Eurotunnel slashes fares to compete with no-frills airlines

Eurotunnel will today launch the biggest overhaul of its passenger shuttle service since the opening of the Channel Tunnel 11 years ago by unveiling a new budget airline-style fares structure.

Passengers will be able to book low-cost return fares for as little as £50 per car if they buy their tickets early or travel at off-peak times.

There will also be much greater flexibility to change travel times once bookings have been made.

The dramatic move is designed to stop the haemorrhaging of revenues and passengers as the embattled Anglo-French company prepares for crunch negotiations with creditors over its £6.4bn debt burden. Eurotunnel says that without a deal to reschedule or cancel two-thirds of the debt it will be forced into bankruptcy by Christmas.

Last year Eurotunnel suffered a 7 per cent decline in overall shuttle revenues as the number of cars using the Channel Tunnel fell by 8 per cent to 2.1 million.

The fall in coach traffic was an even steeper 12 per cent.

The introduction of the new tariff structure is aimed at preventing a further decline in traffic levels this year despite forecasts that the overall cross-Channel market will fall once again as competition from low-cost airlines bites deeper.

One effect of the move towards a "yield management" type of fares structure, whereby passengers pay more the nearer they book to the date of travel, is that Eurotunnel expects to operate 30 per cent fewer services.

At present, the company operates a shuttle service day and night with up to four trains an hour running in each direction at peak times.

During heavy periods such as the summer high season the service is full but at off-peak times load factors can be as low as 5 per cent with only three or four cars using a shuttle train that can transport up to 180 vehicles.

The fares structure, meanwhile, is similar to those used by the ferry operators whereby prices are based on the length of stay rather than the time and day of travel. This means that passengers going on two-week holidays in high summer can pay twice the fare of those taking short breaks even though they may travel out on the same shuttle.

Jacques Gounon, Eurotunnel's new chairman, said: "The effect of the new tariff structure will be to provide low-cost travel for those who want it. We are moving from being an infrastructure company to a transport operator just like the low-cost airlines."

Mr Gounon predicted that although many fares would be significantly cheaper, Eurotunnel would protect its revenues through increased passenger numbers.

"We want the fares structure to be simplified and more attractive but we do not intend to enter a price war," he added.

The Eurotunnel chairman, who is seeking to beat off a challenge from the rebel French investor and share tipster Nicholas Miguet at the company's annual shareholders meeting in 10 days' time, also repeated his vow that any deal with creditors would not dilute the interests of existing shareholders.

Eurotunnel's creditors are pressing for a massive debt-for-equity swap, which would give them control of the tunnel in exchange for writing off up to £4bn of their loans. They have criticised M. Gounon's proposal that the debt be written off without creditors receiving anything in return as "economically illiterate".

M. Gounon insisted that a debt-for-equity swap was "definitively not" an option as it would be defeated by Eurotunnel's French shareholders who own a majority of the company.

However, a source in the creditors camp said: "If he really means that then there are only two options - bankruptcy or substitution, both of which would leave shareholders even worse off."

- INDEPENDENT