Brittany Ferries has dominated the western Channel for more than a decade. Well away from the hurly-burly of Dover, it might have believed itself insulated from the commercial turbulence caused by the impending opening of the tunnel; it discovered otherwise last week.

P&O European Ferries, which, as market leader at Dover, will have to tackle the tunnel head on, has been wanting to develop longer sea routes on the western Channel to hedge its bets. For more than a year it has expressed a desire to operate a service from Portsmouth to Bilbao. But when the plan failed to get off the ground last spring, doubts were expressed about whether the service would ever come into being.

Last week, P&O confounded the sceptics by formally announcing that it had acquired a suitable ferry - the Viking Line's Olympia, currently operating between Helsinki and Stockholm - and would run a twice-weekly service from Portsmouth to Bilbao from 28 April.

The 37,000-ton ferry will be renamed the Pride of Bilbao. With space for 2,500 passengers and 600 cars, it will be the biggest ever to sail from the UK.

Since 1978 Brittany Ferries has been the only company to offer a car and passenger service between the UK and Spain. Faced with P&O's challenge, Brittany Ferries must feel like a little bird that returns to the nest to find a cuckoo pushing her chicks out.

The French company has complained angrily that P&O's new Bilbao enterprise is being illegally subsidised by the Basque government. P&O points to the fact that Brittany Ferries was set up by Breton chambers of commerce and that this year it looks likely to receive a substantial grant from the French government. However, Brittany Ferries claims there is a difference between the Bretons taking a shareholding and the straight subsidy that it says is being offered to P&O by the Basques.

It has to be said that the Basques' method of supporting the service is curious in the extreme. The Spanish regional government says if the service does not break even in the first three years, it is ready to buy pounds 5m worth of tickets which will be distributed among 'low income' groups.

What most concerns Brittany Ferries is that P&O will attempt to gain a market share by undercutting its fares. P&O has not yet published its fares but it promises they will be 'competitive' with Brittany Ferries' tariffs on its Plymouth-Santander route. While business has been growing steadily on the Plymouth-Santander route over the past 10 years, there has to be some doubts as to whether there is room for two ferry operators operating between the UK and Spain.

Like P&O, Brittany Ferries has also invested in a newly acquired Baltic Sea vessel to operate from Plymouth to Santander. The acquisition of the 31,000-ton Val de Loire ferry is part of a pounds 350m investment to improve services this year. From June it will operate not only from Plymouth to Santander but also to Roscoff, and from Portsmouth to St Malo (the first time a super-ferry has been used on this route).

Brittany Ferries is confident that there will be substantial growth in its cross-Channel ferry traffic next year. David Longden, the marketing director, says he believes his company's business will increase by 17 per cent this year, compared with 2 per cent last year.

It is not yet clear, however, how much the fall of the value of the pound against the franc, following its withdrawal from the ERM last September, will affect cross-Channel business. This time last year there were more than 9.5 francs to the pound, now the rate is around 8.2 - a devaluation of nearly 14 per cent. Things might have been worse if the franc hadn't hit its own rocky patch in the ERM earlier this month, and there is confidence in the holiday business that before the summer the value of the pound will pick up to at least Fr8.5.

Holiday-makers themselves, though, may just decide to cut their losses this year and head north. These days the North Sea routes to Scandinavia and Germany are served by Scandinavian Seaways and Color Line - not quite a two-horse race since Color Line operates only to Norway which is not served by Scandinavian Seaways.

This sort of monopoly might provide the basis for the kind of rip-off that once prevailed on the Channel in pre-competitive days. But while each of the operators has a monopoly of ferry services, they now have to face tough competition from the new generation of regional airlines that has sprung up. And, in attracting holiday business, the ferry companies have to offer fares that can compete with other types of package.

As a result, inclusive holidays can be surprisingly good value. For example, Color Line offers five-night half-board motoring holidays in Norway from pounds 340 per person including return ferry crossing.

A two-centre ferry-inclusive chalet holiday, with seven nights at Skei and seven nights at Eidsfjord, costs from pounds 352 per person, based on four people sharing.

Scandinavian Seaways has changed the name of its Summerhouse Holidays programme to 'Country Cottage Holidays'. 'We felt the word 'summerhouse' was not accurately portraying the charm and style of the self-catering properties we feature,' said John Crummie, the company's UK passenger director. 'Scandinavians have holidayed the family way in country cottages for decades. We believe that this style of holiday, with the freedom to do as you please, in settings that are among Europe's most beautiful and unspoilt, will have great appeal to British families.'

The Country Cottage programme features more than 600 privately owned holiday properties in Denmark, Sweden and Norway. Prices range from pounds 89 to pounds 435 per person depending on the ferry route and the grade of accommodation.

This year Scandinavian Seaways is introducing a new service from Newcastle to Hamburg and is extending its seasonal Newcastle-Esbjerg service to a six-month period.

For those keen to travel further afield in the North Sea and Baltic, the main Scandinavian Seaways brochure this year also features details of services from Copenhagen/Helsingborg to Oslo and Amsterdam to Gothenburg - as well as services with Silja Line, Larvik Line, Gotlandslinjen and Estline. For example, Estline offers daily services from Stockholm to Tallinn in Estonia: the car fare is pounds 42 one way - passengers pay from pounds 41 one way.

----------------------------------------------------------------- CAR FERRIES: How peak July/August 1993 fares and services compare ----------------------------------------------------------------- WESTERN CHANNEL ROUTES Route Operator Daily Journey Return fare** sailings time Pounds Portsmouth -Le Havre P&O Ferries 3 5hr 45mins 197-297 Portsmouth -Caen Brittany Ferries 2-3 6hrs 232-306 Portsmouth -Cherbourg P&O Ferries 3 4hr 45mins 156-274 Portsmouth- St Malo Brittany Ferries 1 9hrs 289-328 Portsmouth- Bilbao P&O Ferries 2 p w 28hrs *** Southampton- Cherbourg Stena 1/2 8hrs night 192- 6hrs day 270 Poole- Cherbourg Truckline Ferries 2 4hr 15mins 212-281 Plymouth- Roscoff Brittany Ferries 1-3 6hrs 247-324

Plymouth- Santander Brittany Ferries 2 p w 24hrs 521 -----------------------------------------------------------------

----------------------------------------------------------------- NORTH SEA ROUTES ----------------------------------------------------------------- Route Operator Sailings Journey Return per week time fare** Newcastle- Color Line 3 20/26hrs 384-420 Stavanger/Bergen Harwich-Esbjerg Scandinavian 3/4 20hrs 468-594* Newcastle-Esbjerg Scandinavian 2 19hrs 468-594* Harwich-Gothenburg Scandinavian 3 24hrs 498-710* Newcastle-Gothenburg Scandinavian 2 24hrs 498-710* Harwich-Hamburg Scandinavian 3/4 22hrs 364-510* Newcastle-Hamburg Scandinavian 1/2 23hrs 354-510* ----------------------------------------------------------------- * Fare includes accommodation in a 4-berth cabin with shower & lavatory. ** Return fare based on two adults in a 4.5m car. Exact fare depends upon the time of travel. Cheaper fares are available for short-break crossings. *** Not yet available. -----------------------------------------------------------------

THE OPERATORS Brittany Ferries 0705 827701 P&O European Ferries 0304 203388 Stena Sealink Line 0233 647047 Truckline 0202 666466 Color Line 091-296 1313 Scandinavian Seaways 0255 240240

(Photograph and maps omitted)