Until rail operators reform their fare system, they pose little threat to Europe's low-cost sector, argues Adam Simmons, lecturer at London's University of Westminster.  

Recently, high-speed rail operator Eurostar indicated a desire to expand beyond its current core network of London to Paris and Brussels. Presently, the only extensions are ski trains to Bourg St Maurice and services to Disneyland Paris. From July to September 2002, however, Eurostar is opening up a once-a-week service to Avignon.

So, is an extension of the Eurostar network a threat to the airline sector and, in particular, to the low-cost operators? Eurostar's share of its core markets is approximately 65% of the London-Paris market and 46% for London-Brussels. Are railways likely to make such inroads into other markets that they seek to serve?

An analysis of four routes beyond Paris and three routes beyond Brussels indicates that, even after all high-speed rail extensions are complete (Channel Tunnel Rail Link, Brussels-Amsterdam, Brussels to Cologne), the journey by air is still quicker. This assumes that passengers require an extra 30 minutes to reach Stansted or Luton compared with central London for Eurostar, and need a further 45 minutes between arriving at their destination airport and reaching the city centre.

To compare fares, a study was undertaken of the minimum rail fare, which requires two-weeks' advance purchase and a Saturday night stay (as these fares are limited in number, the tickets may not be available). For air journeys, a fare was sought for an outward weekday morning departure and an afternoon-evening return flight two days later (also on a weekday) some two weeks before departure.

The results of the fare analysis were quite striking. To St Etienne (Lyon), the Ryanair fare came in at less than half the minimum rail fare, even though the overall journey time by air is less than rail (albeit by only 15 minutes or so). A similarly large disparity occurred with Geneva: the air fare, including access to central Geneva from the airport, was almost identical to the minimum rail fare, but the overall journey time is some two hours quicker. On Eurostar's new route to Avignon, it is possible to pay £65 ($93) return or less to fly to Nìmes with Ryanair. On Paris extension routes, only Bordeaux was significantly more expensive by air (£144 with Buzz compared with £105 by rail), although the journey time by rail will still be 3 hours longer.

The results were similar on Brussels extension routes, with Amsterdam and particularly Frankfurt showing significant cost savings by air in spite of the shorter overall journey time (the return fare to Hahn with Ryanair was less than half the minimum rail fare).

Even assuming that leisure passengers will tolerate a longer journey time to avoid air/rail or air/bus interchanges, rail is unlikely to pose a major threat until leisure fares are adjusted to the new reality of low-cost airlines. The minimum fare beyond Paris is £85, and this is far in excess of the lowest air fare available. Rail is effectively hampered by having international fares set by two or more national rail companies. It therefore cannot begin to compete successfully until a significantly more flexible tariff structure is developed and it moves away from the condition-laden system that currently prevails.

The recent moves by British Airways and bmi british midland to simplify and reduce fares between the UK and several European cities only serves to highlight the pro-active stance of carriers in contrast to the more sluggish response of the railways.

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Source: Airline Business