Channel ferry firms sail towards price war

STENA SEALINK has fired the first shots in the Channel price war by launching a 20 per cent cut on selected summer ferry crossings.

With Eurotunnel unlikely to transport holidaymakers before the autumn, the cut is almost certainly directed at P&O, which competes with Stena on the Dover to Calais route.

Eurotunnel has dismissed the cut, which also affects Newhaven- Dieppe and Southampton-Cherbourg crossings, as 'a matter between the ferry companies but it is likely to effect Eurotunnel charges in the long term, once the premium for novelty value wears off.

Last night, Dr Stefan Szymanski, economics lecturer at Imperial College, said that two ferry companies undercutting each other seemed 'bizarre economics'. He argues that a price war between the ferry companies is senseless because the tunnel will eventually put both out of business. 'The profits on the Dover-Calais route have been wonderful in the past few years,' he said. 'The companies had the chance to make a good profit for another year and they seem to have blown it. But it is wonderful for consumers. They were always going to be the real winners.'

Last night, a P&O spokesman said it had no plans to cut its prices in response to Stena's cut, which it claims will knock pounds 64 off a standard return fare for a car and five passengers. 'This shows Stena is in dire straits . . . it has lost market share in the past five months. We can afford to sit and watch. We believe we offer a better product and higher quality.' Claims by Stena that the cut was a response to an earlier 10 per cent cut by P&O were 'completely spurious'.

A Stena spokesman responded: 'P&O is clearly rattled by what is a credible reponse in a volatile market.' But he insisted the move was simply a commercial initiative, not the first signs of a price war and denied Stena was losing market share.

But he admitted that the company believed that the cut to ferry prices - already 10 to 20 per cent lower than those for the tunnel - would 'give Eurotunnel something to aim for'.

Dr Szymanski believes that the ferry companies' fates were sealed when the tunnel was completed. 'The only way they could survive would be to blow the tunnel up.'