Between September 2005 and September 2008 freight volumes on the short sea ferry routes from Dover and Eurotunnel services from Folkestone were consistently and comfortably above 300,000 units per month. Since the credit crunch volumes have averaged to around 250,000 per month. Whilst the last 12 months has seen small growth of around 3.8% life for operators on the Dover Straits is far from plain sailing.

On the 31st May 2010 LD Lines added the Norman Trader to their, relatively new, Dover Boulogne route and increased the frequency to 7 sailings in each direction per day. At the time LD Lines M.D. Christophe Santoni declared – ‘The introduction of the second ship to the route reflects our determination to develop and establish the service.’ Yet 3 months later it was announced that the route would close with Santoni stating – ‘A return to profitability can only be achieved for the ferry industry by adjusting supply to demand, increasing prices and market consolidation.’

Santoni’s sentiment was echoed recently by P&O Ferries CEO, Helen Deeble. In August Deeble announced that her company was to undertake a major cost cutting exercise that could include service reductions and job losses. With two new superferries due in the first quarter of 2011 P&O owners DP World will no doubt be anxious that their investment starts to make returns.

The situation at SeaFrance is far worse. With a three month extension to its period of administration due to be granted until the 15th December the future of SeaFrance remains precarious. The only solution to the situation appears to be SeaFrance’s own recovery plan. Financial support granted by parent company SNCF amount to a staggering € 120 million year to date and forms only part of the global funding requirement of an estimated € 190 million. The recovery plan involves 725 redundancies from its 1600 strong workforce resulting in a new system of work patterns on board its vessels. Consultation with staff representatives is due to commence soon which in itself could cause industrial relation problems for the already beleaguered operator as one union official has warned ‘we will do what is required to ensure that SNCF does not forget where its responsibilities lie.’ Add this, to the requirement for SNCF and the French state to present a case for the long term financing of the company to the EC by the 15th of December, then there could be troubled waters ahead. Only the 28th September media reports suggest that SNCF have appointed a subsidiary of French bank Credit Agricole to find a buyer for its cross channel operator.

Amidst this background of uncertainty and cost cutting Eurotunnel has embarked on an aggressive sales campaign which has given them growth of 44% over the last 12 months. Through effective pricing strategies Eurotunnel’s market share has improved at the expense of all the other operators. Over the last year P&O and SeaFrance have lost 70,000 units each whilst DFDS (Norfolkline) have lost 35,000. In percentage terms the decreases are P&O -9.4%, SeaFrance -16.1% and DFDS (Norfolkline) -10.4%.

Commenting on the changing profile of carryings and price cutting P&Os Helen Deeble blamed Eurotunnel for ‘sparking a price war’ and in a letter to staff she added ‘This attack in the form of a price war emanates primarily from Eurotunnel which has slashed its freight rates to win back market share it lost to us after the tunnel fire. This has cost us a loss of volume and a significant downturn in revenues due to the lower prices we are having to charge our customers.’ In a counter to this however Eurotunnel CEO, Jacques Gounon accuses SeaFrance of a very aggressive pricing strategy off the back of not having to pay creditors whilst in administration.

Aside from the claims and counter claims one thing is for sure. Whilst the haulage and courier industries have been beneficiaries in the price war at some point something has to give when you consider the following:

LD Lines – Withdrawn from Dover – Boulogne.

SeaFrance – The future constantly remains uncertain and a solution of one kind or another has to be found. At the moment you couldn’t hazard a guess whether it will remain under SNCF control, come under new ownership or even close.

P&O – With two new superferries due in Q1 2011 offering 7500 lane metres fleet rationalisation must be a consideration which would yield cost saving at the expense of service frequency. With investment of £360 million in new tonnage P&Os owners will demand a speedy return on their investment.

DFDS ( Norfolkline) – New owners of the Dover Dunkerque route DFDS will turn their attentions to the profitability of their newly acquired routes now the process of integration nears completion.

Eurotunnel have forgone their price premium in return for volume improvement through a series of structured price offerings which suggests that a seasonal pricing model may be their answer to the problem of stagnant growth and falling prices.

Only time will provide the answers but whilst the Dover Straits remains in dire straits the next six months will surely see rationalisation and the tide of price cutting will turn, albeit slowly as ferry operators remain demonstratively unsure of what to do next.

For all the latest ferry news, visit www.freightlink.co.uk