A joint venture between UK, French and Belgian rail operators, Eurostar has faced its fair share of challenges in its relatively short 18-year history, both as a result of external factors and internal complications.
Set up to operate the rail links between the UK and the European mainland, Eurostar's inception was quickly followed by the emergence of low-budget airlines, an unexpected competitor. Moreover, the challenge of operating a multinational company, which had to have its day-to-day operations as well as executive decisions co-ordinated by companies based in three different countries, provided yet more challenges for the company.
“Inevitably, there was a lot of complication, especially [when it comes] to the coordination and efficiency,” says Richard Brown, who between 2002 and 2009 served as a CEO of Eurostar before being appointed as chairman of the company.
In 2010, in response to its internal difficulties, Eurostar adopted a new corporate structure. The company was incorporated into a single corporate entity, with a single management team comprised of representatives from each of its three owners. The move enabled the rail operator to expand its fleet with new trains as well as upgrade its existing ones.
“Frankly, we were not able to buy [any new trains] otherwise, as we did not have a single balance sheet,” says Mr Brown.
Eurostar selected German conglomerate Siemens to supply the new trains in a deal valued at $767m. Meanwhile, the company recorded a 6% increase in revenues in 2011, closing the year with a net profit of $33.3m. But new trains and an improved financial standing have not satisfied Eurostar executives, who are continually looking for new ways to improve the business and distinguish it from its competitors.
One such improvement already in the pipeline is the addition of onboard wi-fi to Eurostar's trains. Mr Brown says that the first wi-fi-enabled trains will start running in mid-2013, with the whole fleet gaining internet access by the end of 2015. This is no small matter for Eurostar’s most dedicated users – businesspeople, to whom onboard access to the internet is expected to be a big draw.
Offering wi-fi will give the company yet another substantial competitive advantage over its main rivals, budget airlines. Currently, the fact that Eurostar takes its passengers from the centre of one city to the centre of another is what differentiates it from low-cost airlines that often operate out of airports that are some distance from the city centre.
“For us, the majority of the cost is connected with the distance the train travels. For airlines, on the other hand, the price depends mostly on the airport charges,” says Mr Brown.
Change of scene
It is not just business customers that Eurostar is looking to attract. Mr Brown estimates that while business travellers prefer not to take train journeys of more than five hours, leisure passengers are willing to travel for up to seven, which opens up new markets for Eurostar.
“There is a big market in places such as the south of France, Switzerland, Germany and the Netherlands,” says Mr Brown. He talks about cities such as Amsterdam, Frankfurt, Lyon, Marseille and Geneva as the next possible destinations for Eurostar travellers.
Such expansion plans have been made possible by the liberalisation of the European rail market, something that the company is hoping to capitalise on. However, liberalisation is a double-edged sword for Eurostar, as it has also allowed German rail operator Deutsche Bahn to expand its operations. The company is planning to extend its destinations to include London by the end of 2015.
Mr Brown is confident, however, that his company has many advantages over emerging competitors, not least the fact that Eurostar has already established itself as a brand. The next three years will show whether that will be enough for its to fight its growing number of competitors.