Higher traffic puts Eurotunnel on track with banks

STRONG growth in cross-Channel traffic has led to a 20 per cent increase in Eurotunnel sales in the first five months. The upsurge puts the company on track to meet targets set in its latest debt reorganisation, said Patrick Ponsolle, executive chairman.

The more positive atmosphere was reflected at yesterday's annual general meeting of the Channel Tunnel operator. Shareholders used question time to congratulate Robert Malpas, co-chairman, on his newly announced knighthood rather than attacking him about the state of their investments.

The company said it carried 1.25 million cars in the five months to the end of May. This was double the number during the same period of 1997 when the service was reduced due to the previous November's fire.

The latest figures also compared favourably with the 676,349 cars carried in the first part of 1996, the last period when it was operating normally.

Other services also showed growth. Travel on Eurostar passenger train services through the tunnel rose 14 per cent to 2.49 million passengers while carriage of rail freight was up 18 per cent at 1.35 million tons.

Attracting new business is vital for Eurotunnel to satisfy lender banks, which agreed earlier this year to reschedule payments on its pounds 8.7bn debt.

Mr Ponsolle said: "If current trends continue we should easily meet our objectives for the year or even, as in 1997, exceed them."

He told shareholders assembled at London's Westminster Hall that the abolition of duty-free sales would slow traffic volumes overall across the Channel.

But he believed Eurotunnel's market share would increase because the company was less dependent than the ferry operators on duty-free sales.

There were better opportunities for Eurotunnel to develop shopping schemes in areas like the Coquelles terminal, he said. "We will unveil large scale projects to that end before late summer."

Similar plans were expected for the UK but planning restrictions made this more tricky, he admitted. The company also hoped to benefit from the new BA-led Eurostar management and was taking steps to improve profitability by attacking overheads.

Negotiations were under way to reduce the cost of debt reservicing. Eurotunnel wants to lower the 250 basis points over Libor rate of its senior debt.