Rail operator Eurostar warned back in November that it was “fighting for survival.” This came on the back of a massive reduction in passenger numbers, forcing it to scale back drastically on the number of services it was running.
Now, it has had to secure a £250 million rescue package from investors and banks to secure its medium-term future. According to a Eurostar spokesperson, the funding was essential to keep the operator in business as it struggled to cope with the drop in demand caused by the coronavirus pandemic.
The spokesperson added that the company hoped to gradually increase the number of trains it could run as restrictions ease. Currently, it is running only two services a day, one between London St. Pancras and Paris Gare du Nord, while the other runs between Brussels and Amsterdam.
The funding consists of £150 million in new loans from banks, that are guaranteed by shareholders, £50 million in equity from shareholders, and the restructuring of £50 million worth of existing bank loans. Chief executive of Eurostar Jacques Damas, said –
“The funding will allow us to continue to provide this important service for passengers. The refinancing agreement is the key factor enabling us to increase our services as the situation with the pandemic starts to improve.”
He added that the governments of the EU and UK would need to take crucial and coordinated action that will restore demand and therefore the financial recovery of the company.
He also said the company had “experienced a more severe decline in demand resulting from the global Covid-19 pandemic than any other European train operator or competitor airline.”
A cry for help
The company’s problems became apparent last November when it announced it was struggling to survive amidst a 95% drop in passenger numbers. It asked the UK Government for more assistance after UK airports were given £8 million in grants to offset as business rates relief.
Again in January, it asked the UK Government for help, saying that their survival was in doubt. However, the UK Transport Secretary announced in February that while he was eager for Eurostar to survive, the difficulties it was facing were a problem for the shareholders. He said that Eurostar was “not our company,” and the UK Government could not step in to help.
What are the recovery plans?
Eurostar has announced that it will focus its recovery efforts on the restoration of its core routes. These are the services that run between, London, Paris, Amsterdam, and Brussels. It said that it would maintain rigorous cost control to repay loans.
It also pointed out that there was a growing demand for high-speed rail travel as passengers were increasingly aware of the ecological impact of air travel.
From 27th May the company will begin ramping up its services. It is beginning by running two daily services between Paris and London and increasing this to 3 a day by the end of June.
It added that it hoped to gradually increase the frequency over the summer as restrictions are eased. Under current restrictions, France, Belgium, and the Netherlands are on the UK Government’s “Amber list” of countries. This means that arrivals in the UK from these countries have to self-isolate for ten days upon arrival and take two PCR tests within this period.