BA prepares to take on Virgin over rail link

CHRISTIAN WOLMAR

Transport Correspondent

A fresh row looks set to erupt between British Airways and Virgin over government funding of the pounds 3bn Channel Tunnel rail link, which is to be built by a consortium including Virgin.

British Airways said yesterday it was investigating the possibility of taking legal action over the pounds 1.4bn government support for the link's construction.

Richard Branson's Virgin group has a 17 per cent share in London & Continental, which was awarded the contract to build the link between London and Folkestone. As part of the deal, L&C has also been given the British share of the loss-making Eurostar train service, which it will take over in April and expects to turn into a highly profitable operation.

Yesterday Robert Ayling, BA's chief executive, said the company would be looking to see if the support for the link deal broke European competition regulations regarding state aid for transport projects.

"We shall be studying the rail link issue and if there is a major case of state aid which in any way contravenes the EU rules, then obviously that's something we would be worried about. I would be concerned if subsidies were being used illegitimately to enable rail operators to compete unfairly with airlines, but at present I don't know if that is the case."

The airline has been highly critical of state funding by the French and Spanish governments for their state airlines and is currently challenging the decision on Air France in the European courts.

BA and Virgin are still locked in a legal battle in the US over British Airways' "dirty tricks" campaign, about alleged poaching of transatlantic passengers from Virgin using computer information from the ticketing system.

Mr Branson has said that he intends to make the high-speed Eurostar trains into "the best service in the world" and he also planned to "give the airlines a good run for their money" on the route.

He ridiculed BA's move yesterday and said: "What nonsense! It's especially rich coming from BA which was given Concorde on a plate with all its costs written off by the government, as well as extensive rights to Heathrow and Gatwick which would be worth millions on the open market."

Virgin argues that the state aid to build the link is not comparable with the subsidies being paid to the European airlines to stay in business because the construction costs are a one-off payment. Much of the aid is also destined to support domestic services between Kent and London, which will also use the link. Already this year Eurostar expects to carry 4 million passengers on its Paris route, more than the 3.25 million which the airlines carried last year.