`Chunnel' Still Needs Cash, but Will Open
Additional $1.52 billion needed may delay profitability past earlier estimate of 1998
OPERATORS of the Channel tunnel between Britain and France are bracing themselves for a fierce price war with seagoing ferries when the long-awaited link opens for traffic next March.
Eurotunnel's prospects of winning the tussle have been clouded by having to raise a further British pounds1 billion (US$1.52 billion).
Sir Alistair Morton, chief executive of the Anglo-French company franchised to operate the ``Chunnel'' until 2042, says Eurotunnel will fix prices ``fully competitive'' with ferry companies. Economists contend that may be possible only by a slippage in the date (now said to be 1998) when the tunnel is forecast to become profitable.
The extra funds needed will bring the cost to British pounds10 billion - twice original estimates. Sir Alistair concedes that construction delays putting the opening date back one year have forced new requests for money from shareholders and the 220 banks funding the project. He is also worried by British Rail's failure to start work on a high-speed rail link between London and the Channel. For some years users on the English side will travel to and from London in trains using congested commuter lines. Announcing the extra cash injection, Morton forecast that opening the tunnel will oblige ferry operators plying between Dover in Britain and Calais in France to restructure their services.
Britain's Peninsular and Orient (P&O), and the Anglo-Swedish Stena-Sealink line, the two largest companies, deny this. Each plans to operate five ``superferries'' on the Dover-Calais run. Hoverspeed, using hovercraft and huge catamarans, plans to carry passengers across the English Channel at least as fast as travelers on ``Le Shuttle,'' Eurotunnel's undersea rail service.
Eurotunnel says the ride will take 35 minutes, plus eight minutes for loading and unloading. Hovercraft cover the route in 35 to 40 minutes. Catamarans do it in just under an hour. Superferries take about 90 minutes but offer passengers meals and entertainment. Stena-Sealink's top roundtrip fare in summer 1993 for a car and five passengers was British pounds312 [US$473]. Eurotunnel, which will set its prices in January, must shave charges to the bone to seize a sizable chunk of passenger traffic.
Economists suggest that the ferry companies have plenty of room to cut prices. Stefan Szymanski, a transport analyst at Imperial College, London, says charges have doubled in real terms since 1985. With cross-Channel traffic forecast to double in the next 15 years, Mr. Szymanski says that there will likely be room on the cross-Channel run for existing operators.
But Roger Vickerman, head of the Channel Tunnel research unit at Kent University, says that if Eurotunnel can make big inroads into the Dover-Calais passenger market in the first year, P&O and Stena-Sealink may have to take some of their ships off the route. ``Not only will we see price competition between the ferry companies and Eurotunnel,'' he says. ``There may be an even fiercer price war between P&O and Stena-Sealink.''
Eurotunnel plans a cross-Europe advertising blitz for January. Christopher Garnett, its commercial director, forecasts that by late 1994 the Chunnel will be carrying 40 percent of Dover-Calais cars and passengers. Eurotunnel researchers expect 28 million passengers to use the fixed link in the first year, increasing to 44 million in 2003. ``We are planning to carry about 30 percent of Dover-Calais freight by autumn ,'' Mr. Garnett says. Eurotunnel executives say final ``tidying up'' of the 31-mile tunnel connecting terminals in Britain and France is virtually complete. Final tests of the shuttle trains are set for December.
While freight services are due to start on March 7, Queen Elizabeth II and France's President Francois Mitterrand will perform the official opening on May 6. The first passenger trains will start rolling a few days later.
By that time the ``undersea'' versus ``over-sea'' battle will be in full swing. The prize is total annual Dover-Calais revenues, expected to top British pounds1 billion by 1995.