Eurostar feels the strain as passenger numbers slump

The number of people letting the Eurostar train take the strain is in freefall. Travellers are forsaking the cross-Channel passenger service for the rail car-shuttle or taking to the skies with cut-price airlines.

Despite a drop in some fares of as much as a quarter, Eurostar has suffered a 14 per cent decline in passenger numbers over the past two years.

When the Deputy Prime Minister, John Prescott, put £3bn worth of taxpayers' money into constructing the new high-speed line being built to link the tunnel with London, he predicted that 9 million passengers would be travelling by Eurostar this year. Endorsing the company's own estimates, he predicted that about 12 million people would be using the services when the link opens in 2007. There was talk of 20 million by 2010.

Last year 6.6 million people used Eurostar and this year that could slump below 6 million if trends continue.

That is of more than academic interest because London & Continental Railways (LCR), which owns 50 per cent of Eurostar, is also building the new line. If revenue from its passenger service is falling, it will have less money to complete the Channel Tunnel Rail Link. Eurostar will also be unable to meet the charges for using the link. It is possible that taxpayers will be asked once more to bail out the project.

The National Audit Office has decided to start a second investigation into the £5.2bn line into St Pancras, after strongly criticising its "value for money" two years ago.

Eurostar has taken desperate measures to attract more customers, including slashing "short-break leisure fares" from £79 to £59 covering 2,500 seats a day – the equivalent of six return flights. When the service started in November 1994, the cheapest fare available was £95 return. Holders of a new "business value" ticket – starting at £199 – now benefit from 15-minute check-ins and new lounges in London, Paris and Brussels. But few signs so far indicate that this is having a significant impact, although the company insists there are signs of a turnaround.

The company's "J'aime le train" advertising slogan might appropriately add "mais je préfère l'avion". Eurostar believes that many of its potential passengers have been lured away by cut-price airlines which operate regular flights to Paris and Brussels. Easyjet, for instance, started a service to the French capital from Luton and Liverpool last June. Aircraft are generally about 80 to 85 per cent full, according to the airline. That compares with a load factor of 50 to 60 per cent on the more expensive "full-price" services operated by British Airways. Fares on the Easyjet flights vary from £35 to £120 return. The Belgian company VLM also operates a popular cut-price service from London City airport to Brussels where fares can be as low as £40 return.

Ironically, the shuttle service through the tunnel, run by Eurotunnel, has enjoyed a marginal increase in passenger numbers. The company attributes the rise to an intensive promotional campaign, but observers believe the enduring appeal of the "booze cruise", especially in the run-up to the Budget, is the main factor.

Eurostar's problems began in 2001 as a consequence of the foot-and-mouth outbreak in Britain and the global economic slowdown. The terrorist attacks in America on 11 September turned that slowdown into a slump. Business travel has been hardest hit with companies turning to "video-conferencing" rather than face-to-face meetings. US-owned financial institutions in Paris, London and Brussels in particular have cut back on their travel budgets. This year, the war in Iraq has also taken its toll, leading to a substantial drop in the leisure market.

Delays and cancellations have added to Eurostar's woes. Perhaps the incident which stuck in most people's minds came last September when a train broke down just after leaving Waterloo. Irate passengers, some of whom broke windows to escape the stifling conditions on board, were only evacuated after enduring a four-hour delay.