traffic volumes might rule it out.

d. Continental destination.

Analysis of the cross-channel market and comparisons of journey times by Regional Eurostar and air show northern France and Belgium as the most attractive continental destinations. Paris and Brussels are the obvious candidates. Since trainsets and frequency will be limited, concentrating capacity on one of the two makes sense.

Paris, northern France and other French destinations represent about 80 per cent of leisure demand and about 65 per cent of business demand between the United Kingdom and the near continent. Inter-Capital Eurostar, with its much more populous catchment areas, has less difficulty filling trains to Paris than to Brussels. In shortlisting options, we have therefore focused on United Kingdom Lille Paris services. With all trains calling at Lille, most of the destinations in Belgium and beyond will be within easy reach. Only if a Paris service is viable should a Brussels or other service (e.g. to the French Alps or Disneyland Paris) be considered

2. Screening The Route Options

Table 5 shows the criteria we applied to produce the shortlist of feasible routes. To run the Regional Eurostar service, the track must be electrified and electrically and physically upgraded. Paths on the track must be accessible and available, and stations need to be able to accommodate calling or terminating trains.

Table 5: Route, Station and Path Criteria
Criterion Explanation
Power The electrically powered Eurostar trains can be used only onlines with 25kV overhead power or electrified third rail.
Track clearance Tracks need to be modified to provide physical clearance for the train and prevent electrical interference with signalling systems.
Calling station preparation Some station platforms have to be lengthened to accommodate Eurostar trains.
Turning station constraints Eurostar trains cannot be turned where there is a lack of capacity on the line or a lack of accessible holding sidings or overnight stabling.
Track access and paths Regional Eurostar track needs to link with the CTRL and operational paths must exist for the service schedule proposed.
Source: ADL analysis, Railtrack, EUKL

As Figure 15 shows, only five routes four on the WCML and the ECML and one to Heathrow meet all the criteria.

3. The Shortlist

Only five routes: to the north of England and Scotland; to the north of England only; to the Midlands; to the north of London interchange service at Watford, and to Heathrow Airport meet all the technical criteria. The first four are on the WCML or the ECML. These routes could be operated with limited investment, but lack of availability of paths may constrain some of them. Heathrow is not on the shortlist since Heathrow Paris rail links do not represent a high priority option for the airport or British Airways nor is it an effective way to serve the regions, as described below.

a. Power.

The routes on the WCML and the ECML and the link to Heathrow are all electrified.

b. Track clearance.

All five options are on lines that have been physically and electrically cleared, with one linking section in the London area to be completed.

c. Calling station preparation.

Stations on the four WCML and ECML routes have already been modified to allow the trains to call, in some cases with partial door opening to cope with short platforms. With investment, Heathrow trains could access Terminal 4 or the station planned for Terminal 5.

d. Turning station constraints.

Table 6 shows the stations on the WCML and the ECML that can act as turning stations.

Table 6: Turning Station Availability
Turning Station Feasibility
Glasgow Terminus and turning station for extended BRB proposal on ECML. Necessary maintenance facilities exist.
Edinburgh Turning possible and stabling (for overnight stops) available on the station itself.
Newcastle Turning possible, but new stabling arrangements would be needed, possibly at Heaton.
York Turning possible, but no stabling readily available for overnight stops.
Manchester Original terminus and turning station for BRB proposal on WCML. Necessary facilities exist.
Birmingham New Street Proposed terminus and turning station for some services included in BRB proposal. Stabling would be possible at a new location north of Birmingham, or at Manchester.
Watford Additional investment required to turn Eurostar, including extending the St. Albans line platform, providing new passenger check-in and handling facilities. Current PUG2 investment plans could be modified to allow turning at Watford after 2005.
Source: ADL

With these stations available for turning and/or stabling Eurostar trains, all four WCM Land ECML route options can be run: Watford can run only after the second phase of the Passenger Upgrade programme (PUG2) in 2005. Some constraints do however exist: lack of practical turning points limits the north of London interchange to Watford, unless investment in a new platform is made. Turning is also possible at Heathrow.

e. Track access and paths.

For the WCML, access is possible via Kensington Olympia and the West London line. Rights already exist in the timetable for Regional Eurostar on the WCML and can be operated now and post PUG2. These paths appear, with some journey time penalties, in Railtracks outline timetable post PUG2 in 2005. Sections of the paths could be used to support the Midlands (to Birmingham) and Watford options. The situation on the WCM Land links to the West London line became less clear in November. The Rail Regulator has asked Railtrack to revise the September version of the post-PUG2 timetable; the next version, expected in March 2000, may have implications for routing and journey times on the already constrained Regional Eurostar paths.

For the ECML, access is achieved via Kensington Olympia and the North London line. Outstanding electrical clearance work would take 9 to 12 months. Two paths from Glasgow would be available from this year. With some timing constraints, Newcastle Kensington Olympia paths would be possible.

For Heathrow, options exist for access from the south.

4. Routes Not Shortlisted

Routes to Leeds and Liverpool, to the South West and Wales, to other South East stations, to a west of London interchange and to Heathrow or Gatwick are not feasible.

a. Leeds and Liverpool.

Services would need clearance. With a limited number of trains, Liverpool would be served only at the expense of services to Manchester, and Leeds at the expense of services to York, Newcastle and potentially beyond. Since these stations would have rail connections with Regional Eurostar at Crewe and Doncaster respectively, they would feed traffic to the Regional Eurostar service.

b. South West/Wales.

Electrified track is not available to the west and Railtrack has no plans to introduce electrification. Diesel-hauling Regional Eurostar carriages would be complex and expensive and would slow the service.

c. Other South East stations.

The track to these stations has not been cleared physically or electrically. Clearing would entail considerable investment on routes that do not link with the main traffic generating routes.

d. West of London interchange.

Railtrack has no plans to electrify main line tracks to the west of London to an interchange point at Reading or beyond. Electrification would be a major investment, not justifiable for Regional Eurostar services. Reaching Reading via third rail electrified track from Waterloo would be slow and electrical and physical clearing would entail significant investment. Diesel haulage would be impracticable.

e. Heathrow Paris.

We have not included HeathrowParis among the shortlisted options for Regional Eurostar, for two reasons. It is not a top priority for the parties whose interest in the service is crucial, nor does it offer an effective service for the regions. However, in the long term, domestic and international access to Heathrow could make use of Regional Eurostar trainsets.

The Heathrow Paris option is closely linked to the plans and needs of BAA, ICRR, and its shareholders, including British Airways. Since their support is central to the viability of the project, we have taken their views into account. Heathrow Paris links are technically feasible. However, BAA, ICRR and its shareholders are concerned about the level of infrastructure investment needed and its time scale and the delivery of competitive journey times. For British Airways, the network benefits from freeing short-haul slots can be achieved in other ways and the commercial case is not clear. ICRR partners are concerned about the unattractiveness of the returns compared with other uses of the Regional trainsets.

A Heathrow Paris rail service does not offer advantages for the regions north of London which represent the majority of the regional travel market. Flying from a regional airport to Heathrow to make a rail interchange makes little sense against flying direct to Paris or Brussels; reaching Heathrow via domestic rail from north of London is likely to take longer than using Inter-Capital services at Waterloo or St. Pancras, and driving to Heathrow from any distance north of London is unlikely to be quicker than accessing Inter-Capital services by domestic rail. From the west and south west, however, road or rail access to Heathrow might be faster than direct access to Waterloo or St. Pancras.

Heathrow Paris does not therefore appear to represent the best long-distance rail link option for the regions, at least in the short term and we have not shortlisted it.

More attractive options exist for linking Heathrow by rail to a wider United Kingdom catchment area (e.g. Manchester and Birmingham), using domestic long-distance services. These services could use Regional Eurostar trainsets and if they proved successful, they could potentially be extended to include a Heathrow Paris link.

f. Gatwick Paris.

We have not shortlisted Gatwick Paris for reasons of investment, market and potentially complex operational arrangements. Preparing the track to Gatwick for Regional Eurostar would require investment of around £2030 million, mainly to overcome signalling interference on the Tonbridge Redhill and Brighton lines, and adapt platforms. Accessing the Brighton line would require a complex operation, probably involving reversing the train on an already busy line. Overall, the investment needed and operational complexity would be hard to justify for a service with a limited catchment area.

B. Operating the service

For the feasible options, we examined different ways of operating the service, and their commercial implications. The operational choices to be made are shown in Table 7.

Table 7: Operational Choices
Choice Options
Use of trainsets The full 14-carriage train, permanently split in half, or temporarily split?
Hours of service Daytime only or 24 hours?
Time coverage All year or seasonal?
Passengers carried International, or international and domestic?
Link with Inter-Capital Eurostar services None, or via St. Pancras?
Source: ADL

The criteria we applied are shown in Table 8.

Table 8: Operational Criteria
Criterion Explanation
Regulatory constraints Operational plans and a safety case associated with them need to be approved before services can operate.
Investment required Previous studies have shown Regional Eurostar as a financially marginal or non-viable service. Heavy investment is unlikely to be economic.
Scale of market and revenue The trains need to be able to address large markets, with high revenue potential.
Operational constraints Services that are highly complex to operate, or that do not allow efficient utilisation of trainsets, are unlikely to be viable.
Revenue sharing Revenue-sharing terms apply under existing rail franchises to new services on domestic routes. If the proportion of revenue retained is too low, Regional Eurostar is unlikely to be viable.
Costs of operation High operating costs will make services financially non-viable.
Source: ADL

To have a chance of commercial success, the service would need to be based on daytime use of the 14-carriage trains all the year round, carrying international passengers only, Figure 16.

1. Full 14-Carriage Trains Or Split

Two options exist for splitting the Regional Eurostar trainsets: permanent creation of14 seven-car trains, or splitting for part of the route only, operating two separate service branches, before rejoining for the remainder of the route. The permanent split could provide additional coverage or frequency, the partial split would provide coverage on route sections where less capacity is required. However, investment and regulatory requirements make these unattractive ways to run the service. Temporary splitting and rejoining requires design changes to permit evacuation in the Channel Tunnel and would reduce reliability, since delay to either half of the train could delay the onward journey.

An investment of £70 million would be needed to build additional power units to allow all seven sets to be split. Given the scale of investment and the other difficulties, we believe a permanently or temporary split train operation is unlikely to be attractive. Simulating the impact of additional frequency by splitting the trainsets showed that the additional revenue would not justify the investment. We therefore assume that all services will use the full 14-carriage trainsets.

2. Daytime Use Or 24 Hours

In a regional meeting, the proposal was made that, to improve trainset utilisation, Regional Eurostar services could be used at night for seated passengers to attract people who currently travel by low-cost overnight coach: students/backpackers looking for low fares and free overnight accommodation. The concept is similar to that of the ski trains, where the social ambience proves very popular. For operational and commercial reasons, however, overnight passenger services are not viable. Operationally, overnight use would take up too much of the time available for maintenance. Commercially, it would be unlikely to generate high revenues as fares would need to be low.

3. Daytime Use Or 24 Hours

In meetings in Scotland and other regions that attract high inbound tourism, seasonal services (e.g. May October) were seen as potentially interesting, although people recognised that they could be difficult to operate in conjunction with a regular service outside the seasonal peak. From an operational and commercial standpoint, seasonal services focusing on inbound and outbound tourism do not appear attractive. Seasonal services to Edinburgh or York, or outbound to Disneyland Paris or ski resorts, are unlikely to be commercially viable. They would not make full use of rolling stock or paths and would reduce the ability to offer scheduled services.

4. International Passengers Only Or International And Domestic

The common-sense argument in favour of filling otherwise empty seats suggests carrying domestic passengers on parts of the Regional Eurostar routes. The most likely markets are those between London and the larger, further away, regional stations. While security and customs-related constraints arise, domestic passengers could be carried in specially designated carriages.

However, the consensus among domestic rail operators is that when track/train upgrades are in place, a low frequency Regional Eurostar service, in competition with the main Virgin Rail and Great North Eastern Railway (GNER) services, is unlikely to gain a large share of the domestic markets. Moreover, any revenues would probably have to be shared under the terms of the domestic rail franchises.

We concur with that view: the number of new passengers is likely to be low, a high proportion of revenue would have to be shared, and security processes would add costs and potentially create delays.

Regional Eurostar is likely to attract at most 2.5 per cent of the domestic market on mainline routes. The number of new passengers is likely to be low, as the domestic capacity created by two or three trains a day in each direction, with up to 270 seats per train (seven coaches), would represent only 5 to 10 per cent of that of domestic operators such as Virgin or GNER. Until CTRL2, the London station will be Kensington Olympia, which is unlikely to attract as much demand as Euston or Kings Cross. Post CTRL2, with St. Pancras, demand may increase, though domestic services will also have improved and will be faster. Services to Ashford are not feasible: they do not allow time for security checks before the Tunnel; shorter commuter routes with lower fares are unlikely to be attractive commercially and would make security control difficult. The net present value of the revenue generated at average fare levels would be limited to £3 million to £5 million on each line served.

A high proportion of the revenue generated from domestic passengers would have to be shared with domestic train operators. The regulatory position for the carriage of domestic passengers is based on the International Rail Regulators opinion that the trains would be under international regulation; it is not yet clear whether this would conflict with the domestic franchising regime. However, on the WCML, moderation of competition principles could apply, restricting a new operators share of revenue earned: these might also be applied to the ECML, where Virgins re-franchising agreement might act as a model for GNER. The share of revenue retained by Regional Eurostar is likely to be low, based on the proportion of domestic traffic that is judged to be new in that passengers would not otherwise have used a domestic service.

Immigration and security controls would add to costs and their application could deter domestic passengers. A plan to carry domestic passengers between Kensington Olympia and WCML and ECML stations has been developed, but is labour-intensive and involves complex staff logistics on-board.

5. Possible Link With Inter-Capital Eurostar

If Regional Eurostar were operated as an extension of Inter-Capital Eurostar services, there could be cost savings to the combined Eurostar service. After CTRL2, Regional Eurostar services to/from the north of London could stop at St. Pancras and could provide Inter-Capital services to/from Paris beyond St. Pancras. The benefits from linking Regional and Inter-Capital services depend on the level of regional business that Regional Eurostar attracts. Seven regional trainsets making five round trips a day between the United Kingdom regions and Paris could initially carry out their regional role and, at the same time, replace up to two Inter-Capital trainsets. However, as regional demand filled capacity, the benefit would disappear. Revenues from regional travellers would be reduced to the extent that the increase in journey time from a station stop at St. Pancras deterred time-sensitive travellers. Our analysis of the benefits of replacing Inter-Capital trainsets compared with the loss of revenue from the journey time increase showed that any net benefit gained is likely to be small.

C. Scheduling

Our work on feasible routes and operational arrangements narrowed the viable options for Regional Eurostar to full trainsets, daytime, all year operation and international passengers only, on WCML or ECML routes.

We then examined what service frequencies and schedules would make sense, given feasible turning stations, desirable service timings, available paths, the need to maximise trainset utilisation and infrastructure developments. We have not considered services starting before 2001, when all seven trainsets could be made operational and final path clearing will be complete. We have included schedules for after 2007 when PUG2 is complete and CTRL2 open.

1. Requirements And Constraints

A number of requirements and constraints drives the schedules we have developed.

a. Terminus stations

Regional services need to start or finish at one of the following stations: Glasgow, Edinburgh, Newcastle, York, Manchester, Birmingham or Watford (after 2005).

b. Desirable service timings.

Departures too early in the morning or arrivals too late at night are unlikely to attract leisure travellers, limiting revenue opportunities. However, from stations north of the Midlands, a later starting service may not be able to reach Paris and return at reasonable hours, reducing trainset utilisation. For business customers, services that fit in with normal working hours are attractive. Timings have been selected to maximise potential. Further improvement may be possible, when path availability becomes clearer.

c. Available paths.

Timetabled paths already exist on the WCML and ECML for Regional Eurostar. Changing these paths is difficult, constraining service frequency and schedules. Therefore, we have used existing paths wherever possible.

d. Need to maximise trainset utilisation.

Allowing for maintenance, only five Regional trainsets can be scheduled into a reliable timetable. The utilisation of each train therefore needs to be high. In examining the services that could be offered, we have considered ways to allow each train to make as many journeys as possible every day.

e. Infrastructure developments.

The completion of CTRL1 in 2003 will shorten journey times by about 20 minutes for all services; PUG2 on the WCML in 2005 may affect path timings and availability, and the completion of CTRL2 in 2007 will allow new routes and new paths, with savings of15 minutes on the WCML and 30 minutes on the ECML.

2. Schedules

Taking account of these requirements and constraints, we produced an illustrative operating schedule for each shortlisted route. Figure 17 shows the WCML to Manchester and the ECML to Glasgow.

The schedules produced are examples only, and would need to be confirmed before services could be operated.

a. Glasgow Paris/Manchester Paris (Glasgow/Manchester)

Daily each way services: one between Glasgow and Paris, two between Manchester and Paris (one via Birmingham) and one between Birmingham and Paris. This is the service originally proposed by BRB, with an extension to Glasgow, Figure 18.

The Glasgow/Manchester option would have advantages: it would cover a large regional market and existing and contracted paths are designed for it. It would, however, be a low frequency service, in view of the length of the journey.

Our proposed timetable follows ICRRs original plan, and includes the journey time reductions resulting from the completion of CTRL in later years, Table 9. The availability of paths would affect the details of the schedule if the service were to be run.

Table 9: Daily Service Glasgow/Manchester Option
From 2001
Starting Station Departure Times Terminating Station Arrival Times
Manchester 06.12 Paris 13.59
Manchester 09.27 Paris 16.29
Birmingham 14.26 Paris 20.56
Glasgow 07.30 Paris 17.53
Paris 16.22 Manchester 22.08
Paris 17.43 Manchester 23.40
Paris 08.43 Birmingham 12.56
Paris Glasgow 21.30
From 2007
Starting Station Departure Times Terminating Station Arrival Times
Manchester 06.12 Paris 13.24
Manchester 09.27 Paris 15.54
Birmingham 14.26 Paris 20.21
Glasgow 07.30 Paris 17.03
Paris 16.22 Manchester 21.33
Paris 17.43 Manchester 23.05
Paris 08.43 Birmingham 12.21
Paris 13.07 Glasgow 20.40
Source: ADL and Halcrow Rail

b. Newcastle Paris/Manchester Paris (Newcastle/Manchester).

Daily each way services: two between Newcastle and Paris, two between Manchester and Paris (one via Birmingham) and one between Birmingham and Paris. The option would cover less of the country than the Glasgow/Manchester option, but with more frequent service at northern ECML stations, Figure 19.

This option would have a similar schedule to the Glasgow/Manchester option, but with two services a day on the east coast, both terminating in Newcastle, Table 10. The schedule from 2007 is based on current contracted fast line WCML paths. There is, however, a risk that Regional Eurostar will have to be routed on slow line paths due to heavy track utilisation on the WCML and constraints linking between CTRL2 and the WCML. This would increase journey times but improve the flexibility of the timetable that could be offered.

Table 10: Daily Service Newcastle/Manchester Option
From 2001
Starting Station Departure Times Terminating Station Arrival Times
Manchester 06.15 Paris 13.59
Manchester 09.06 Paris 16.10
Birmingham 14.30 Paris 20.53
Newcastle 08.31 Paris 16.29
Newcastle 14.15 Paris 21.57
Paris 17.10 Manchester 21.53
Paris 18.19 Manchester 23.50
Paris 09.10 Birmingham 13.02
Paris 07.43 Newcastle 13.35
Paris 16.22 Newcastle 22.29
From 2007
Starting Station Departure Times Terminating Station Arrival Times
Manchester 06.15 Paris 13.23
Manchester 09.06 Paris 15.53
Birmingham 14.30 Paris 20.40
Newcastle 09.15 Paris 16.29
Newcastle 13.45 Paris 20.47
Paris 17.10 Manchester 21.33
Paris 18.09 Manchester 23.25
Paris 09.10 Birmingham 12.47
Paris 07.43 Newcastle 13.00
Paris 16.22 Newcastle 21.39
Source: ADL and Halcrow Rail

c. Manchester Paris/Birmingham Paris (Manchester/Birmingham).

Daily each way services: two between Manchester and Paris (both via Birmingham), and four between Birmingham and Paris. This route on the WCML would serve the West Midlands and the South East regions with high market potential, building on Birmingham’s position as a traffic generator, Figure 20.

Since trains would need to be stabled in Manchester overnight, two services would go to Manchester via Birmingham New Street, the rest from Birmingham International. Availability of paths would limit the frequency of service to three a day until 2005, rising to six after the completion of PUG2. After CTRL2, journey times would reduce by up to 20 minutes. We have therefore considered schedules for this option from 2007 only, Table 11.

Table 11: Daily Service Manchester/Birmingham Option from 2007
From 2001
Starting Station Departure Times Terminating Station Arrival Times
Manchester* Paris 06.36, 08.36 Paris 14.10 to 00.10, two-hourly
Birmingham 08.28 to 18.28, two-hourly
Paris 07.55 to 17.55, two-hourly Manchester 21.30, 23.30
Birmingham 11.36 to 21.36, two-hourly
* For stabling and maintenance the first and last two trains start and terminate at Manchester
Source: ADL and Halcrow Rail

d. Watford Paris (Watford).

Seven daily each way services between Watford and Paris. This service would target business and leisure passengers in the South East and leisure passengers transferring from domestic services, Figure 21.

The potential market is large and not within easy reach of Inter-Capital Eurostar stations; the service could also be competitive with air in frequency and journey time. Since the frequency of service would be limited to three a day until paths become available after2005, this option is attractive only with the higher frequencies and shorter journey times that CTRL2 will make possible in 2007, Table 12. After 2007, the limitation on service frequency remains the availability of paths giving access to Watford within a practical timetable, rather than the number of trainsets. The precise timetable from 2007 will depend on the paths available then.

Table 12: Daily Service Watford Option from 2007
From 2001
Starting Station Departure Times Terminating Station Arrival Times
Watford Paris Two-hourly 06.00 to 18.00 Paris Two hourly 10.00 to 22.00
Paris Two-hourly 07.00 to 19.00 Watford Hourly 09.00 to 21.00
Source: ADL and Halcrow Rail

3. Start Date

As suggested in the detailed description of the options above, delaying the start of Regional Eurostar could bring some advantages, especially in reduced costs over the near term. Since the cross-channel travel markets are growing, a later start would mean that the service could attract a bigger market. The opening of CTRL2 in 2007 will shorten journey times and improve route options, frequencies and trainset utilisation, to the benefit of Regional services. As explained above, the Manchester/ Birmingham and Watford options could run after 2007; the Glasgow/ Manchester and Newcastle/ Manchester options can be run from 2001, but delaying the start until 2007 could have advantages. Table 13 shows the six options.

Table 13: Options Chosen for Detailed Evaluation
2001 Start 2007 Start
Glasgow/Manchester Glasgow/Manchester
Newcastle/Manchester Newcastle/Manchester Manchester/Birmingham Watford
Source: ADL

Chapter five – Appraisal of shortlisted options

In Chapter 4, we shortlisted six options for Regional Eurostar services: two that could start in either 2001 or 2007 (Glasgow/Manchester and Newcastle/Manchester) and two that would not start before 2007 (Manchester/Birmingham and Watford). To identify the most attractive, we assessed these options against the financial and other criteria shown in Table 14.

Table 14: Assessment Criteria
Criterion Explanation
Passenger numbers Forecasts of total travellers using the service over time.
Financial results Revenue generated and costs incurred under each option and the total financial value created over time.
Regional regeneration Regions served and the regeneration benefits achievable.
Environmental benefit Total carbon dioxide emissions, performance against other environmental criteria, and appraisal against the DETRs Guidelines on Methodology for Multi-Modal Surveys (GOMMMS).
Source: ADL

Although each of the options would attract large numbers of passengers, none of the proposed Regional services would make a profit in any year, mainly because over half the passengers on any service would be people who would have used Inter-Capital Eurostar had Regional services not been available: as a result, they would represent limited new revenue for Eurostar. At the same time, the vast majority of passengers would be leisure passengers on lower fare tickets, but operating costs would be high since Eurostar is not a low-cost service. The passenger numbers and financial results are similar for a number of options, with Newcastle/Manchester performing slightly better because of the higher number of passengers carried.

The later start options are financially more attractive, avoiding the losses between 2001and 2006, when the trains carry fewest passengers. After 2007, journey times would be shorter because of CTRL2, and the regional travel market as a whole would be larger.

Even if higher market growth and share forecasts are assumed, the best option, Manchester/ Birmingham, only approaches breakeven, with other options remaining negative.

The measurable regional regeneration and environmental benefits are small for all options and do not alter our conclusions on the limited attractiveness of even the best of them.

A. Passenger numbers

Our passenger number forecasts, for business and leisure, cover the start of service to 2025. The numbers are based on an air/rail split model developed for this project, with separate estimates of passengers diverted from coach and passengers who would not make the journey if there were no Regional Eurostar service. We distinguish between new passengers and total passengers: new passengers comprise those diverted from airlines or coach induced passengers; those who would not have travelled if there were no Regional Eurostar service. Total passengers include abstracted passengers those who would otherwise have used Inter-Capital Eurostar; these represent no increase in overall Eurostar passenger numbers, and little increase in overall revenues. In our analysis of options, we only consider the additional passengers, revenues and costs that Regional services would generate above those that Inter-Capital would achieve if Regional Eurostar did not exist.

The number of passengers generated will depend on the size of the markets Regional Eurostar can address, the propensity to travel of people in these markets and the share of the market that Regional Eurostar can capture from air, coach and Inter-Capital Eurostar. As Chapter 2 shows, Regional Eurostar will have difficulty in capturing a large market share: journey times are longer than those by air, and the amount by which fares can be reduced to compensate for the longer journey is limited by the high cost base of the service.

Our forecasts of passenger numbers change over time for two reasons. First, the competitive offering of each travel option will change, for example, to the extent that journey times shorten after CTRL, and when airline competition on fares intensifies. Second, the travel market on the routes will grow. Overall, the average annual growth rate20012025 is three per cent for business passengers and four per cent for leisure passengers.

As shown in Figure 22, the number of new passengers generated by all the Regional Eurostar options is low, because of the higher journey times than air, infrequency of service and higher fares than coach.

The Newcastle/Manchester option generates the highest number of new passengers of the two options considered to 2007; it also generates the highest number of new passengers from 2007 to 2023:

  • The Newcastle/Manchester option covers a large part of the addressable market along the WCML and ECML. Stopping at Newcastle allows a more frequent service on the ECML than the Glasgow/Manchester option. It also attracts some traffic from Scotland via interchange at Newcastle.
  • Manchester/Birmingham, with a higher service frequency from Birmingham, faces stronger competition in the Midlands from air at Birmingham International; travellers from the markets served will also be able to access Inter-Capital Eurostar more easily from St. Pancras after 2007, when it will also offer a faster service.
  • The Watford service also has higher frequency but faces strong competition from air and from Inter-Capital Eurostar, both of which are more frequent and faster or competitive on time. Proximity to London means that many travellers who would prefer to travel by train can already access Inter-Capital Eurostar and therefore count as abstracted passengers, not new ones. The Watford option evaluated assumes ten trains each way per day the maximum frequency with existing Regional Eurostar trainsets which is likely to be greater than the number of paths which will be available (see Chapter 4). A lower frequency would reduce the number of passengers attracted.

For the Newcastle/Manchester option, the capacity limit for standard class is reached in2014 at 1.2 million passengers a year (assuming service frequencies as detailed in Chapter 4) equivalent to filling about 70 per cent of the standard class on the train over the year.

The total average loading is high by rail standards. With six trains a day, compared with five for Newcastle/Manchester, the Birmingham option is less capacity constrained, generating the highest number of passengers after 2023. With four first class coaches, as in the current configuration of the Regional Eurostar trainsets, the number of first class passengers does not reach capacity in any year. Reconfiguring the trains in one of the later refurbishment programmes to include only two first class coaches would extend by three years the period before the trains reached capacity. Financial results would improve, as a result, but not enough to change our conclusions.

Of the total passengers, about half are new, the rest being passengers who would otherwise have travelled by Inter-Capital Eurostar. For the Newcastle/Manchester option, the split between new passengers and those abstracted from Inter-Capital Eurostar is shown in Table15. A number of passengers to/from the United Kingdom regions 1 are still expected to use Inter-Capital Eurostar services: of the 478,000 such passengers in 1998, slightly over half will decide to use Regional Eurostar.

The Regional Eurostar passengers who would otherwise have used Inter-Capital Eurostar contribute much less new revenue than new passengers (see Section B below), placing a major constraint on the success of Regional services. Even when trains are full, fewer than half the passengers will be new passengers. Trying to ensure that only new passengers use Regional Eurostar is neither practical nor desirable.

Table 15: Newcastle/Manchester New and Abstracted Regional Passengers
Passenger Type (000) 1998 2002 2005 2010 2020
New 0 39 46 10 12
Abstracted 0 32 39 23 29
Total Regional Eurostar 0 71 85 33 41
Inter-Capital to/from regions
via London
64 66 76 120 160
Total Eurostar to/from regions 64 137 161 153 201
Leisure Passengers New 0 292 427 603 686
Abstracted 0 400 506 618 684
Total Regional Eurostar 0 692 933 1221 1,370
Inter-Capital to/from regions via London 414 180 82 232 346
Total Eurostar to/from regions 414 872 1015 1453 1,716
Total new 0 331 473 613 698
Total abstracted 0 432 543 641 713
Total Regional Eurostar 0 763 1018 1254 1,411
Abstracted as a percentage of total Regional Eurostar 57 54 51 51
Source: ADL/Oscar Faber

Arthur D. Little, ICRR and Virgin Forecasts
Our best performing option, Newcastle/Manchester, will gain many more new passengers than the ICRR forecast for the original BRB proposal, a similar number to Virgins forecast, but fewer than in the ICRR forecast with Watford and Kensington Olympia. Our lower passenger forecast for Watford and Kensington Olympia is based on the fact that accessibility to air and Inter-Capital Eurostar limits the potential of Regional services in the areas covered by these stations, Figure 23.

Only ICRR gives forecasts over time for the original BRB proposal. Our passenger forecasts to 2008 for Newcastle/Manchester are higher for new passengers and similar for abstracted passengers, Figure 24.

B. Financial returns

To compare the financial performance of the short listed options, we calculated the revenues that each option could generate and the costs incurred. The resulting profitability over time gave us an overall comparison. Where possible, we compared these numbers with financial forecasts in the ICRR and Virgin studies. Only new revenues those that would be in addition to those that Inter-Capital Eurostar would generate anyway contribute to the Regional business.

Our valuation is based on discounting cash flows between 2001 and 2025; we assume a discount rate of 12 per cent, in line with rates used in models by other commercial rail operators, including EUKLs Regional Eurostar model. All numbers are in real terms (i.e. not including inflation) at 2001 prices.

1. Overall Comparison

All options are loss-making from 20012025, giving negative net present values (NPVs).The main reasons are the low number of new passengers, the majority of them lower fare paying leisure travellers, and the high cost of running Regional services. Losses reduce overtime as the market grows, but never turn into profits. All the 2007 options perform better than the 2001 options, with Newcastle/Manchester 2007 performing best, Table 16.

Table 16: NPV of Options (20012025)
Option Name Start Date NPV (£ million)
Glasgow/Manchester 2001 (158)
Newcastle/Manchester 2001 (132)
Glasgow/Manchester 2007 (55)
Newcastle/Manchester 2007 (32)
Manchester/Birmingham 2007 (40)
Watford 2007 (102)
Source: ADL

The reason for Newcastle/Manchesters improved, if still negative, NPV is that it generates more revenue than the other options while its costs are similar, producing a lower operating loss, Figure 25. The NPV is higher for 2007 start options as the costs outweigh revenues significantly in the early years; not running a service before 2007 reduces the losses made.

Arthur D. Little, ICRR and Virgin Financial Results The best of our 2001 start options, Newcastle/Manchester, has a more negative NPV than the ICRR options, Table 17. Virgin did not give NPV figures.

Table 17: NPV Comparison with ICRR
£ million ADL* ICRR
Newcastle/ As BRB Proposal Manchester (2001 Start) With Watford and Kensington Olympia
NPV (19992006) n/a (68)** (26) to (34)**
NPV (20012006) (107) n/a n/a
NPV (20012008) (128) n/a n/a
*To be consistent with ICRR, we use a six per cent discount factor in the ADL options in this table.
** All calculated at 2001 prices, accounting for inflation.
Source: ADL analysis, ICRR

The reasons for the worse NPV in the Arthur D. Little option are the lower new revenues and higher costs. In 2002, new revenue for Newcastle/Manchester is lower than in ICRRs forecast with Watford and Kensington Olympia; it is similar to Virgins with Watford case, reflecting the lower passenger numbers forecast for Watford and Kensington Olympia stops and lower expected revenue per passenger 3 . Some operating costs however, are higher in our model. The main differences are in the biggest cost elements: following discussions with SNCF, we have assumed significantly higher costs for the access charges for Gare du Nord and French Railways than those assumed by ICRR and Virgin. In addition, it could be difficult to make paths available on the French domestic system for Regional Eurostar services. Operating losses are higher as a result, Table 18.

Table 18: Financial Comparison with ICRR and Virgin (2002)
£ million ADL* ICRR
Newcastle/ Manchester (2001 Start) As BRB Proposal With Watford and Kensington Olympia Watford*
Total new revenue 22 8 45 26
Total operating costs (43) (21) (55) (24)
Operating profit/(loss) (21) (13) (10) 2
*Assumes that the trainsets, tunnel and track access would be provided free of charge.
N.B. Values are based on 2001 prices.
Source: ADL analysis, ICRR, Virgin

2. Revenue From Passenger Services

New revenue will be generated from three sources: ticket sales to new passengers, the difference between Regional and Inter-Capital fares for passengers who would otherwise have used Inter-Capital Eurostar, and on-board services.

a. Ticket sales to new passengers.
Business passengers pay more for tickets than leisure passengers, giving a higher average revenue per business passenger. Regional Eurostar fares in the base year (2001) are assumed to be 5 to 30 per cent lower than equivalent air fares, with the higher discounts for the longer journey times. Average business fares are £111£129 (one-way), average leisure fares£50£56. We assume that fares will fall until 2007 in response to falling air fares, but that modest fare increases are possible with shorter journey times after CTRL2.

The revenue per new passenger from ticket sales is similar for all options, with a low proportion of business travellers in all cases: £54£56 in 2002, falling to £50£53 afterCTRL2. Business passenger numbers fall after CTRL2 when Kensington Olympia is no longer a stop on the route , and passenger numbers from other south eastern stations fall as a result of competition from St. Pancras. After 2007, the Manchester/Birmingham option has the highest number of high fare-paying business customers, leading to the highest revenue per passenger.

b. Ticket sales to passengers who would otherwise use Inter-Capital Eurostar.

The one-way fare for Regional Eurostar passengers from outside London and the South East would be about £15 more for business and £6 more for leisure than the Inter-Capital Eurostar London to Paris fare. Abstracted passengers would therefore contribute some revenue to the Regional service; the increase in revenue for Eurostar from charging these passengers a higher fare would be part of the revenue from passenger services. The revenue from this source for the Newcastle/Manchester option in 2002 is £2.5 million.

c. Revenue from on-board service.

The on-board revenue per passenger is small in comparison with ticket sales, and is derived mainly from catering sales. Catering would be free for first class passengers.

d. Total new revenues.

The rise in passenger numbers will lead to an increase in total new revenues over time, as shown in Figure 26. Revenues are highest for the Newcastle/Manchester option, followed by Manchester/Birmingham.

The business and leisure ticket sales new revenue split, not including catering revenue, is shown in Table 19. Despite the higher revenue per business passenger, the higher number of leisure passengers means that they generate most of the revenue.

Table 19: Business and Leisure Revenue
£ Million 2002 2005 2010 2020
Newcastle/Manchester Business revenue 4 5 1 2
Leisure revenue 16 24 34 41
Total revenue 20 29 35 43
Glasgow/Manchester Business revenue 4 5 1 1
Leisure revenue 13 15 22 27
Total revenue 17 20 23 28
Manchester/Birmingham Business revenue 2 3
Leisure revenue 28 36
Total revenue 30 39
Watford Business revenue 2 2
Leisure revenue 11 14
Total revenue 13 16
Source: ADL

3. Costs

Total operating costs for all four options are similar, as shown in Section 2. The factors driving these costs are the number of passengers using the service, the number of journeys a day and the kilometres travelled each year. Costs for options that generate more passengers are higher since the cost of ticket sales (mainly commissions to travel agents) is higher, as are the charges Eurotunnel levies for use of the Channel Tunnel.

Since the biggest cost elements, such as station operating costs and French Railways access charges, are fixed, operating costs do not change significantly over time. Regional Eurostar will not incur any costs for the use of United Kingdom paths; these are already paid for by EUKL under its agreement with Railtrack. EUKL would incur increased immigration costs for a service of more than five trains a day and would be required to compensate its Eurostar Group partners if it wanted to run services with a low load factor.

Some capital expenditure is required before Regional services can start, whether in 2001 or2007. The main investment costs are:

  • Refurbishment costs for the stations on the route highest for the Glasgow/Manchester option at £6.8 million, and lowest for the Watford option at £5 million. For the Newcastle/Manchester option, they are £5.9 million.
  • Refurbishment costs of £40,000 per carriage every 7 years.
  • Security checking equipment replaced every 7 years, at £150,000 a train.

4. Sensitivities

In order to test the robustness of our conclusions, we carried out the following tests:

  • High and low forecast traffic and market share.
  • Fare sensitivities.
  • Airline competition sensitivity.
  • Discount rate sensitivity.

Our market forecasts reflect what we believe to be the most likely outcome; actual results could be better or worse, as in our high and low scenarios. The major differences in the scenarios appear in Table 20.

The base case forecast represents the most likely case. The high and low scenarios are, in our view, realistic variations. We estimate the chance of the outcome falling outside the range of the high and low scenarios at less than 25 per cent.

Table 20: High and Low Scenarios
High Scenario Low Scenario
Growth Rates Average of 3.75% CAGR for business and 4.75% CAGR for leisure (both increased by 0.75% from the base case of 3% and 4% respectively). Average of 2.25% CAGR for business and 3.25% CAGR for leisure (both decreased by 0.75%from the base case of 3% and 4%respectively).
Business Passengers More business passengers from all regions, with greater increases for shorter journeys (up to four times the base case for the South East). Fewer business passengers from all regions, with greatest reductions for longest journeys (up to half the base case for the North West).
Induced Passengers Higher levels of induction, leading to twice as many induced passengers as in the base case. Lower levels of induction, leading to two-thirds of the induced passenger number in the base case.
Coach Passengers Greater share of the coach market captured, leading to one-and-a- half times as many coach passengers as in the base case. Smaller share of the coach market captured, leading to three-quarters of the coach passenger number in the base case.
Source: ADL analysis

Our financial assessment of the options in the high and low scenarios confirms our overall conclusion that only the Manchester/Birmingham and Newcastle/Manchester 2007 start options come close to breakeven in the high scenario, Figure 27.

In the high scenario, the NPV for the best 2001 start case, Newcastle/Manchester, is still heavily negative. Of the 2007 start cases, assuming that assets are not released for other uses in the interim, Manchester/Birmingham produces a just negative NPV.
It performs best in the high scenario as it offers most capacity, allowing it to take up the increased demand in this scenario. A Watford terminating service is the least attractive. As a further check, we tested even more aggressive market growth and share assumptions. The results change only marginally, with the NPV of all options remaining negative.

In the low scenario, as expected, NPVs are worse; even the best option (Newcastle/Manchester 2007 start) gives a heavily negative NPV.

Raising or lowering fares by 20 per cent (i.e. by about £12 on a one-way leisure fare of £60and about £25 on a one-way business fare of £125) shows, for Newcastle/ Manchester, that base case fares are close to the optimum, Table 21. Although the number of passengers carried falls or rises, the effect on revenue is offset by lower or higher fares.

Table 21: Fare Sensitivity
NPV (£M)
Base (132)
High Fare (138)
Low Fare (132)
Source: ADL analysis

As discussed in Chapter 2, we expect competition from airlines to intensify. An alternative viewpoint is that restricted capacity at airports and more severe environmental regulation will limit competition from airlines. We have therefore tested that possibility as a sensitivity by increasing Regional Eurostar ticket prices by 10 per cent leaving passenger numbers unchanged; even with much less intense airline competition, however, the best option does not break even. The results for the Newcastle/Manchester option, 2007 start, are shown in Table 22.

Table 22: Airline Competition Sensitivity
NPV (£M)
Base (32)
Reduced air competition (21)
Source: ADL analysis

The results of applying different discount rates, nine per cent and six per cent, to the Newcastle/Manchester 2007 start option are shown in Table 23. As the option is loss-making throughout its life, and the lower rates discount these future losses by a smaller amount, the results are more negative.

Table 23: Discount Rate Sensitivity, Newcastle/Manchester, 2007 Start
  NPV (£M)
12% (Base case) (32)
9% (41)
6% (53)
Source: ADL analysis