P & O bids to capsize state aid for rival

Date: 15/11/01

By Laurence Frost

FERRY company P & O has appealed to the European Court of First Instance against the Commission's decision to authorise around €48 million of state aid to Brittany Ferries. The UK company says it has evidence that its French rival has chartered vessels at well below market rates from public companies over the past 15 years as well as receiving direct cash transfers from some of the same companies. Graeme Dunlop, chairman of P & O Ferries, said he was "surprised" by the Commission's decision to allow 80 of the proposed €60-million package of further aid to go through. It was basically a political decision," said Dunlop. "We're a commercial company having to compete against a company that's dependent on state aid."

P & O maintains that three boat-owning companies have financed the renewal of the Brittany Ferries fleet with repeated cash injections from their share-holders - local and regional authorities in Brittany and Normandy. The vessels were chartered to Brittany Ferries at 15-20 below market rates. "There have been instances in the past when Brittany Ferries hasn't been doing too well when they have simply not paid the charter fees at all," said Dunlop. Brittany Ferries is also alleged to have benefited from valuable loan guarantees from the boat-owning companies and their public shareholders.

The British firm says the acquisition of a new 'jumbo ferry' under the 1996-2002 restructuring plan will increase its rival's capacity, breaking EU state aid rules which state that restructuring aid can only be used for downsizing. A spokeswoman for Brittany Ferries said no one was available to comment on the allegations.

In a press release announcing its decision, the Commission said in May that the French operator was "one of the driving forces behind regional development in Brittany and Lower Normandy". It said that "in the light of these industrial and social factors" the plan represented a "return to viability for the company".

A spokesman for Transport Commissioner Loyola de Palacio said the EU executive was "very confident" in its original decision. "We treat all cases fairly," he added. The Commission now has until December to respond to P & O's appeal submission. EU guidelines on restructuring aid state that regional development issues can be taken into account in certain circumstances. P & O has an annual turnover of around €245 million from the routes where it is competing against Brittany Ferries. The French operator currently holds a market share of around 55.

Ferry company P&O has appealed to the European Court of First Instance against the Commission's decision to authorise around €48 million of state aid to Brittany Ferries.