Low-cost airlines and ferries hit Eurotunnel

Eurotunnel tumbled further into the abyss yesterday reporting a sharp drop in revenues over the key summer period as cut-throat competition from ferry operators and budget airlines continued to take its toll.

Eurotunnel tumbled further into the abyss yesterday reporting a sharp drop in revenues over the key summer period as cut-throat competition from ferry operators and budget airlines continued to take its toll.

The Channel Tunnel operator said that revenues in the three months from June to September fell 4 per cent to £140m. Worst hit were Eurotunnel's passenger shuttle services which suffered an 8 per cent decline in revenues as customers were lured away by cheaper cross-Channel prices elsewhere.

The grim news comes a week before Eurotunnel is due to present a three-year rescue plan to its banks setting out how it intends to cut costs and increase sales. However, the plan will not shed any light on how the Anglo-French company will tackle its overriding problem - the £6.4bn debt mountain weighing down the business.

The number of freight trucks using the tunnel fell by 4 per cent in the quarter to just over 302,000 while the number of cars carried fell by 5 per cent to 606,000.

A spokesman blamed the decline in passenger traffic on the fall in day trippers using the tunnel to bring in cheap cigarettes and alcohol after the increase in French tobacco taxes.

But Eurotunnel was also hit badly by competition from existing ferry operators and new ones such as SpeedFerries which entered the market with very low prices. Next summer, SpeedFerries is offering £50 flat-rate returns from Dover to Boulogne for a car and up to six passengers, even on peak weekend crossings. Eurotunnel's cheapest deal is a £98 return but this has conditions attached.

The only bright note in an otherwise dire set of trading figures was the 13 per cent increase in the number of Eurostar passengers using the tunnel. However, this only translated into an inflation-linked 2 per cent rise in revenues for Eurotunnel to £58.8m because of the minimum usage charge which the through railways pay.