P&O Axes 1,200 Jobs and One-Third of Fleet to Salvage Ferries Business ; BUSINESS ANALYSIS City Sees Overhaul as Precursor to Sale, Leaving Group Focused on Ports and Logistics
Mesure, Susie, The Independent (London, England)
P&O STAKED its immediate future as a ferry operator on the burgeoning freight market yesterday as it blamed the death of the booze cruise for the need to axe one-fifth of its workforce.
Yesterday's long-awaited shake-up will see 1,200 jobs go from the group's loss-making ferry business, with staff at Portsmouth tipped to bear the brunt of the losses given that P&O plans to retreat from all but one of its crossings from the sea-faring town. A further 350 jobs depend on P&O's ability to transfer three of its Portsmouth- based fleet to other operators.
P&O hopes to plug the hole its ferries arm has made in its bottom line by slashing its ferry routes from 13 to nine and getting rid of one-third of its ships, slimming its fleet down to just 23 vessels.
Unions denounced the job losses yesterday, threatening strike action if any of the redundancies are compulsory. Bob Crow, the RMT general secretary, said: "Our members will be devastated by the massive cuts. We urged the company to consult with us properly, but instead they kept us guessing for weeks and then dumped a massive pile of documents in front of our reps after they had made their announcement. That is not consultation, and loyal P&O employees deserve better than this knee-jerk reaction."
But the City hailed the overhaul, which was far more radical than any observers had predicted, prompting analysts to bet that the group would manage to rescue its embattled ferries operation. Shares in P&O rose 5 per cent to 258.5p as analysts interpreted yesterday's shake-up as a precursor to an eventual sale of the ferries unit, leaving it with just its thriving ports and logistics businesses.
John Lawson, at Investec Securities, said: "The key message is that the steady drain on group resources should be stemmed and in time we would expect the group to completely exit the business."
Ever since the opening of the Channel Tunnel sounded the death knell for ferry operators, it has been a question of when, not if, P&O would be forced to retrench. Its ferries business has been struggling to stay afloat in a sea of red for the past four years: losing pounds 40m last year finally prompted the group into action, and the new chief executive, Robert Woods, launched a far-reaching review six months ago.
The group blamed a litany of culprits for the decline of its ferries business, from the abolition of duty-free sales in 1999 to the French government's decision to raise the tax on cigarettes by 50 per cent over the past 18 months - moves that have all but killed the appeal of on-board shopping. Meanwhile, the travel revolution engendered by the rise of low-cost airlines has opened up far more exotic destinations than Calais and Cherbourg to sun-starved Brits.
And that's without even getting the group started on the traumas of operating in a market where two of the major players - Sea France and Brittany Ferries - are basically owned by the French government, and consequently under little pressure to deliver any sort of meaningful profit. Not to mention the ill-fated Eurotunnel, which has spectacularly failed to provide any form of shareholder return since its inception, leaving P&O with little choice but to slash rates for its crossings to stand any chance of competing.
Mr Woods said: "Our operating profit has seen a continuous and marked decline. If we want to keep this business, and we do, we need to get it trading profitably. We do have a pretty uneven playing field, but we are not asking for Government subsidies. …