February 28, 2011

Gounon sees light at the end of the Channel Tunnel

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With Eurostar and German Rail planning to launch new services between Britain and mainland Europe, Eurotunnel CEO Jacques Gounon tells Kevin Smith that the company is striving to promote growth.

CHANNEL Tunnel operator Eurotunnel reported impressive financial results in 2010. Revenues increased by 26% to €736.6 million as shuttle traffic returned to 2008 record levels. Nevertheless, the tunnel has often been criticised since it opened in 1994 for not quite fulfilling its potential. While Eurotunnel's shuttle services are maximising their capacity with approximately 2.2 million cars and coaches travelling through the tunnel in 2010, railfreight and passenger traffic could be increased.

Chairman and CEO Mr Jacques Gounon is certainly a subscriber to this view. He is keen to encourage greater use of the tunnel, which of course would be beneficial to Eurotunnel's balance sheet.

Last October, German Rail (DB) conducted extensive tests using a 200m-long Velaro train in the tunnel in the lead up to its much publicised ICE to London test (IRJ November 2010 p4) that was arranged ahead of launching its own cross-channel services in 2013 to compete with Eurostar.

Eurostar also plans to expand its services. This was emphasised when the company announced a few weeks earlier that it had ordered 10 high-speed trains from Siemens in a controversial €700 million deal. The French government and Alstom, the rival bidder, immediately questioned the safety credentials of the Siemens trains, specifically their length and the use of distributed traction.

Eurotunnel is currently reviewing the tunnel's operating rules which at the moment stipulate that trains are at least 400m long and that power cars situated at either end of the train are used, and Gounon says he is happy to see the rules changed to suit the new trains and operators.

"Using 200m-long trains that have distributed traction through the tunnel is something that we have looked at for a long time and I don't think will have any difficulty in achieving," Gounon says. "Similar trains are used on existing tunnels in the Alps and in Japan that have less strict safety standards than we have in the Channel Tunnel. So it is not a technical issue but a political dispute with Eurostar and what trains it chooses to operate through the tunnel."
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In January Eurotunnel unveiled its new fire suppression safety system (pictured) which is part of the company's efforts to improve safety standards following the September 2008 lorry fire which caused extensive damage and restricted services for several months.

Gounon is particularly proud of Eurotunnel's safety record. Not one passenger has been seriously injured or killed in the tunnel since it opened and he describes the tunnel as the safest in the world when compared with others of similar length. He says it is the only tunnel of its kind to have a passenger platform throughout and also a service tunnel that allows fast and safe evacuations.

Remaining an attractive option to freight traffic is a long-term priority for Eurotunnel, which was reflected in its 2009 purchase of the French activities of Veolia Cargo, and GB Railfreight (GBRf) last year. Gounon says that this latest acquisition will remain the sole carrier in the British market because of Britain's specific technical and clearance requirements.

"Britain is a key market for our freight business and one that we would like to grow," Gounon says. "At the moment the class 92 electric locomotives are the only British type allowed to run in the tunnel, and they are not yet accepted on the French network. For that reason we envision GBRf remaining British-focused."

As for securing the concession to operate passenger services on High Speed 1 between the Channel Tunnel and London St Pancras, Eurotunnel missed out on that particular deal in December.

While it would clearly have been a coup for Eurotunnel to have won, Gounon says that the amount paid was more than Eurotunnel was prepared to spend and that it has not caused a problem to the company's long term plans. He does though anticipate working closely with the new concessionaire over the coming years.

"We see this as an opportunity to grow," he says. "We are not entirely sure what they are going to do yet, but we are looking forward to working with them. And if the opportunity to bid comes up in the future we would certainly consider it."

Gounon says it is a strong possibility that following the sale other passenger operators will follow DB and offer services through the tunnel and along High Speed 1, citing past efforts by Veolia and Trenitalia to analyse the business case to operate such a route, and the likelihood that the new concessionaire will do all it can to encourage new operators.

In Gounon's view, it is just a matter of time before another operator throws their hat into the ring.

"There is high potential for a new system operator to run trains through the tunnel," Gounon says. "The difficulty is always getting the first operator. But once we have done that I can see more following because they will have seen that it works and how to do it."

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