Ferry aid plan makes waves

Date: 17/10/1996

By Chris Johnstone

THE European Commission is being called upon to examine plans to rescue cross-Channel ferry companies from the wave of recent cut-throat competition.

Officials in the Directorate-General for competition (DGIV) are monitoring French plans to help their companies while, at the same time, keeping a watching brief on an unprecedented merger between P&O and rival Stena Line.

The shake-out in the ferry industry has already claimed one victim. Belgium's state-owned ferry company, Régie des Transports Maritimes, will cease trading at the end of the year and be replaced by a slimmed-down private joint venture.

French plans to back its struggling ferry industry, with a mixture of help from the government and ports, are being watched closely by the Commission to see whether they involve illegal aid.

The Directorate-General for transport (DGVII) has been involved in an exchange of letters with the French authorities after rival ferry firms accused Brittany Ferries of benefiting from unfair subsidies this summer.

But Paris has stalled any possible action by the Commission by saying that its project has still to be finalised and no cash has yet been paid.

The French government is considering three possible lines of action: cutting social charges for ferry crew; cash aid to help French companies upgrade their fleet in 1997; and a solidarity plan by ports to cut charges to ferry companies.

The French authorities say any cut-price port fees would apply to all ferry companies operating in and out of French ports regardless of their nationality, and should therefore be regarded as non-discriminatory.

But Commission officials say such a move could spark a complaint from Eurotunnel, the operator of the underground rail link between the UK and France.

Some British ferry companies are also worried that the French package, in whatever shape it finally emerges, will amount to covert help for struggling Brittany Ferries.

The company slipped from a small net profit in 1991-92 to increasingly large losses over the following three years.

Brittany Ferries complains it is being undercut by the lower social charges of its UK rivals, the weakness of the British pound and the trend towards increased capacity across the Channel.

Brittany Ferries has contributed to the capacity problem itself with four new jumbo ferries between France and the UK.

But talks between the company and its rival P&O about cuts in capacity in the western Channel have so far proved fruitless.

“We would like to see some improvement in the situation,” said a P&O spokesman. “It is still an issue.”

Meanwhile, both British and European competition authorities are eyeing the intention of P&O and Stena Line to form a 60-40 joint company for their cross-Channel ferry operations. The companies won clearance from the UK's Office of Fair Trading (OFT) last July to enter into alliance talks, in a move which ended a traditional ban on cooperation between ferry lines.

The OFT is to examine the new alliance and then recommend whether the Department of Trade and Industry should order a full investigation by the Monopolies and Mergers Commission.

The Commission's Directorate-General for competition (DGlV) says the P&O-Stena venture does not qualify for vetting under its rules for large mergers, since more than two-thirds of the companies' turnover is concentrated in the UK.

However, it expects to examine the deal under its competition rules.

P&O is confident. On the heaviest-used Dover-Calais link, it claimed a combined market share with Stena of around 41&percent; of car passengers in August, while the Channel Tunnel had an equivalent 41&percent; and the rest was shared between SeaFrance, Hoverspeed, and Sally Line.

In the freight sector, P&O-Stena had about 40&percent; of the market, with the Channel Tunnel taking 44&percent;.

P&O has taken the OFT go-ahead for ferry cooperation talks as a signal that it will not sink the merger.

“The competitive situation has totally transformed with the arrival of the tunnel,” said a company spokesman.