November 13, 2014 / 6:18 PM / 4 years ago

Eurostar bets on new trains and destinations to grow

LONDON (Reuters) - Eurostar is spending about 300 million pounds on seven new trains to reach more distant destinations in an effort to lure more passengers from aeroplanes to the Channel tunnel.

Two women walk past the Eurostar terminal at St Pancras International station in London December 4, 2013. REUTERS/Suzanne Plunkett

Exactly 20 years after it first connected London and Paris and London and Brussels by rail, Eurostar on Thursday showcased the new-look train as part of a fleet expansion and refurbishment project costing 1 billion pounds.

The link has transformed transport between the three capitals and Eurostar now has around an 80 percent share of the city-to-city market (including air travel) which it says has doubled in size since it launched.

“I don’t think we can go much higher than that. The growth for us is no longer on Paris or Brussels, it’s to go beyond those destinations,” Eurostar chief executive Nicolas Petrovic said in an interview.

Over the next two years, the distinctive flashes of Eurostar’s yellow livery will be seen hurtling through countryside beyond northern France and Belgium, going as far as Marseille, in southern France, and Amsterdam in the Netherlands.

“We need to convince passengers to try us and switch from air to rail. We have to create new markets that didn’t exist before,” Petrovic said.

Slimline seats on the new, bigger Siemens (SIEGn.DE) trains will offer passengers more leg room than before, and there will be wi-fi throughout.

Infrastructure funds and pension funds have the chance to buy into the growth story after Britain put up its 40 percent stake in Eurostar for sale in October.

But the jury is out on whether the new trains and routes can deliver.

“I’ve been sceptical about longer routes because I don’t believe the train can offer a sustainable price advantage, and fundamentally, the airlines are still materially faster on those routes,” Liberum analyst Gerald Khoo said.

When a train journey goes over two and a half hours, which the Marseille and Amsterdam routes will, passengers tend to favor air travel, analysts said.

Eurostar, whose other shareholders are French state-owned rail operator SNCF SNCF.UL and Belgium, hopes the new trains can help it counter any future competition. Germany’s Deutsche Bahn [DBN.UL] is planning a rival channel-tunnel service from Frankfurt to London via Brussels, though the launch is on ice.

Additional reporting by Andrew Callus in Paris and Stephen Brown in Berlin; Editing by Mark Potter and Vincent Baby

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