Newspaper article The Christian Science Monitor

The Channel Tunnel Faces A Long Dig to Profitability

Newspaper article The Christian Science Monitor

The Channel Tunnel Faces A Long Dig to Profitability

Article excerpt

TOMORROW'S official opening by Queen Elizabeth II and President Francois Mitterrand of the Channel Tunnel linking their two countries looks like it will be a prelude to years of anxiety for Eurotunnel, the operating company.

Engineers say building a 31-mile undersea "fixed link" between Britain and France is a feat comparable to Ferdinand de Lesseps's construction of the Suez Canal in the 19th century.

But the project's financial future is uncertain, and problems are likely to get worse before they get better.

Brisk price-cutting by seagoing ferry companies, calling their ships "Channel Funnels," is helping to fuel doubt about the fixed link's ability to turn a profit in the foreseeable future.

More troubling for Britain's Sir Alistair Morton and France's Andre Benard, co-chairmen of Eurotunnel, however, is the mountain of debt piled up by the company as it coped with construction delays and cost overruns. The total bill for the "Chunnel" will be around 10 billion British pounds ($15.2 billion), more than double the 1987 forecast. Annual interest charges alone will be 500 million.

British pounds British pounds British pounds British pounds British pounds British pounds Sir Alistair has confirmed that Eurotunnel's shareholders and the 220 banks backing the project will be asked for more than 1 billion extra capital in the early months of the fixed link's operation.

Eurotunnel researchers expect 28 million people to use the fixed link the first year, rising to 44 million by 2003.

Sir Alistair insists that the long-term future of the tunnel is "assured. It will be the leading transport company of the 20th century, and it will make a lot of money."

Transport experts, however, are not so bullish. They note that the project is running a year behind schedule, and that even now, there will be delays in getting it completely operational. Full passenger and freight services will not start until October, and peak frequency for the 35-minute shuttle trip is unlikely to be reached before next March.

Richard Hannah, a transport specialist with UBS Securities, says Eurotunnel may be too optimistic in its traffic and revenue forecasts. …

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