Eurotunnel targets smaller hauliers

Eurotunnel’s latest drive to draw small and medium-sized hauliers to its truck shuttle services appears to be paying off.

Despite recording dismal figures in 2009, Eurotunnel’s fourth-quarter figures showed a marked improvement on truck shuttle traffic and revenue on the same period in 2008.

Year-on-year, truck shuttle volumes fell 39% for the whole year, but increased 12% during the last quarter. Revenue fell 25% for the whole year but increased 7%, at a constant exchange rate, during the last quarter.

Eurotunnel has attributed the poor figures to the fire in September 2008 and the subsequent non-renewal of annual contracts by some customers, coupled with the effects of the economic recession.

Jo Willacy, Eurotunnel’s commercial director, attributes the majority of the growth in the final quarter of 2009 to a “prospecting drive to find a new layer of customers".

“Over the last few years we have had a lot of success with large [core] customers. But it is better from a volume and revenue perspective, to have a larger base of customers. It gives us more balance.

“To be able to run a consistent frequency of service you need core business. Bigger hauliers are very positive, because they have less peaks and troughs in throughput – and this is reflected in the rates [Eurotunnel offers them].”

But having just a small number of large customers is not healthy, she insists. “That is why we are building up our small- and medium-customer base. Then we can build incremental traffic.”

Building volumes through these smaller and medium-size customers is allowing the business to protect its yields and has allowed it to “soften” its rates, she adds.

Although Willacy maintains that Eurotunnel will not enter into a negative spiral of a price-war with ferry operators, she admits there has been a “softening of rates” to widen the tunnel’s appeal to smaller and medium-size customers.

The new “layer” of customers are also not required to commit to volumes to secure space. However, the better they perform, the more capacity will be set aside for them during times of ferry or port disruption.
These customers have a quota that is constantly updated, depending on their weekly traffic flows.

“If someone has been doing five or ten crossings a week, we will set aside that capacity for them,” she explains.

“We are also showing them how we can be cost-competitive by looking at the whole package rather than just the ticket-price.”

Willacy will not be drawn on how many new customers Eurotunnel has won over the last few months, but says: “We’re picking up customers with 500 to 3,000 crossings a year. In a declining market, there is no creation of new traffic, so customers are switching from the ferries.”

Eurotunnel is clearly targeting time-critical traffic and attracting hauliers with a three-, four- or five-hour drive from Calais, rather than those coming from or going further afield, she adds.

Half-truck shuttles

Besides the targeting of new customers, the move to using half-truck shuttles in October, to tailor supply to demand, also appears to be paying-off.

The move to half-truck shuttles had no impact on customers, says Willacy, but it allowed Eurotunnel to make operational cost savings.

“We were committed to ensuring frequency, because that is part of our competitive advantage. But we also needed to be flexible in a difficult market.”

However, the strategy was not necessary for the whole quarter because as traffic increased, it moved back to full trains at peak times.

“It’s a technique we will use in the future, if needed. The good news is that we are moving towards full trains.”

This year, Eurotunnel will continue with its investment programme, which aims to increase frequency at peak times from seven to eight trains an hour by the fourth quarter, but Willacy admits that while the capability will be there, the number of departures scheduled will depend on market demand.

“This recession is just a moment in time – a long and painful moment – but it will pass.”

She believes the shuttle business needs to be ahead of the game to be ready to offer more capacity before demand increases.

“Only 18 months ago, our capacity was becoming limited. We now have plans to improve frequency and extend trains to take more shuttles.”

In January, Eurotunnel was running at its minimum, the low-season norm of four shuttles an hour, but Willacy expects this to increase towards the end of the quarter.

Forecasting volumes for this year has been made difficult by the snow in December and January.

Things are starting to feel normal, says Willacy, but growth is in single digits and she is unsure whether the increase is due to final deliveries delayed by the snow.

“Our current projection is that we are expecting the first half to reflect last year, but there are indicators of some recovery and there is cautious optimism from customers,” she says.