Home U.K Eurostar crisis 'can and will lead to bankruptcy' for companies in EU

Eurostar crisis 'can and will lead to bankruptcy' for companies in EU

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The French Government and business leaders are sounding the alarm over the future of Eurostar as the company continues to struggle during the pandemic. Jean-Pierre Farandou, chief executive of French state rail company SNCF, which owns 55 percent of Eurostar, said recently: “We are getting closer to the moment when Eurostar will have real cash flow problems … by next month, we have to conclude these discussions.” Meanwhile, French transport minister Jean-Baptiste Djebbari said in January: “We are working with the UK on mechanisms for aid that are proportionally pro rata to the implications of each in Eurostar.

“The government will back Eurostar to maintain this strategic link between our two countries.”

A spokesman for Eurostar also added: “Without additional funding from the government, there is a real risk to the survival of Eurostar as the current situation is very serious.”

It is believed Eurostar has already faced a 95 percent fall in demand as the pandemic continues to make travel restrictions necessary.

The company’s annual revenues collapsed from £1billion (€1.1bn) in 2019 to about £180milllion (€208m) in 2020.

On top of this, Eurostar has already borrowed £400million and received a cash injection of £170million (€197m) from its owners.

The rail operator is also under pressure to raise funding because of the £400million debt hovering above its head.

As its finances deteriorate and a bailout fund remains out of reach, a trade group has warned of dire consequences.

The Community of European Railway and Infrastructure Companies (CER) warned that Eurostar’s losses could have a big impact elsewhere.

CER highlighted in December that the slump in passenger numbers across Europe’s rail system could lead to €22 billion (£19billion) in losses for 2020.

The trade group, which represents passenger and freight train operators, added: “It’s a totally extraordinary situation.

“There is no comparison for it, and it can and will lead to the bankruptcy of a number of companies, unless there is the political will to prevent it.”

Train tracks stretching across Europe take nine billion passengers and 1.6 billion tons of freight across the continent each year, indicating that Europe must keep its railways systems viable.

READ MORE: Eurostar warned survival at ‘real risk’ as France and UK standoff

Analysts say work-from-home practices, online socialising and the rise of Internet shopping will have a lasting impact on rail travel of all types, leaving privately owned companies like Eurostar and state railways including DeutscheBahn in Germany and SNCF of France, Eurostar’s biggest shareholder, struggling to survive.

These companies have already received hefty support: SNCF faced losses of up to £4.3billion in 2020, and received a £3.5billion capital injection from the government in Paris in December.

DeutscheBahn’s estimated losses of around £4.8billion has left it needing £3.5billion in rail support from the German government.

A Eurostar spokesperson told the New York Times that the outlook for 2021 “continues to be significantly lower passenger numbers and loss of revenue than can sustain our business”.

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This has also sparked fears in the UK, however, as Eurostar employs around 3000 people in Britain.

Mick Lynch, a representative of the National Union of Rail, Maritime and Transport Workers, said: “Until Covid broke, we had a business that was on the up and up.

“Now, we are looking at five percent of previous revenue and passengers on a good day. No business can operate on that.”

Huw Merriman, chairman of the Commons Transport Select Committee, called on ministers in the UK to come up with a solution for Eurostar.

Mr Merriman continued: “Services have been stripped back to a bare minimum. It needs a joint, bespoke UK-French solution to help it through this crisis.

“Like airlines, quarantine and travel restrictions have blighted Eurostar’s access to its markets during the pandemic.

“Unlike airlines, Eurostar has been shut out from government loans that have offered a lifeline.”



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