Looking back to 1994, the free trip under the Channel for new shareholders must seem like the only worthwhile return on their investment. Meanwhile, management at the Channel Tunnel operator is trying to dig itself out of a £6.4 billion black hole of debt. For some investors, the new all-French board of untried businessmen and politicians installed after the dramatic shareholder revolt on 7 April has failed to inspire confidence that it can turn things around, particularly after the disappointing interim figures issued in July.
'These results are not ours,' said chairman Jacques Maillot, distancing himself from first-half losses of £80 million and blaming the previous board. However, finance director Herve Huas admitted that some parts of the company were in worse shape than expected. He warned that the business would 'not be able to dig itself out of its ditch on its own', and told investors to remain patient. Yet there was 'very little time' to sort things out.
THE STRAIGHT TALK
Anxious investors fear that the management is struggling to get a grip on operations. One London-based credit analyst told the Guardian: 'The elusive profitable Eurotunnel strategy has yet to be found, and I'm not sure these guys are going to find it, either. Until they come up with a gang-buster plan to turn everything around and cut interest charges, I'm sceptical.' Like Concorde, Eurotunnel was always going to be difficult to sustain as a profitable concern, particularly with the advent of cut-price flights between London and Paris, Eurostar and low ferry prices.
The company has set about improving market share and the yield from each journey on its shuttle trains by changing its price structure and instituting measures to cut costs by £26 million a year. But the effects won't be felt until 2005. It's also seeking to restructure its vast debt. Valiant efforts, perhaps, but things will not get any easier: in December next year, the stabilisation period agreed with creditors in 1998 comes to an end, and compulsory current debt repayments restart, thus increasing the burden. Then in November 2006, Eurotunnel's minimum user charge - which guarantees a base sum from railway operators using the tunnel for 12 years from opening - will cease, and that could reduce Eurotunnel's operating revenues dramatically. How will it escape then?