Because of the price war and the doubling of capacity as a result of the construction of the tunnel, the total number of passengers going across or under the Channel on Le Shuttle in the first half of this year went up 16 per cent compared with the same period in1995. However, P&O's market share has slumped as a result of the tunnel which is now threatening to mop up half the market and all the growth plus some of P&O's former customers have gone to Eurotunnel.
The number of passengers using P&O's ferries on the short sea crossing fell from 4.8 million to 4.1 million, but the company suffered even worse results on its longer routes in the Western Channel as people are increasingly being attracted by the bargains available between Dover and Calais. On the longer crossings, the number of passengers for the first six months fell by nearly a quarter to 863,000 compared with 1,134,000 in 1995.
Last week, P&O and Stena, the largest two rivals to Eurotunnel on the short-sea crossing route between Dover and Calais were given permission to negotiate over co-operation. The two main options are either sharing ticketing arrangements, or a full merger with the creation of a new company operating both sets of ferries. However, sources at P&O are doubtful that such a merger would be allowed either by the British or the Brussels regulatory authorities.
P&O is very pleased that it has finally been given the go-ahead to talk to Stena as it says its earnings on its ferries "have been well below commercial levels of return".
However, the company has performed much better on its cruises where loadings approach 100 per cent (although this is a overestimate as it is based on the number of cabins being occupied and some are not fully occupied). Profits in this sector are expected to rise from pounds 110m last year to pounds 160m this year.
Separately, some analysts said yesterday that company's plans to rationalise by disposing of its non-core businesses may be setback because of the poor freight rates for its bulk shipping division. The sale of P&O bulk shipping, worth and estimated pounds 200m was flagged as a key part of the company's disposal plans earlier this year by chairman Lord Sterling. A growth in the number of new vessels and low scrapping rates have reduced charges for freight.