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Last Updated: Thursday, 6 May, 2004, 07:33 GMT 08:33 UK
Eurotunnel's sombre 10-year party
By Lucy Jones
BBC News Online business reporter in Folkestone

Staff at the channel tunnel operator Eurotunnel are putting on brave faces as celebrations get underway to mark the 10-year anniversary of the link between the UK and Continental Europe.

Preparations for the Eurotunnel 10-year anniversary party
The 10-year anniversary party will be 'modest'

Eurotunnel is 6.4bn in debt.

And nobody has a clue what is going to be done about it.

Yet, during preparations on Wednesday for Thursday's low key staff party, some of them recall the early days.

Denise Lewis, a passenger operations manager, remembers having to stay 10 hours underground during security procedures, working with no toilet facilities.

She also remembers the pioneering spirit of the early days.

"It was exciting. We never, ever knew what the day was going to bring," she says.

"The equipment was new. We didn't know whether it was going to work."

It did, of course, at least in engineering terms.

But financially, the project has been a disaster.

New board

Much of the pioneering spirit is still very much evident among the staff working for Eurotunnel outside Folkestone.

I've never sold a property to anyone who's come to work for Eurotunnel. People come from London to do buy-to-lets because, quite frankly, this is a low income area
Folkestone estate agent Philip Martin
Many of them enjoy rural lifestyles along the English, or even the French, coast.

And the atmosphere at work seems friendly, cheery and enthusiastic.

"I feel proud of what we've achieved," says Ms Lewis, and many of her colleagues clearly agree.

But at board level, much has disintegrated.

Company directors were recently pushed out by disgruntled French shareholders, angry that their investments are now almost worthless.

And the new board will not present a rescue plan for another three months.

Meanwhile, the financial strain is felt by the staff.

Even Thursday's parties which will take place on both sides of the channel will be of "modest expenditure," given the company's woes, admits Dave Pointon, the firm's director of technical and shuttle services.

The right-wing French politician Nicholas Miguet who led the shareholder revolt - many say to raise his own profile - will certainly not be attending, nor will any French shareholders.

'Dinner in France'

The stream of travellers going from the UK to France is steady as the link has given Britons quick access to French food and drink

A lot of train spotters bought shares and they enjoy being able to go on tours
Eurotunnel's communications officer Camille Newall.
Ms Lewis is convinced that the tunnel has enabled lifestyle changes, even brought style into the lives of many of the people living near the tunnel.

"For example, I go to France for dinner," she says, adding that many other people in the area do the same, making the most of a 19 day return ticket.

But while Kent residents may be going to France for shopping and meals out, few French people are making the equivalent day trip.

Folkestone, with its run down high street and houses in disrepair, feels a world away from the futuristic tunnel just down the road.

There are few French day trippers in Folkestone
Property prices have risen in the area - like everywhere in the UK, but according to Folkestone estate agent Philip Martin, "not because of Eurotunnel".

"I've never sold a property to anyone who's come to work for Eurotunnel. People come from London to do buy-to-lets because, quite frankly, this is a low income area, and up until three years ago the returns were good."

Eurotunnel, however, does employ local people among its 1,200 staff at the Folkestone terminal and provides jobs for a further 1,500 subcontractors.


The employment effect now is nevertheless not as great as it was a decade ago.

The boring of three 50-kilometre tunnels between Britain and France was one of the greatest engineering feats of the twentieth century.

Eurotunnel passengers
The channel tunnel is one of the busiest railway links
It is the world's longest undersea tunnel and one of the busiest rail routes, with 400 trains passing through every day.

As such, there is arguably still plenty to celebrate for Eurotunnel - despite the company's present financial nightmare.

The hard work involved in Wednesday's party preparations, with flat packed tables and plastic chairs stacked high in a large marquees, seems a fitting tribute to the project.

For much has been achieved.

Sickly ferry rides and tedious trips to airports have become a thing of the past for the millions of passengers who use the tunnel.

Some of them are investors.

"A lot of train spotters bought shares and they enjoy being able to go on tours," says Eurotunnel's communications officer Camille Newall.

Free trips offered to shareholders also enable them to go from the UK to Coquelles on the outskirts of Calais in France to stock up on wine and cheese.

It seems the sharp contrasts between Folkestone and Coquelles have somehow influenced at least some investors' sentiments.

Debt threat

But there are not enough cheese and wine lovers, diners and trainspotters to clock up the sort of passenger numbers required for Eurotunnel to make money.

Denise Lewis
Ms Lewis is proud of what Eurotunnel has achieved
Passenger numbers have fallen far short of the levels predicted at the outset.

One early prediction was that the Chunnel would be catering for 17 million customers in 2003.

Effective responses by cost cutting budget airlines and deal offering ferry operators since the Chunnel was built meant that competition is now serious.

Consequently, only seven million people chose Eurostar last year.

Like many prestigious projects, Eurotunnel's building costs ran vastly over budget and debts were amassed.

Lower-than-predicted passenger numbers now mean the company is only just generating enough revenue to pay the interest charges on its debts.

In 2003, the company's total revenue - before costs were taken into account - was about 500m.

At the same time, interest payments on its loans were around 300m, according to one estimate.

Add to that staff costs of over 100m, and it becomes clear that Eurotunnel is left with little change.

The company is unlikely to go bankrupt, however. At least not immediately.

Eurotunnel is protected by fixed minimum usage rates until 2007 and by previous financial restructuring exercises.

'No public cash'

The key question is what happens after this point.

There are presently two main schools of thought.

The sacked board in its rescue plan "Project Galaxie" proposed reducing tunnel fees to stimulate business.

But the new board dismissed fee reductions and is instead saying it may seek state aid.

Government assistance for Eurotunnel would be highly controversial.

After former British Prime Minister Margaret Thatcher had gradually warmed to the idea of a tunnel linking Britain and France, she insisted no public money would be used for the project - a principle which was enshrined in the 1986 Treaty of Canterbury.

It is possible the board could yet change its mind on what should be done.

"The new package will contain some aspects of the old package," says Mr Pointon.

As the creditors draw ever closer, Eurotunnel's more than 3000 employees insist it is "business as usual".

Eurotunnel has always had its problems and the 6.4bn hole is just something that has to be overcome, they say.

Eurotunnel's finance chief quits
22 Apr 04  |  Business
Sales slide at ailing Eurotunnel
20 Apr 04  |  Business
Creditor fears batter Eurotunnel
13 Apr 04  |  Business
Eurotunnel rebels secure victory
07 Apr 04  |  Business

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