Eurotunnel Says Fear of Deutsche Bahn Puts Fire Under Eurostar

Channel Tunnel operator Groupe Eurotunnel SA (GET) said Deutsche Bahn AG’s plan to run trains to the U.K. via the subsea link has pushed Eurostar Group Ltd. to boost services and will prompt a step-change in passenger numbers.

Eurostar, which has had a monopoly on inter-city routes through the tunnel since 1994, has introduced new destinations including to Aix-en-Provence and may be compelled to cut fares once the German company commences services, Eurotunnel Chief Executive Officer Jacques Gounon said in an interview.

A wrangle with Eurostar over access charges was prompted by the train operator’s displeasure over the opening up of the market rather than any excessive fee burden, Gounon said, adding that Paris-London fares are 55 percent higher than for Paris-Amsterdam, even when the tunnel rates are discounted.

“Competition must come to the tunnel, and Eurostar is angry about that, Eurostar is terrified,” the CEO said in Paris. “Deutsche Bahn’s arrival will bring three to four million passengers more, a 30 or 40 percent increase, and that will mean a step change, that’s very clear.”

The European Commission last month warned Britain and France -- which together regulate Eurotunnel -- to curb “excessive” fees levied from Eurostar and freight-train companies. Eurostar has said it backs the commission’s view.

Ferry Hit

Eurotunnel today reported a first-half net loss of 18 million euros versus a year-ago profit of 5 million euros after its new MyFerryLink business posted a 19 million-euro shortfall.

Excluding the cross-Channel ferry unit, the group had a profit of 1 million euros, it said. The year-ago figure after restating for currency changes was 2 million.

Gounon said Eurotunnel has no intention of succumbing to pressure to lower fees, saying Eurotunnel’s private shareholders deserve a return on their investment.

The CEO said it’s still not clear whether U.K. Competition Commission opposition to the 65 million-euro acquisition of ships from French rail operator SNCF’s defunct SeaFrance arm in 2012 will cause the MyFerryLink project to unravel.

In June, the commission barred the service between France and Dover in the U.K. for two years on concern Eurotunnel would gain dominance on the Channel traffic route. The company has appealed the decision and the French transport ministry said in June it would raise the matter the matter with U.K. authorities.

Gounon said today he’s hopeful the governments will come to a negotiated solution. Eurotunnel traded down 1.1 percent at 5.90 euros as of 10:45 a.m. in Paris, where it is based.

To contact the reporter on this story: Andrea Rothman in Toulouse at aerothman@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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