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Ferry cuts favour freight

7th October 2004, Page 20
7th October 2004
Page 20
Page 20, 7th October 2004 — Ferry cuts favour freight
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Which of the following most accurately describes the problem?

This week's announcement of service cuts and job losses at P&O will

not hit the freight industry too hard. Chris Tindall reports.

p&O has decided to focus on the expanding European freight market, announcing 1,200 job cuts and cancelling eight ferry services.

The writing was on the wall for the lossmaking group's ferry operation following the publication of its business review, which called for a fundamental change in both its services and the cost base of the business.

A drop in the number of passengers travelling on 'booze cruises', the rise of budget airlines and the opening of the Channel Tunnel a decade ago were all cited as reasons for the company's operating losses.

But the ferry business announced it would continue to fight for its survival by making swingeing job cuts and slashing the number of crossings.

The only route from Portsmouth that P&O intends to keep — which included routes to Cherbourg, Le Harve and Caen— is the crossing to Bilbao, a reduction of six ships to one; however, Brittany Ferries will be taking on two of P&O's ships to operate from Portsmouth.

The Irish Sea will lose one ship as the Rosslare to Cherbourg route closes. However, the existing Irish Sea crossings from Liverpool to Dublin and Larne to Cairnryan and Troon will stay.

Only one service from Dover to Calais will be cut, leaving six sailings a day on the route where competition is most intense.

The company's proposals are designed to reduce the operating costs of the businesses by over £100m, or 20%.

The cost of implementing the savings will be £60m, but after allowing for the anticipated loss of net revenue from the closure of the routes the bottom line is expected to be boosted by £55m a year. Most of the savings are expected to be achieved by mid-2005 and the remainder by early 2006.

P&O has also turned to the burgeoning freight market, which has been growing at 6% a year since 1999. Freight accounts for 50% of P&O Ferries' net revenue and, with the recent expansion of the European Union it hopes long-term prosperity will be maintained through increased trade links with Latvia, Hungary and the Czech Republic.

"We are going to be focusing on freight, though not to the detriment of tourists," says a P&O spokeswoman. "Things like freight products, scheduling and customers.

"Freight accounts for half of our net revenue, so it's important for us:" She adds that the business responded to research that highlighted a need for key account strengthening and an overhaul of the tariff system that has proved to be too complicated. A new freight director, Robert Hardy, was recently appointed to lead the development of the company's freight business across the North Sea, Short Sea and Western Channel routes.

Don Armour, manager of international services at the Freight Transport Association, says operators should not be too badly affected by the changes: "We were slightly concerned about this to begin with but it looks much better than we initially feared.

"It has kept its commitment to the DoverCalais route, which is welcome, and —although the loss of the services from Portsmouth is disappointing — its impact is lessened by the transfer of the ships to Brittany Ferries. Our only concern would be if it tried to raise prices on that route." iii


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