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Restrictions removed on Channel ferry operators

Merger talks between Lord Sterling's P&O and Stena Line of Sweden moved a step closer yesterday after the Government finally lifted competition restrictions on cross-channel ferry routes.

But the go-ahead for the two main Dover-Calais ferry operators to compete with the Channel Tunnel by pooling their resources also raised the prospect of an end to cut-price travel across the Channel. The news lifted shares in P&O, which bucked the weaker market trend by rising 8p to 500p.

Under existing arrangements dating back to 1979 and 1982, Sweden's Stena Line and P&O European Ferries, were prevented from making any fare-fixing, merging or pooling arrangements.

But yesterday Ian Lang, President of the Board of Trade, released the two companies, as well as Hoverspeed, from any previous undertakings.

"I consider that competition on the cross-Channel market has changed sufficiently since the Monopolies and Mergers Commission made their adverse findings, such that it is no longer appropriate to hold the companies to the undertakings."

The decision was immediately welcomed by the ferry operators. A spokesman for Stena said it was now up to P&O to approach the Swedish group with an agenda for talks.

Lord Sterling, while unable to make any immediate announcement about P&O's future plans, said: "We have always said that, even with the strong market growth we are seeing, there is too much capacity, and rationalisation is essential. We can now get ahead with looking at how best to achieve this."

The ferry operators have been struggling to compete since the Channel Tunnel was opened in May 1994 and Eurotunnel has gradually become the biggest operator of Dover-Calais traffic

P&O's share of business slipped from 40 per cent to 30 per cent last year and profits at the ferries division fell from pounds 114m to pounds 75m. Stena has 18 per cent of the market, and Eurotunnel has about 45 per cent.

In May 1996 the cross-Channel price war heated up when Eurotunnel slashed fares on the Le Shuttle service by up to 60 per cent. A standard return then cost pounds 129, which equalled the P&O fare.

Last month traffic through the Channel Tunnel smashed all previous records, with 183,752 vehicles passing through during the month. with the London to Paris and Brussels Eurostar trains showing a 55 per cent passenger increase on June 1995.

Ferry operators have slashed fares and increased sailings since the opening of the Tunnel opened in an bid to win back customers.