P&O's share price plunged 31p to 506p as chairman Lord Sterling admitted the company's ferries were engaged in a "battle" with Eurotunnel for cross channel traffic.
Stena Sealink, which only last week announced plans to for a fast ferry and the largest ever ship to operate on the Dover-Calais service, joined the fray saying that Eurotunnel was facing a "crisis".
The P&O chief said Eurotunnel was "a bit like the Suez canal - it might go bust, but it won't go away. It's there for all time."
Lord Sterling said competition from the channel tunnel had an increasing impact on P&O's cross channel business in the first half of the year, and was set to increase. The tunnel had won considerable market share in freight and further gains would be "across the board".
He added that the maximum share of traffic grabbed by Eurotunnel would only emerge in 1996-97, when the tunnel was being used to full capacity.
P&O announced half-year pre-tax profits below expectations at pounds 126m, up pounds 2m from last time, with cross-channel ferries making a reduced contribution of pounds 25m against pounds 31m.
UBS is reported to have downgraded full-year profit forecasts for P&O by pounds 30m-pounds 40m.
Other companies caught up in the channel war include British Midland and BA, which on Wednesday recognised that Eurostar's impact is detectable in its own Euroflight figures.
Stena managing director Gareth Cooper said customers preferred to travel by ferry and the tunnel had captured new business only through "single- minded discounting".
"On the passenger market its prospectus was forecasting it would take 50 per cent of the market at a price premium as a result of consumer preference for its product," said Mr Cooper.Reuse content