Passengers could benefit from direct services between London and several new continental destinations, including Cologne, Frankfurt and Amsterdam.

Deutsche Bahn (DB), Germany’s state-owned railway, may also use Eurostar trains to operate a rival service through the Channel Tunnel, with competition resulting in cheaper tickets to Paris and Brussels. But the Government, which is preparing to sell the third of Eurostar that it controls, would lose the ability to influence the development of the rail link to the Continent.

DB has plans to be the dominant rail operator in Europe and already operates high-speed services between Germany and 80 foreign cities in cooperation with state-owned railways in France, Belgium, Denmark, the Netherlands, Switzerland and Austria.

Over the past 18 months, it has quietly bought several British train companies that carry a total of 30 million passengers a year. DB owns Chiltern, which runs between London Marylebone and Birmingham, and half of London Overground, which operates on the North London Line and will serve the extended East London Line from next year. It also runs two thirds of Britain’s goods trains through its purchase of EWS, the biggest British rail freight company.

DB believes that Eurostar is being run very inefficiently and is failing to take advantage of opportunities to expand its services. From 2010, train companies will have the right to run services across the European Union without needing special agreements with member states.

Passenger numbers on Eurostar have increased from 6.6 million in 2002 to nine million this year but are still far below the 20 million predicted in the mid1990s when the Channel Tunnel Rail Link was approved.

DB hopes to persuade Geoff Hoon, the Transport Secretary, that it will operate a more efficient service through the Channel Tunnel by drawing on its experience in Germany of integrating trains with other modes of transport. German rail passengers can book an entire journey on just one web-site and with one ticket and can even arrange for an electrically assisted bicycle to be waiting for them at the station.

Andreas Hamprecht, the company’s head of international business, said that it was interested in running international services through the Channel Tunnel and also expanding in any country willing to sell part of its railway. DB’s self-proclaimed objective is to “become the world’s leading passenger and logistics company”.

It is unclear how much Britain’s one-third share of Eurostar is worth but DB will make clear to Mr Hoon that the price would be much lower if he allowed France to take greater control of the company in a proposed restructuring. SNCF, the French state railway, owns 62 per cent of Eurostar, and SNCB, the Belgian state railway, owns the other 5 per cent. It is this ownership structure with duplicated management roles that is the cause of much of the company’s inefficiency.

DB would either run Eurostar in cooperation with SNCF and SNCB or run an alternative service using the 11 186mph trains owned by the Eurostar’s British arm. It already cooperates with SNCF on services between Paris and Frankfurt and Paris and Stuttgart. Fares for these services are about half the price of a similar type of ticket on Eurostar. DB offers a €39 (£35) Europa-Spezial ticket for a one-way journey across its existing international high speed network.

The Government effectively owns Eurostar UK through its controlling stake in the parent company, London & Continental Railways.

See also:

Brussels urged to act over SNCF

Financial Times: December 11 2008
By Guy Dinmore in Rome and Robert Wright in London

The once-cosy world of European state-owned railways was given a jolt on Thursday as Italy revealed it had teamed up with Germany’s Deutsche Bahn to press the European Commission to act against what they saw as unfair competition and fully liberalise national passenger markets.

Mauro Moretti, chief executive of Italy’s state-owned Ferrovie dello Stato, made it clear that the Italian-German initiative was aimed primarily at France’s SNCF, which he accused of unfair competition and obstruction. “This is our first action [against SNCF],” he told the Financial Times. “If there is not a positive answer we can consider other steps.”
EDITOR’S CHOICE
Tensions high between rail operators

Their action follows raids by the French competition authorities last month against SNCF.

It said it would co-operate fully with the inquiries about the openness of the rail freight market, saying it was “playing the game fairly”.

SNCF also rejected D Bahn’s and Ferrovie’s accusations, pointing out that since its rail freight market started deregulating in 2005, private competitors had taken 8 per cent of the market – a point it said took 10 years to be reached in Germany.

The largest competitor to SNCF in France is D Bahn’s Euro Cargo Rail division. “The French market is open,” SNCF said.

Mr Moretti and Hartmut Mehdorn, chief executive of D Bahn, wrote a joint letter to Antonio Tajani, European transport commissioner, last month asserting that European law required the opening of national passenger markets where train companies of one country could freely operate in another. They proposed setting January 1 2012 as a starting date.

Italy, Germany, Denmark and the UK had liberalised their markets, the letter said, but others had not, so creating “a very negative impact in terms of fair competition and reciprocity”.

The proposed move would be in addition to the liberalisation of international passenger traffic already due to come into force on January 1 2010. International rail freight traffic was liberalised in 2003, while all European countries’ rail freight markets have been open since 2006.

Mr Moretti said last April he had asked SNCF for terms governing Italy’s cross-border ambitions and was told he would be informed by the end of the year.

SNCF has taken a 20 per cent stake in an Italian venture, NTV, which plans to launch Europe’s first privately operated high-speed train service in 2011.

See also:

Tensions high between rail operators

Financial Times:
By Robert Wright, Transport Correspondent

The joint letter sent by Italy’s Ferrovie dello Stato and Germany’s Deutsche Bahn to European competition authorities underlines the tensions between the continent’s big operators in the face of liberalisation.

The letter appears to have been aimed at forcing greater opening-up of France’s domestic freight and passenger markets to outside competitors.

However, rail market observers have tended to see more similarities between the strategies of the continent’s different state railways than differences.

All three groups involved have been accused of discriminating against private competitors in their home market while moving aggressively to establish a competitive foothold abroad to guard against the erosion of their domestic position.

Ferrovie and DB are often accused by private competitors – often, ironically, part-owned by one of Europe’s other state-owned railways – of using their control over their countries’ rail networks to make access for private competitors difficult. The pair steadfastly deny engaging in such behaviour. France’s rail network is owned by a separate state-owned company, RFF, but SNCF continues to handle most functions on the system.

But France has long been identified as a particular laggard in the European liberalisation process by the European Commission.

The first new private competitor to SNCF ran its first freight train only in 2005 and alternative operators have been slow to take up the opportunities offered by the opening of every European country’s domestic rail freight market to competition in 2006.

The Conseil de Concurrence, the French competition watchdog, raided a number of SNCF’s offices last month over allegations connected to its behaviour towards would-be rail freight competitors. SNCF firmly denies the allegations, saying it is “playing the game fairly” in rail competition.

However, the country is no longer the solid state rail monopoly it was. SNCF points out that private competitors have taken 8 per cent of its rail freight market in three years, a level that it took private competitors 10 years to reach in Germany. After many years of trying, DB is also now able to run its high-speed trains along France’s high-speed network, on the new eastern high-speed line.

The question is how much further the new testiness between the state railways will go. For years, they have appeared caught between co-operating in the face of liberalisation and competing in some areas – a strange state many called “co-opetition”. DB’s and Ferrovie’s letter suggests that competition may now be becoming more important.

Heiko Fischer, chief executive of VTG, Europe’s largest rail wagon leaser, suggests that could be a positive step.

“I’m positive about any measure that further opens up the European markets, to further push rail as the preferred mode of transportation,” he says.