Eurotunnel given six months to stop Channel ferry service

LONDON/PARIS Fri Jun 27, 2014 10:58am BST

A high-speed Eurostar train exits the Channel tunnel in Coquelles, near Calais, May 5, 2014. REUTERS/Christian Hartmann

A high-speed Eurostar train exits the Channel tunnel in Coquelles, near Calais, May 5, 2014.

Credit: Reuters/Christian Hartmann

Related Topics

Quotes

   

LONDON/PARIS (Reuters) - Britain's competition regulator has told Groupe Eurotunnel, the operator of the undersea rail link between Britain and France, it will have to stop operating its separate cross-channel ferry service in the next six months and find a buyer for the ships, confirming a decision it made in May.

Eurotunnel immediately said it would appeal against what it called an "absurd" decision that it said would mean higher prices for consumers and put 600 people out of work.

French transport minister Frederic Cuvillier said on Friday that his government would do all it could to "find a solution allowing the ships to continue operating and to preserve jobs," noting that 533 jobs were at risk in France and 71 in Britain.

Groupe Eurotunnel started to operate services on the Dover-Calais crossing in 2012 under the MyFerryLink brand when it acquired three ferries from the now-defunct SeaFrance service owned by French railways operator SNCF.

"Eurotunnel will be given six months to stop running services from the date of an order to that effect. It could also find another owner for the MyFerryLink business if that made MyFerryLink completely independent of Eurotunnel," Britain's Competition and Markets Authority (CMA) said.

The regulator repeated its previous reasoning that with two of the operators on the ferry route running at a loss the current level of competition was not sustainable and could lead to the exit of a competitor.

As well as Eurotunnel, which operates its vessels under the MyFerryLink brand, Danish ferry operator DFDS and Britain's P&O Ferries also runs services on the Dover-Calais crossing, competing against the rail link for freight and passengers.

DFDS has said it is losing between 8 and 10 million Danish crowns ($1.47-1.84 million) a month as a result of MyFerryLink.

"Today's final report from the CMA is good news for DFDS and our 1,300 employees providing ferry services on the English Channel ... We hope the decision will be implemented as swiftly as possible," Niels Smedegaard, CEO of DFDS said in a statement.

Eurotunnel said in a statement that by removing one competitor from the market, CMA was creating a "de facto monopoly", which would lead to higher prices for consumers and lower revenue for the ports of Dover and Calais.

"The decision by CMA is a denial of the reality of the situation. It penalises the consumer and puts 600 people out of work without any real justification," Eurotunnel's chief executive Jacques Gounon said.

The French transport ministry said there was room for three operators, adding: "It is a paradox that in the name of fair competition the British authority eliminates one of the operators."

Shares in Eurotunnel were up 1.5 percent at 9.78 euros by 0952 GMT after French broker Oddo raised its rating to "buy" from "neutral" and its target price to 11.2 euros from 9 euros, saying the CMA decision would cut costs for Eurotunnel.

Eurotunnel posted earnings before interest, tax, depreciation and amortisation (EBITDA) of 449 million euros last year, which included a 22 million-euro loss at MyFerryLink. Group operating costs totalled 643 million euros, a rise of 86 million euros with 76 million euros attributed to MyFerryLink.

(Additional reporting by Shida Chayesteh in Copenhagen; Editing by Kate Holton and Greg Mahlich)

FILED UNDER: