Consumer groups protest as P&O fares surge after link-up

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P&O yesterday upset consumer groups by signalling a determination to push up fares on cross-Channel ferry routes after its tie-up with rival Stena Line.

Graeme Dunlop, P&O ferry boss, said that passenger and freight fares had already been raised 6 per cent and 12 per cent respectively this year.

Asked about further scope for increases, he said: "There is that possibility." Lord Sterling, P&O chairman, added that it was "logical" for prices to move back upwards.

The Consumers Association said: "We said at the time that joint operations would reduce choice for consumers and lead to higher prices. That view seems to be confirmed."

The 1998 rates will be kept at the current level introduced on 1 January, partly because brochures with this year's prices have been published. But P&O says it needed further increases to make up for a 50 per cent drop in short sea rates between 1994 and 1997 when the Channel Tunnel opened.

A fire which halted Tunnel traffic was partly responsible for P&O Ferries producing a significant increase in 1997 operating profits of pounds 67.7m for the 12 month period. That helped produce a better-than-expected P&O group increase of 30 per cent in pre-tax profits, to pounds 433.9m.

But one third of ferry revenues came from shipboard sales and P&O is presuming the European Union will abolish duty free sales next year.

P&O and Stena have a free hand to raise their fares over the next three years under the terms of EU approval for the joint operation. But P&O says that there are also great opportunities to cut costs.

Meanwhile Lord Sterling revealed that a new joint venture between P&O's bulk shipping interests with Shougang Group of China could be floated as a separate company.

It would be natural to move the joint venture, to be called ABC, away from the umbrella of P&O by way of an Initial Public Offering on Hong Kong and US stock markets, he said.

Lord Sterling also used a presentation for P&O's 1997 financial results to indicate that shareholders could be in line for an increased dividend over the coming 12 months.

The 30.5p dividend held for the last five years in the face of mounting City criticism had probably been set too high in 1992, he said. It was "something we will be re-examining" in the light of the company's increasingly buoyant position, he added.