Red Chunnel

Reader Alan Vanneman, who swears he's "not as anti-rail as you guys," nonetheless points us to an Economist piece on the subterranean finances of the Channel Tunnel.

Why is the Chunnel tanking? One reason is something that Southwest and Jetblue fans will readily understand: The emergence of cheap air travel in Europe.

Comments

[TomHynes]

Can I make the obvious pun about "sunk costs"?

As long as revenues cover operating costs, it doesn't matter how much it cost to build the thing or how big the interest payments are. It would be crazy for England or France to bail them out. But they will.

[Jean Bart]

Good news from France: France has persuaded Germany not to protest France's plan to drop the VAT on restaurant bills from ~20% to ~5%! 🙂

[Jon H]

So maybe they need to cut down on passenger lines and increase freight?

[Mark Fox]

Without looking at the financials, I expect the freight is by far the biggest problem, carrying only 35% of projections. I wonder if the overall cross-channel volume of freight is less than expected, or if the Chunnel is simply not competitive with ferries. (Rail and air don't often compete for the same cargo.)

Eurostar (passenger) had, to me, it best advantage in total travel time between cities. Without hours lost in airport transfers, it is easier to take short trips between London and Paris via Eurostar. As the trip (vacation time?) length increases the effect of airport transfers diminishes, and if the traveler wants a car, it is usually easier to get one at the airport than rail station. Perhaps the planners looked at pre-Chunnel passenger volume without considering the nature of the trips?

Another unprofitable public project that is really cool. 🙂
And this one didn't come out of my pocket. Double cool!

[Jason Ligon]

This is vaguely related, so I'll try to joe's attention here.

Joe! Tyler Cowen at MarginalRevolution links to the blog of a fellow by the name of Peter Gordon. It is an economics and urban planning blog, so I thought you might be interested.

http://www-rcf.usc.edu/~pgordon/blog/

[M1EK]

Cheering on the cheap-airlines over rail may seem satisfying, but it's counter-productive. Without the massive government subsidies for each, it's difficult to see how air travel could be cheaper than rail travel in any way, shape, or form. I think the Southwests of the world are the result of market distortion rather than efficiency.

[Jean Bart]

M1EK is at least partly correct; airports in Europe at least given large subsidies to the "cheap airlines." Indeed, the E.U. has been cracking down on these, which Ryan Air just discovered. 🙂

[Overlord]

M1EK,

So lets end government subsidies to both airlines and railroads and see what happens.

[MALAK]

Jean Bart: Many thanks for the wine info. of several days ago. Just picked up a few bottles from the Cotes du Rhones Villages. Looking forward to cooking tomorrow night. And the grape to go with. Thanks again.

[anon]

The web of subsidies is even thicker than this. Cheap flights between the UK and Europe arose(particularly France) because Ryanair persuaded small local airports to subsidise his use of their facilities. These local airports are paid for out of regional development projects funded by govt. and the EU.

In fact, some of the big airlines (BA among them) have sued for unfair competition on this basis!

So this a fine example of govt. money going round in circles, fattening some and starving others and having some interesting unintended consequences.

[dj of raleigh]

More than people travel through the Chunnel.
They could run a freight train per hour through there.
Try putting heavy goods on airplanes to the interior.
Of course, the Chunnel is a magnet for two sorts,
illegal immigrants and terrorists.

[Jean Bart]

Malak,

It is my pleasure; they were not too expensive, correct?

[MALAK]

Jean Bart: Considering the quality (my wife and I had Saturday evening), they are cheap at twice the price. Retail in Ontario was about $25.00 - $30.00 or thereabouts.