Eurotunnel state aid plan replaced by cost-cutting

The new board of Eurotunnel yesterday abandoned its attempts to persuade the British and French governments to bail out the Channel Tunnel and instead unveiled a rescue plan based on cost savings and higher revenues.

The new board of Eurotunnel yesterday abandoned its attempts to persuade the British and French governments to bail out the Channel Tunnel and instead unveiled a rescue plan based on cost savings and higher revenues.

Jean-Louis Raymond, Eurotunnel's chief executive, said the company aimed to generate an extra €100m of benefits. These are split between €40m in cost savings - equivalent to a 10 per cent reduction - and a €60m improvement in revenues.

It was not clear, however, whether the plan would entail job losses among the 1,400 staff or price rises for cars, lorries and Eurostar trains using the 30-mile link between Folkestone and Calais.

When the new Eurotunnel team sensationally ousted the previous board and seized control in April, the incoming finance director, Hervé Huas, said it intended to seek a renegotiation of the Channel Tunnel Treaty, which forbids state support for the link.

But M. Raymond said this strategy had been scrapped. "I consider that the position of the two governments is clear," he said. "There will be no money so we didn't ask for it."

He was speaking as Eurotunnel provided shareholders with a 90-day update on the progress it has made in its "recovery" plan. The update contained no information on how Eurotunnel planned to overcome its biggest problem, its £6.4bn debt mountain. It was also vague on what the new pricing strategy would be and how the cost reductions would be achieved, promising that the broad outline of its refinancing plan would be unveiled in late October.

M. Raymond criticised the previous management for losing sight of Eurotunnel's main task of attracting more customers at best possible prices. He also said Eurotunnel had got sucked into a price war with the ferries when it should have been promoting the "exceptional quality" of its service. M. Raymond said the new Eurotunnel team had decided to retain some elements of Project Galaxie - the rescue strategy put forward by the previous board - in particular the plan to launch its own through rail service for freight customers.

But it does not intend to seek a merger with Eurostar and London & Continental Railways, the state-backed consortium building the new high-speed rail link from the tunnel into central London.