Eurotunnel Tackles Ferries, But Price May Be Too High
OPERATORS of the Channel Tunnel have fired the first shot in an anticipated price war with ferry companies when the long-delayed ``fixed link'' between Britain and France opens for car and passenger traffic in May.
But there are indications that the operating company, Eurotunnel, which hopes to seize at least 50 percent of the cross-Channel market, may have aimed its prices too high. When it announced its fare structure on Tuesday, Eurotunnel's shares fell sharply on the London stock exchange.
Ferry companies say they will have little trouble keeping and attracting passengers, despite the speed and novelty of the undersea service. The 220 banks financing the fixed link are reportedly concerned that Eurotunnel will have trouble meeting its traffic and revenue targets if its price structure is not right.
The fixed link is already a year late in opening, and its cost is twice as high as original projections. The delay has enabled ferry operators to replace old vessels with new ships providing high standards of comfort.
Car travelers using the 10 billion British pounds Chunnel - known as ``Le Shuttle'' - from May 8 will pay a peak fare of 310 British pounds ($461) for a return ticket between Folkestone, England and Calais, France. This is only 10 British pounds cheaper than an equivalent ferry ticket. They will be able to board shuttle trains at Folkestone for the 31-mile, 35-minute journey to France. Passengers will stay in their vehicles for the journey but will be able to tune in to a special radio station giving them information about their trip.
It will take travelers using sea ferries 75 minutes for the crossing. They will be able to leave their vehicles and take advantage of high-quality onboard facilities, including restaurants, shops, and live entertainment. Executives of P&O and Stena Sealink, the two main cross-Channel ferry operators, can hardly disguise their delight at the narrow margin between their prices and Eurotunnel's. Chunnel travelers will need to stop at the British or French end for a meal and to make purchases, a P&O spokesman says. ``We will be offering better value,'' he adds.
Tuesday's 2.7 percent drop in Eurotunnel shares was caused partly by signs that business travelers may not want to use the Chunnel. A Mori survey of 400 companies shows that two-thirds of business travelers are unlikely to use the Chunnel for trips to Paris and other European destinations and prefer to fly.
Christopher Garnett, Eurotunnel's commercial director, says his company does not plan to wage a price war. But travel-industry executives forecast that after the novelty of using the Chunnel wears off, many people may switch back to ferries.
``A lot of people will want to try the Chunnel, but nobody can be sure how popular it will be in the long run,'' says Keith Betton of the Association of British Travel Agents. ``If Eurotunnel's targets are not met, prices are likely to fall.''
Each shuttle will consist of two double-deck and 12 single-deck carriages and will carry up to 180 cars. This compares with 500 cars on each of the 10 large ferries traveling between Dover and Calais. Initially, there will be two shuttle trains every hour in each direction. In a few months, shuttles will leave every 15 minutes. There will be no reservations.
Eurotunnel's plans for later in the year include running special passenger-only Eurostar trains on London-Paris and London-Brussels routes. The service will compete directly with airlines. Journey time will be about three hours, according to Eurotunnel.
A Chunnel freight-only service is due to start in March. ``We are planning to carry about 30 percent of Dover-Calais freight by autumn this year,'' Mr. Garnett says. He says he expects the shuttle service to be Eurotunnel's main revenue-earner. The company hopes to carry 8 million passengers a year by 1996.
Some forecasts suggest that passenger-carrying trends between Britain and continental Europe will enable both Eurotunnel and the ferries to reap good profits. In the last decade, cross-Channel traffic has increased by 48 percent. Last summer, Dover-Calais ferry sailings increased by one-fourth.
A Eurotunnel spokesman says passenger reaction to traveling at high speed for more than 30 minutes in a sealed tube beneath the ocean is difficult to gauge. Some travelers might be concerned about the close quarters or security.