2007 Reference Document for Groupe Eurotunnel SA PDF file size

4. RISK FACTORSrate indexed to inflation, and (iii) the final two (one in sterling, the other in euro) at a floating rate, are hedged to afixed rate for the duration of the Term Loan.For the preparation of the financial statements, the floating rate debt tranches (before hedging) are £350 million and953 million euros.The risk of an unfavourable change to interest rates during the term of the NRS is mitigated by the fact that the NRSbear interest at a fixed rate.The risk of an unfavourable change in interest rates during the term of the SDES is mitigated by the fact that theSDES bear interest at a fixed rate.4.3 Risks related to Eurotunnel Group’s businessEurotunnel Group’s turnover depends primarily on cross-Channel traffic, which in turn depends on factorsover which Eurotunnel Group has no control in most casesEurotunnel Group’s turnover is closely linked to cross-Channel passenger and goods traffic.Cross-Channel and Tunnel traffic depends on a number of factors over which Eurotunnel Group has no control inmost cases. These include:general economic growth, particularly in France, the United Kingdom and Europe;the political situation in France, the United Kingdom, Europe and worldwide;the occurrence of health or natural disasters in Europe and worldwide;competition from traditional airlines, airline alliances and low-cost regional airlines;the appeal of transport services through the Tunnel compared to other forms of cross-Channel transport;competition from ferries and a possible escalation of the price war;taxation in France and the United Kingdom;limits on the number of time slots for trains using the Tunnel; andthe competitive position and commercial policies of rail operators offering passenger transport (such asEurostar) and goods transport via the Tunnel.These factors could have a negative impact on Eurotunnel Group’s turnover, earnings, financial position andavailable cash flow.A new commercial and operational strategy has been adopted and implemented progressively since 2005. Despitepositive results in 2006 and 2007, the strategy may be disrupted in the future and this could have negativeconsequences on Eurotunnel Group’s results.Eurotunnel Group faces strong competitionThe competitive environment of Eurotunnel Group could become stronger in all of its business areas. EurotunnelGroup’s business has been and is subject to competition (see section 6.2.3 of this Reference Document), whichcould further intensify in the near future.The relative excess of cross-Channel transport capacity is leading to strong competition between operators. Pricesremain subject to the threat of an economically stronger new market entrant and the further development of regionalroutes by low-cost airlines.Eurotunnel Group is faced with continued competition from airlines. Low-cost airlines have become major players inthe European transport market in recent years, both directly by servicing the usual destinations of the travellers11