Pressure Mounts on SeaFrance Ferries
Tuesday 05 July 2011
The future of the cross channel ferry company SeaFrance looks in doubt as the European Commission launches an investigation.
The EC are to examine the €223 million of additional capital provided to the company by its parent, the state owned railway operator SNCF.
In announcing the investigation, the Commission expressed "serious doubts" whether the company can realistically become viable in the long term without continued public funding support.
It also questioned whether its participation in the restructuring costs was sufficient. The level of this contribution was well below the 50% normally required for large companies.
‘‘Rescue and restructuring aid is one of the most distortive types of state support’', the Commission stated.
“The commission must make sure the company contributes its fair share of the burden and that it is ultimately viable without further state support.’’
"The Commission also questions whether the measures proposed to limit competitive distortions caused by the aid are sufficient.’’
In response to the announcement, Vincent Launay a senior exective with SeaFrance, interpreted the ‘serious doubts’ evoked by Brussels as a “strong signal of alarm which demanded consideration of measures capable of strengthening our case on the points mentioned by the Commission.’’
Although SeaFrance has been under investigation by the EC for sometime, their troubles were increased last May when P&O Ferries made a formal complaint to the EU about the level of aid given to it, accusing the company of unfair pricing due to the state aid it had received.
A P&O Ferries spokesman stated that “The gist of the complaint we submitted to Brussels is that SeaFrance has soaked up huge amounts of money from SNCF over the years, and continues to benefit from this financial back-stop.”
“This not only allows SeaFrance to remain in business, but to cut prices to commercially unviable levels. It amounts to a huge distortion of competition”, he added.
P&O Ferries is not alone in pointing the finger at SeaFrance. Although Eurotunnel has made no formal complaint to the EU, at regular intervals it also publicly voices its anger at the price war generated by SeaFrance due to their ability to call on state subsidies.
SeaFrance is currently offering return fares across the Channel between Dover and Calais for a car and up to 5 passengers for €70, a price which P&O has been forced to match in order to retain business.Outside of the peak summer period the price war has been even fiercer.
The company has been under judicial administration since June 2010, and in April this year a court in Paris agreed to prolong until October the period of observation of the company to see if it could resolve its financial problems.
Sale plans for SeaFrance were withdrawn earlier this year after no offers were received.
The company have already made hundreds of employees redundant, over which the trades unions have started legal action, including a complaint that the company has replaced permanent staff with those on short-term fixed contracts.
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