x Abu Dhabi, UAESaturday 20 January 2018

P&O Ferries sees light at end of Chunnel

The Spirit of Britain is giving new hope to the shipping operator P&O Ferries that the Channel Tunnel and airlines will never be able to completely replace the joy of travelling from Dover to Calais over the briny.

A general view of the new P&O Ferries largest cross Channel ferry, the Spirit of Britain, as she arrives for the first time at The Port of Dover in Kent.
A general view of the new P&O Ferries largest cross Channel ferry, the Spirit of Britain, as she arrives for the first time at The Port of Dover in Kent.

Steaming away from the white cliffs of Dover, bound for the French port of Calais, the Spirit of Britain cuts a striking figure as a heavyweight fighting for business in the world's busiest shipping lane.

At 47,500 tonnes and stretching 213 metres from stern to bow, the new superferry carries the hopes of P&O Ferries in a commercial bout waged at and below sea level.

Nearly 2,600 years have passed since the first recorded cross-Channel ferry made its way over the same strip of water, with a dozen or so people aboard a craft made from oak planks. The first car ferry went into service in 1928.

But it is the success of a rather more recent a triumph of human ingenuity, the Channel Tunnel, that ensures competition has never been tougher.

P&O, part of Port & Free Zone World, which is owned by the Dubai Government, is taking the battle seriously. This year it will introduce the ferry's sister ship, Spirit of France, on the same short route across the English Channel or, as the French call it, La Manche.

The enormous investment - the two vessels, built in Finland, cost a total €360 million (Dh1.86 billion) - reflects a bold approach to a future that the construction of the tunnel once seemed to threaten.

Many transport analysts gave conventional sea crossings little chance of long-term survival after the British queen Elizabeth and the French president Francois Mitterrand jointly opened the Channel Tunnel in 1994.

"If I cast my mind back, we were supposed to just pack up shop and go away," recalls Brian Rees, the head of press and public relations for P&O Ferries.

Mr Rees says avoiding such defeatism was made harder by two separate issues of painful transition, one related to the tunnel and the other a product of bureaucratic intervention.

First, the tunnel injected a huge increase in cross-Channel capacity. Its operator, Eurotunnel, was also allowed in time to write off its vast debts, says Mr Rees. It was, he says, "a bit like us being given a whole fleet of new ships and not having to pay for them, but on a vastly bigger scale".

Then the ferry companies had to absorb the loss of an "easy revenue stream" when EU rules forced them to abolish the duty-free sales that were so attractive to passengers.

"But wind forward a decade and we're still here," Mr Rees says. "We're still investing for the very long term. We build new ships not just for the next five or 10 years, but with the next 25 years in mind, and we'll keep pulling out all the stops to continue to do so."

Today, P&O claims about a third of cross-Channel traffic, with the tunnel shuttle from Folkestone to Calais leading the way on 40 per cent, and the other ferry operators - Sea France and DFDS - sharing the remainder.

There have been casualties. Stena Line and P&O combined their Dover operations in a joint venture leading to cuts in the numbers of ships, routes and jobs. And hovercrafts, unable to weather the storm, ceased to operate in 2000 after 32 years of service.

The tunnel undoubtedly offers cross-Channel travellers a speed and simplicity the ferries can never hope to match.

This may help to explain why there has apparently been no rush of buyers for Sea France, the only French operator on the route, which has been in the hands of administrators since last September and is now seeking EU consent for a recapitalisation plan.

Eurostar trains from London to Paris, Brussels and other continental destinations carried 9.5 million passengers last year compared, for example, with P&O's 8 million.

But the rail services connecting capital cities are not seen as directly comparable competition.

Since the Dubai takeover, P&O has not been required to be listed on the London Stock Exchange.

It says it is modestly profitable but needs to perform better, especially in freight, which was badly hit by the recession.

"When the economy is struggling, things simply don't move between European countries as they did," Mr Rees admits. "But we're confident that will be clawed back.

"What makes us attractive are the low passenger fares. Give me £70 (Dh415), book early and I can get you, your car and your family from the UK to France in the peak season.

"People watching their money are more likely to take that, even if it means going for a shorter period, than spend an awful lot more per person flying to the Caribbean or US."

Professor Tim Leunig of the London School of Economics, who specialises in transport history, remembers the widespread assumptions that the ferry market would collapse after the tunnel's opening.

Now Prof Leunig sees no reason why, with the greater fuel efficiency of large, modern vessels, the sea routes cannot prosper.

"In the event, it is not surprising at all that the ferries have done so much better than predicted," he says. "The tunnel has opted for premium pricing and it is usually more expensive to use than ferries."

Prof Leunig believes that while the ferry companies are operating in a difficult market, their survival prospects remain bright.

"More and more people are travelling," he says. "More and more are taking short breaks and the British have become accustomed to driving on the continent, where they find the roads a pleasure compared with the experience in England.

"On top of that, while ferries are slower the experience is much nicer: catering is good, considerably better than on French motorways; there is a chance for the kids to stretch their legs; truck drivers can get good, honest nosh and a rest in their own areas of the ship."

At P&O Ferries, managers are also cautiously optimistic. The disruption to air travel caused last year by the ash cloud from an Icelandic volcano and then by heavy snow at Christmas, gave the ferry services unexpected boosts.

"Thousands of displaced airline passengers who hadn't been on ferries for a while got to see how things have moved on," says Mr Rees.

"I'm not sure I'd say business is thriving, as it never seems easy. There's always a challenge around the corner and freight, which represents half our business, is flat.

"But given the economy we can't complain about the tourist side of trade."