LCR's management of its finances has had a beneficial impact on cash flow

3.11 LCR has large cash balances to manage because the funds it raised through bond issues have not been required immediately. We asked RBC Capital Markets to examine whether LCR and its external fund managers had invested these large cash balances prudently. RBC Capital Markets found that LCR invests the bond proceeds in low risk investments with short maturities to ensure liquidity and availability of funding. LCR's management of its funds, investments and debt liabilities have tended to yield a positive return. However, this benefit will reduce as LCR runs down its investment portfolio to pay for construction of Section 2.

In 2004, the Department revised its forecasts of Eurostar UK's passenger revenues

Source: Booz Allen Hamilton Limited

12	ICRR has kept operating costs within its control below the 1998 level, even before allowing for inflation
		1998 £ million, nominal	1999 £ million, nominal	2000 £ million, nominal	2001 £ million, nominal	2002 £ million, nominal	2003 £ million, nominal	2004 £ million, nominal
Total costs1		2712	243	235	240	235	276	366
Less
Access charges
Eurotunnel usage charges		80	83	81	81	84	85	93
Railtrack plc/Network Rail access charges net of recovered penalties		39	39	37	37	36	38	12
Access charges to Section 1 of the Link							45	150
Redundancy/reorganisation costs3		2	1	1			2
Distribution and sales		20	21	22	21	20	18	15
Charges and fees3
LCR's management charges		7	2	1	1	2	2	2
ICRR's fees net of its contribution			1	2	(2)	(9)	(8)	(5)
Addressable costs4		122	95	92	102	102	94	100
Cost reductions achieved compared to addressable costs incurred in 1998 (no allowance for inflation)			27	30	20	20	28	22
Source: LCR and the Department
NOTES 1 Total costs have been calculated from Eurostar UK's operating expenditure. Allowances for depreciation and impairments have been deducted from the reported operating expenditure. Profits from disposals of fixed assets have been added to the figure. 2 Given as £257 million in Figure 10 of our 2001 report. The difference reflects an overcounting of an impairment allowance and an undercounting of depreciation. 3 LCR considers that costs for: reorganisation; and management charges and fees should not score towards addressable costs. 4 These figures have been amended to reduce rounding errors.

Eurostar UK identified the markets where it needed to improve its share and identified actions to do so

Brussels route

■ Introduced new price schedule

■ Revised timetabling and reduced journey time

■ Strengthened the Brussels marketing team

■ Introduced corporate sales programme

Business market

■ New advertising strategy focusing on journey time and city centre access as unique selling points

■ Distribution through corporate travel managers and airline based booking service

■ Planning to introduce broadband internet access

Overseas market

■ Distribution of Eurostar tickets through airline distribution systems

■ Partnerships with overseas airlines (e.g. Delta Airlines, All Nippon Airways)

■ Planning to promote London-Paris, London-Brussels daytrip opportunities

Source: National Audit Office

14	Eurostar's market share of passengers on both the London-Paris and London-Brussels routes has increased since 2000

Source: National Audit Office analysis