Eurotunnel reveals first operating profit

Eurotunnel, the Channel Tunnel operator, yesterday revealed its first-ever annual operating profit, but hit out at the Eurostar train business for failing to attract more passengers on to the flagship services from London to Paris and Brussels.

Eurotunnel unveiled profits of pounds 57m, before taking into account the huge interest charges on its pounds 8.5bn debt burden, compared with operating losses of pounds 35m in 1996. Including interest payments, losses amounted to pounds 611m, down from pounds 685m.

The marathon financial restructuring, signed last month by members of Eurotunnel's 174-strong banking syndicate, would have knocked pounds 281m off the losses, bringing last year's deficit down to pounds 330m. The refinancing involves banks swapping debt for Eurotunnel shares, which could give lenders up to 61 per cent of the company.

Shares in the Eurotunnel rose 2p to 65p on the results, which showed sales last year rising 14 per cent to pounds 532m despite the impact of the November 1996 fire. The car shuttle operations had recovered in December to take 48 per cent of the Dover to Calais market, compared with 22 per cent for P&O, the nearest rival. Overall, Le Shuttle revenues dropped by 20 per cent to pounds 113m last year, reflecting the disruption.

Eurotunnel admitted that traffic figures had failed to meet forecasts made as recently as last May. Some 2.4 million cars were carried in 1997, up 11 per cent on 1996 but short of the company's 2.5 million forecast.

Eurostar passenger numbers were around 10 per cent below forecasts at 6 million. Jim Evans, head of Eurotunnel's rail division, warned that on average Eurostar was only half full on the most popular London to Paris services last year and was just 35 per cent full on trips to Brussels, where competition with airlines was particularly fierce.

"Empty seats are a perishable commodity. We would prefer to see Eurostar going for higher volumes," said Mr Evans, in response to questions about the train operator's attempts to move the services upmarket.

Though Eurotunnel's pounds 212m revenues from Eurostar were 11 per cent higher than in 1996, the company admitted the figure was the minimum payment guaranteed from the train operator under a 10-year agreement, lasting until 2006.

Lower-than-expected demand for Eurostar was one of the main reasons for the collapse of the plans to build the pounds 5bn high speed Channel Tunnel rail link by the London & Continental Railways (LCR) consortium. In its original bid LCR had predicted Eurostar, which it operates, would carry 9 million passengers last year.

Patrick Ponsolle, Eurotunnel's executive chairman, insisted the high- speed link was "absolutely necessary", not just to the company but also to Kent commuters.

"Our view is that the full route is preferable to shorter versions," he said.