Europe’s Battered Airlines Face Threat From Night-Train Alliance

(Bloomberg) -- European governments agreed to expand night-train services linking the continent’s major cities, creating another headache for airlines fighting to recover from an unprecedented slump in air travel.

Ministers from France, Germany, Austria and Switzerland unveiled a plan Tuesday to boost rail traffic between cities including Paris, Berlin, Vienna and Milan to curb rising carbon emissions. The Trans-Europe Express 2.0 initiative will be established in late 2021 and allow travelers to journey across multiple national borders without changing trains, a direct challenge to aviation.

The revival of Europe’s night-train network comes 25 years after the collapse of the original Trans-European Express that linked 130 cities across the continent. The boom in short-haul flying eroded its appeal, but campaigns by environmental activists such as Greta Thunberg are making people more aware of their carbon footprint.

There is “growing demand for young people for other modes of transport other than aeroplanes,” said Marc Papinutti,” an official at France’s environment ministry.

Expansion of night-train services comes at an awkward time for Europe’s airlines as they struggle to cope with the fallout from the coronavirus, which punctured a decades-long boom in air travel.

However, rail’s impact may be limited by the difference in traveling times. A direct journey from Amsterdam to Rome would take over 13 hours under the TEE 2.0 plans, compared to just over 2 hours flying. That’s unlikely to attract time-short business travelers, although could appeal to climate-conscious holidaymakers.

Furthermore, the fallout from the Covid-19 pandemic means countries leading the night-train charge are major stakeholders in national airlines, and are unlikely to undermine their recoveries. Germany, which coordinated the TEE 2.0 launch, is the biggest investor in national carrier Deutsche Lufthansa AG following a $10 billion bailout of the company earlier this year.

German state rail operator Deutsche Bahn said it expects to see a “golden age” for train travel after the coronavirus passes, while Austria’s equivalent is adding night-train capacity in expectation of rising demand, buoying manufacturing-order books.

“European rail traffic is a game changer for a climate-friendly and economically successful future,” said Michael Peter, chief executive officer of Siemens AG’s mobility division, one of Europe’s largest train manufacturers. “Night trains will enjoy a renaissance.”

©2020 Bloomberg L.P.