BBC News' Sarah Pennalls: Eurotunnel beginning to turn around

The company has returned a net profit of £64m, after a loss last year of £611m.

However, Eurotunnel said it would be forced to raise ticket prices this summer if duty-free is abolished in 1999.

The group warned that it would have to recoup lost sales by increasing ticket prices, which could deter some passengers from travelling.

Eurotunnel traffic is booming

Total turnover at Eurotunnel in 1998 was up 26% to £666m from £529m in the previous year, thanks to a sharp rise in traffic through the tunnel.

The company's train service, Le Shuttle, now carries more than half of all cars crossing the channel, and 39% of coaches.

But the group's return to profit owed more to the restructuring of the company's massive debts, rather than growing traffic numbers.

Its overall figures were helped last year because a complex financial restructuring of its massive debt injected some £279m

Eurotunnel said it was now confident of meeting its near and long-term financial targets after being bailed out by its banks and investors.

The improvement in its financial fortunes has allowed the group to bring forward plans to pay off some of its debt mountain.

But despite the good results Eurotunnel remains deep in debt, owing £7.8bn pounds and it will take years to repay it and become "truly" profitable.