Eurostar Ridership Slumps 95%, Forcing U.K. and France to the Rescue

(Bloomberg) -- France and the U.K. are negotiating an aid package for Eurostar International Ltd. after the coronavirus crisis wiped out 95% of the Channel Tunnel train operator’s passenger traffic.

One option under discussion could see the Bank of England provide funds from its Covid loan facility as part of the U.K. contribution, according to a person familiar with the matter who asked not to be identified. The person said the train operator is eligible despite French government majority ownership.

Talks are centered on support that reflects the interests of both countries, French Transport Minister Jean-Baptiste Djebbari told a parliamentary committee on Thursday. France controls Eurostar via state railway SNCF, but the firm is based in London and seen as important to the British economy.

“We are working with the U.K. on mechanisms for aid that are proportional pro rata to the importance of Eurostar to each,” Djebbari said, adding that the goal is to make Eurostar “sustainable from a financial standpoint.” Talks have been going on for weeks with U.K. counterpart Grant Shapps, he said.

The BoE-managed Covid Corporate Financing Facility has been accessed by numerous firms including airline competitors to Eurostar such as EasyJet Plc.

Eurostar said it had previously been deemed ineligible for forms of U.K. support granted to airlines and domestic rail operators.

A spokeswoman for the company declined to comment on government talks, while the U.K. government didn’t immediately respond to a request for comment.

Plea for Aid

London business chiefs have lobbied for a rescue of Eurostar, whose express trains connect the U.K. capital with Paris, Brussels and Amsterdam. The Conservative chairman of the U.K. parliament’s transport committee, Huw Merriman, on Thursday called on both governments to “set out their commitment” for supporting the company, saying it contributes 800 million pounds ($1.1 billion) a year to the British economy.

Eurostar is 55% owned by SNCF, which has said there’s a “real risk” to the business’s survival without government funding. SNCF is itself bleeding cash and has relied on a 4.1 billion-euro ($5 billion) capital infusion from the state to get through a steep slump in traffic. Britain sold its 40% holding in Eurostar in 2015, complicating any government funding.

“The subject is highly political and we will reveal when the time comes principles of support, which certainly won’t be the SNCF,” Djebbari told French lawmakers. “The government will back Eurostar to maintain this strategic link between our two countries.”

Yves Crozet, a professor at Lyon University’s Urban Planning Transport Economics Laboratory, told the U.K. parliamentary committee that France is unlikely to support Eurostar on its own, despite its shareholding, and that a bout of “arm wrestling” is to be expected.

“The situation is very critical at Eurostar,” SNCF Chief Executive Officer Jean-Pierre Farandou said Tuesday on France Inter radio. “We have already injected capital into Eurostar to help it get through this rough patch.”

Letter to Sunak

The London First lobby said in a letter to U.K. Chancellor of the Exchequer Rishi Sunak that Eurostar was set to run out of cash in coming months even before a border lockdown began Monday.

The company says it has received money from its shareholders, which also include the funds Caisse de Depot et Placement du Quebec and Hermes Infrastructure, with a 40% stake, and Belgium, which holds 5%, but has had only furlough money from Britain.