P&O is cutting routes to save costs

The group announced the closure of four of its 13 ferry routes and cut eight ships from its fleet.

The shake-up followed a far-reaching review of P&O's ferry operations, which was launched in March after the unit notched up full-year losses of �40m.

The company has been losing business in the face of rising competition from no-frills airlines and Eurotunnel.

Passenger numbers fall

"Clearly, the Channel Tunnel has had a major impact on our business and has taken a substantial market share," chief executive Robert Woods said.

The firm also said that an increase in French tobacco duty had hit on-board sales.

The duty increase is also thought to have lowered passenger numbers as it made "booze cruises" across the channel to stock up on cheap alcohol and tobacco less attractive.

P&O and similar operators could be hit even harder if, as predicted, the number of passengers travelling to France halves between 2000 and 2010, the former boss of Stena Line, Hover Speed and Sally Line Bill Moses told Radio 4's Today programme.

Jobs go

We believe it is time for the company to consider whether it is serious about staying in shipping Ship masters' union Numast Check P&O's share price P&O's stormy waters

Reports suggest that 800 jobs will go in Dover and 400 jobs in Portsmouth, while a further 350 jobs will be transferred to Brittany Ferries.

P&O currently employs 3,600 sea-going staff and 2,500 shore-based workers, and unions are bitterly opposed to any redundancies.

"Today is a bad day for British shipping and British seafarers and we believe it is time for the company to consider whether it is serious about staying in shipping," Paul Moloney, senior national secretary for the shipmasters' union Numast said.

He added that managers at the firm are "like rabbits facing headlights" in the face of losses, opting to cut costs rather than seek "imaginative and bold strategies for the future".

Meanwhile, Rail Maritime and Transport (RMT) union bosses are due to hold talks with P&O bosses in Dover, with members expected to call for strike action.

Leaner service

Three of the four routes on the firm's Western Channel service will go - from Portsmouth to Cherbourg, Le Havre and Caen.

The Portsmouth-to-Bilbao route will stay on the timetable, but the number of ships operating on the route will fall from six to one.

ALL CHANGE AT P&O Western Channel Three of four routes closed Routes from Portsmouth to Cherbourg, Le Havre and Caen to close Six ships to be cut to one Short Sea (Dover-Calais) No route cuts Fleet to be reduced by two ships to six Irish Sea One of seven ships taken out of service; four routes reduced to three Rosslare to Cherbourg to close North Sea Bore Mari returned to owners; replaced by European Diplomat

Services on the Dover to Calais ferry route will remain but the number of ships serving the route will be cut from eight to six ; and on the Irish Sea, the service from Rosslare to Cherbourg will be terminated.

P&O was unable to say when the routes would close or when they would stop taking bookings for the services.

Profit hopes

The company hopes fewer routes, fewer ships and a lower cost base will ultimately increase profitability, chief executive Robert Woods said.

The shake-up is expected to cost �60m to implement but the company hopes the moves will boost "the operating result by an estimated �55m a year", with most savings achieved by "mid 2005 and the remainder by early 2006".

But Mr Woods refused to say whether the firm would sell off the operation if it did return to profitability, saying only that P&O was "reviewing its business portfolio on a regular basis".

Meanwhile there was some good news from the freight side of the business.

The group said the freight side of its ferry operation had seen its market grow by 6% a year.

Tourist traffic and on-board sales account for half of the company's revenues while freight traffic accounts for the rest.