CHANNEL FREIGHT FARE WAR IS GOOD NEWS FOR OPERATORS
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by Karen Miles
* International operators can look
forward to anoth er two years of
fierce Cross
Channel discounts as Eurotunnel and the ferry compa nies slog it out over freight traffic. The predictions from industry ana lysts follow another bad week for the chunnel operator: its latest figures show that it still isn't earning enough to cover the interest payments on its E8bn debt.
City analysts say Eurotunnel's disappointing £104.5m income for the first half of this year means the price war will continue.
One says: "At the moment we're in the busy summer season and all the ferries and the tunnel are giving tremendous discounts on both freight and passenger traffic. Why on earth should the discounts disappear when the markets quieten down in the autumn and winter?"
Others believe discounting will continue until one of the smaller ferry operators drops out of the market and eases the competition. "It's good news for anyone crossing the Channel in the next two years," says one. Since Christmas the ferry operators and Eurotunnel have been accusing each other of cutting freight prices by up to 20%.
All the cross-Channel companies are under pressure to increase their volumes. Eurotunnel is expected to earn only around £300m in 1995—some £225m below its projections for the year. "And have you heard about Eurotunnel's discounting system sir?"
Observers believe that Eurotunnel's 220 banks will restructure the £8bn debt later this year, either by writing some of it off or by converting some of it into shares.