CO-FOUNDER of night train start-up Midnight Trains, Mr Adrien Aumont, says he was inspired by the story of entrepreneur Mr Stelios Haji-Iouannou who started low-cost airline EasyJet on a shoestring. While Haji-Iouannou’s rise to global fame and fortune through the resulting Easy empire is well documented, Aumont’s journey has not progressed as he would have hoped.

Midnight Trains was forced to shut up shop recently without running a single train. The Paris-based company, conceived in 2020 by Aumont and Mr Romain Payet, had hoped to launch services between Paris and Nice, Milan and Venice. A Paris - Edinburgh service was also promoted.

Aumont’s dream was for an eventual network of high-quality sleeper trains crossing Europe, providing passengers with a customer experience on a par with premium hotels, including high-quality bedding, food and drink, spacious compartments with private showers, reliable Wi-Fi, sound-proofing and timings that allowed passengers to get a full night’s sleep.

Succession of hurdles

Sadly, Aumont’s dream was to remain just that, as a succession of hurdles meant that the business was ultimately unsustainable. Aumont has articulately documented the real nightmares that the company faced in its blog pages, which remain online. He summarises the key factors that led to the failure of his venture as follows:

  • government bodies aren’t very interested in rail when it comes to net-zero initiatives as they are much more focused on the energy sector
  • open-access isn’t that open: the dominance of incumbent operators, all intent on protecting their own areas of operation, makes breaking into the market extremely challenging
  • the capital conundrum:  accessing debt funding is very difficult, as venture capitalists are unwilling to support long-term, asset-rich businesses while institutional investors are reluctant to take on the risks associated with start-ups, and
  • lack of momentum: underfunding at the start (due to the funding issues identified above) prevented the business from gaining critical mass and the maturity required for future funding rounds.

The demise of Midnight Trains will likely be viewed with consternation by other open-access operators currently aiming to secure major funding deals that will allow them to procure new rolling stock. They include European Sleeper and Kevin Speed.

The former is currently running night trains using second-hand coaches on the Brussels - Amsterdam - Berlin corridor, extended to Prague earlier this year, with a second service between Brussels and Barcelona planned. The company has employed crowdfunding to launch and run its services, but now requires institutional funding to purchase new sleeping cars.

Kevin Speed has yet to run any services, but recently obtained approval for its long-term track access agreement from French rail regulator ART, enabling it to operate high-speed commuter services out of Paris. Again, the company is now turning to the corporate funding market to provide finance for a fleet of new high-speed trains.

Passenger boom

These and other open-access operators are all being driven by a conviction that a significant rise in passenger demand will require new services. In turn, this is likely to result in demand for new trains, a trend highlighted by German-based rail sector analysts SCI Verkehr. In a new report, Intercity and Night Trains - European Market Trends 2024,SCI points out that the boom in passenger numbers is leading to a resurgence in locomotive-hauled stock, for both conventional inter-city and night trains.

The flexibility of being able to add and remove coaches according to demand levels and to swap portions between services running to different destinations, has largely been lost with the widespread deployment of fixed-formation trains. SCI forecasts that the OEM market for coaching stock will rise from €570m in 2023 to €1.7bn in 2028, an annual increase of 24%, while that for locomotives to haul them will rise from €90m in 2023 to €570m in 2028, an annual increase of 44%.

SCI observes that the use of driving trailers optimises flexibility, allowing formations to be altered according to demand, but providing the quick turnaround ability of multiple-units.

The majority of new coaching stock orders are likely to come from incumbent operators, according to SCI, though it notes that the push by open-access operators into long-distance services could result in new orders for manufacturers.

This will only happen if the new entrants can find a way of financing the rolling stock they require. Midnight Trains’ experience suggests that this might be more difficult than any of those currently involved in the market have anticipated.

Lop-sided financing market

“While the lop-sided nature of the financing market persists, there must be correctional action,” says Mr Nick Brooks, secretary general of the Alliance of Passenger Rail New Entrants (AllRail). “All rolling stock operators should receive the same financing terms as state-owned rail incumbents, if necessary, with a similar type of state-backed guarantee. This should remain the case until the rail financing market achieves a similar level of maturity as, say, the aviation or bus sector.”

If new entrants are unable to purchase rolling stock, the likely result is a reduction in potential choice for passengers and a loss of revenue for manufacturers. Aumont says that “dreams are meant to be realised.” Other would-be operators will be hoping that European politicians and financiers wake up in time for their dreams to become reality.

One glimmer of hope on the horizon is this month’s announcement by French high-speed start-up Proxima that it has attracted €1bn of private equity, plus debt finance from a pool of French and international banks, for its planned initial phase of operations, running trains between Paris and western France. The capital raised will fund a fleet of 12 Alstom Avelia double-deck high-speed trains, similar to the TGV M currently in production for French National Railways (SNCF).

If Proxima is successful in launching services as planned in 2028, it could blaze a trail for others to follow.