European Infrastructure Finance Yearbook - Investing In Bonds ...

8%, on the previous comparable period.
Further downside risk cannot be excluded,
however, and overall yields may come under
significant pressure as ferry companies
aggressively and increasingly compete for
market share.
The new approach has also yielded better
visibility in terms of traffic forecasting, as some
major customers have entered into multi-year
contracts with Eurotunnel. These contracts enable
customers to lock in their requirements in terms
of number of crossings, and enable Eurotunnel to
fine-tune its capacity planning. Further
refinements of this approach are planned
for 2007.
Car shuttles.
Standard & Poor’s considers that this segment
will be relatively stable in the future.
Eurotunnel’s share of the passenger car market
on the short straits link has reduced to 43.5% in
2006 from 45.5% in 2004. This was largely due
to SpeedFerries’ entry into the market in May
2005, to the gradual increase in Norfolkline’s
passenger capacity in 2005 and 2006, and to the
impact of Eurotunnel’s new commercial strategy.
The new Eurotunnel strategy implemented
during 2005 has focused on improving yields
through dynamic ticket pricing after taking into
account the load factor and time of arrival,
changing the customer mix in favor of the nondaytrip
passengers versus the daytrip passengers,
and implementing a 34% reduction in capacity,
with less availability for daytrip passengers.
With this strategy, Eurotunnel has been able to
increase the load factor on its passenger shuttles
to 62.5% in 2006 from 45.1% in 2004, and car
revenues by 10% (due to the 11% increase in the
average yield). The first half of 2007 maintains
strong momentum, with volumes up 8% on the
previous comparable period.
Coach shuttles.
The coach market, which has declined by around
4% per year between 1998 and 2006, is expected
to remain a marginal contributor to revenues. The
continuing decline is due to factors such as the
loss of duty-free, and increased competition from
airlines for leisure and price-sensitive non-leisure
trips. Further decline cannot be excluded in this
price-sensitive market.
Eurotunnel’s share of the passenger coach
STANDARD & POOR’S EUROPEAN INFRASTRUCTURE FINANCE YEARBOOK
TRANSPORTATION INFRASTRUCTURE
market on the short straits link has risen to
38.9% in 2006 from 33.5% in 2004.
Coach revenues were down 11%, mainly due to
lower volumes, which decreased by 13% in 2006
and returned to a level comparable to that of
2004. Average yields increased by a modest 2%.
Volumes decreased by another 2% in the first half
of 2007 on the previous comparable period.
Railways.
Railway revenues (including MUC payments)
increased by 2% to €350 million in 2006.
Excluding the MUC, the underlying increase in
railway revenues was 7% in 2006, due in part to
the 5% increase in Eurostar passenger traffic
traveling through the tunnel.
In 2007, railway revenues are not protected by
the MUC, and are forecasted to fall by
approximately 25% (the actual figure was 27% in
the first half of 2007).
Passenger rail (Eurostar).
Standard & Poor’s expects Eurostar’s long-term
growth to be in line with GDP, with a market
share stabilized a couple of years after CTRL2
(Channel Tunnel Rail Link-2).
Eurostar has shown impressive passenger
growth since 1997 except between 2000 and
2003, primarily due to low-cost airlines drawing
passengers to other destinations. The company
has however fallen short of expected volumes,
which were overly optimistic. Further material
growth is not expected before November 2007,
when Eurostar’s competitive position should
benefit from the second phase of the U.K. highspeed
link CTRL2 (reducing inter-capital journey
time by an additional 20 minutes, and the
opening of two additional stations, increasing the
catchment area). Thereafter, extension of
Eurostar’s rail links to Amsterdam could
potentially add some volume.
Growth in Eurostar traffic, which had been
restrained by the July 2005 terrorist attacks in
London, resumed in 2006. Paris to London
passenger numbers were up by 4.2% in 2006, at
5.66 million (and by 4.8% over the first six
months of 2007, at 3.90 million). In 2006,
Eurostar had 70.2% of the Paris to London
passenger market. On the Brussels to London
passenger market, the 2006 figures were 2.2
million (up 8.5%) and 71.7% respectively.
Eurostar, whose first-half sales were up 13.6% on
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