Make or break for DFDS in Channel dispute next week

DFDS has spent years trying to stop MyFerryLink from operating on the English Channel. The British Competition Appeal Tribunal's decisive hearing in the case will take place next week. CEO Niels Smedegaard believes in victory, he tells ShippingWatch.
Photo: Carsten Bundgaard
Photo: Carsten Bundgaard

Next week will likely bring the final round in the match between DFDS and French competitor Eurotunnel, which entered the English Channel two years ago in a move that has led to million-dollar losses for DFDS.

Since Eurotunnel launched operations on the Channel in 2012 through ferry operator MyFerryLink, DFDS and British P&O have been trying to stop the European transport giant, and several competition authorities have upheld the two carriers' claim that Eurotunnel should not be allowed to operate ferries on the Channel. The carriers' argument has been that Eurotunnel, as tunnel operator, would have a market share of more than 50 percent on the English Channel. However, the French competition authority has a different opinion.

Now it is time for the final round: On Monday and Tuesday next week, Eurotunnel and its ferry operator MyFerryLink will be heard by the British Competition Appeal Tribunal, DFDS CEO Niels Smedegaard tells ShippingWatch in relation to the carrier's 3rd quarter interim report, which shows significant improvements.

DFDS raises expectations for 2014 again 

It will be another few months before the final decision is presented, but with this hearing Smedegaard hopes to finally be able to put the matter behind him.

"We're still optimistic. The British Competition Commission has reached the same decision in the last two years," he says, referring to the latest decision, presented back in September, which once again ruled in favor of DFDS and barred Eurotunnel from operating ferries on the historical route between Dover and Calais.

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"Even though there's always a risk, we hope that we can leave the matter behind us and secure a more profitable business on the English Channel."

It is no secret that the battle on the English Channel has led to massive deficits for DFDS on the carrier's Dover-Calais business. Niels Smedegaard declines to put a number on the losses, but describes the figure as "significant."

He has previously told ShippingWatch that DFDS has been losing up to USD 1.6 million a month since the three MyFerryLink ferries started operating on the Channel.

Dover-Dunkirk pleases

Even though DFDS is still suffering big losses on the Channel, a growing number of passengers on the English Channel contributed significantly to the solid 3rd quarter result - this pleasing development, however, stems from a different route than Dover-Calais, namely the service between Dover and Dunkirk, says Smedegaard.

The solid result is generally attributed to slight improvements in the English economy, explains Niels Smedegaard. This has resulted in increased import and export volumes, as well as the Brits traveling a bit more.

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"All these things help pull developments in the right direction. England is one of our key markets as a majority of our services go to and from this country. When the economy is doing well it rubs off on passengers, shipping and logistics. This is slowly starting to come through," he says, adding:

"But the development we've seen on the Channel does not change the fact that we're still losing a lot of money on Dover-Calais."

The latest decision from the British Competition Commission gave Eurotunnel six months to leave the route, and the same conditions will apply when the final decision is presented next week. The question then becomes whether the ferry operator will stay in the Channel throughout this period or pull out ahead of the deadline.

The first quarter is not a peak season, which leads to speculations that the French company will withdraw ahead of time if the appeal tribunal rules in favor of DFDS.

DFDS achieved a result before taxes and special items of USD 63.2 million in the 3rd quarter, a 15 percent improvement. In light of this result the carrier once again raises its full-year forecast to an operating result before taxes of USD 236.0 - 244.3 million, from previously USD 219.0 - 244.3 million.

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