Eurotunnel in a black hole

EUROTUNNEL today revealed deepening net losses of £82m for the first half and warned that without speedy restructuring things can only get worse.

The new French board, headed by former Nouvelles Frontieres travel boss Jacques Maillot, admitted the financial situation of the Channel Tunnel operator was 'worrying'.

He said that overhauling the company's commercial strategy and slashing costs 'will not be enough'.

He added: 'It is essential that Eurotunnel engages in a global dialogue as soon as possible with all its partners, whether public or private, financial or industrial, if it is to achieve recovery'. Eurotunnel shares slumped 8.8% to e0.31.

Maillot's warning accompanied figures for the half to end-June that showed a continued decline in the profitability of Eurotunnel's core business of moving cars and trucks under the Channel.

Revenues from its shuttles fell 6% to £137m at constant exchange rates.

At the same time, operating costs increased 8% to £137m. Only £115m of revenues from through rail services, including Eurostar passenger services and international freight trains, enabled the tunnel company to achieve total revenues of £252m, down 2% overall.

The shuttle business continued to see revenues decline. The cross-Channel car market slumped 10% compared with 2003,

Eurotunnel said, as holiday-makers found it cheaper to fly with a low-cost airline and hire a car upon arrival.

The number of cars carried by Eurotunnel fell 14% to 944,832, leaving it with only 48% of the market.

The number of coaches also fell 14% to 29,834, as coach services lost passengers to budget airlines. And although the number of lorries carried on the shuttles increased by 4% to 646,468, reduced yields left overall truck revenues down.

There were two bright spots, however. The number of through passengers on Eurostar inter-city train services surged 20% to 3.4m in the first half as the opening of part of the high-speed link between the tunnel terminal at Folkestone in Kent and London cut the travelling time.

International rail freight also showed a 15% recovery, to 978,717 tonnes, but fees to Eurotunnel rose only 2%.

Eurotunnel now has £6.2bn of debt for £1.2bn of shareholder funds. Maillot and his board, appointed on 7 April when shareholders ousted the previous management, are promising to unveil restructuring plans in October.