LONDON (AFP) - Peninsular and Oriental Steam Navigation Co (P and O) -- the ports, shipping and logistics group -- announced sweeping cuts to its ferry operations to refocus the business in the face of competition from low-cost airlines.
P and O said that the restructuring would mean the loss of 1,200 jobs in its Channel operations between England and France and the ending of a route to Ireland.
The decision is a significant step in a refocusing of the group that has been under way for many years: the company, once synonymous with the movement of passengers and freight around the British Empire, is now essentially a leading world port facilities group.
From 2001 to 2003 it disposed of its cruise line, P and O Princess.
The company said that following a far-reaching review it was closing all of its ferry services between Portsmouth in the south of England and the ports of Cherbourg, Caen and Le Havre on the northern French coast of Normandy and Brittany.
Ferry traffic around the British Isles is facing increasing pressure from the rise of low-cost airlines.
Another factor that has worked against P and O is the rise of tobacco prices in France which has reduced traffic by Britons making quick round trips to France to buy cheap cigarettes. This traffic helped P and O to compete with the Channel tunnel.
"The central conclusion of the review is that there will be a fundamental change in both the product that is offered to customers and the cost base of the business," the company said Tuesday.
A route to Ireland is also to be cut and the number of ferry routes overall would be reduced from 13 to nine.
The line is to cut the number of ferries it operates in the western Channel from six to one, but it is to maintain a service between Portsmouth and Bilbao in northern Spain.
The company said it would concentrate on port management and that overall its fleet of ships in the ferry division would be cut from 31 to 23.
Chief executive Robert Woods said: "I am determined to see a major improvement in the profitability of P and O Ferries.
"What we are announcing today will enable us to have a simplified, customer focused product operated on fewer routes with fewer ships and a substantially lower, more flexible cost base."
Woods said that while he regretted the possible job losses, "we are convinced that what we are proposing is the best way forward for the long-term prosperity of the business".
Under the plan, to be discussed with staff, 1,200 people would lose their jobs and 350 people would be transferred within the group.
About 140 of the job losses concern employees in France, the communications director of P and O in France, Jean-Michel Inglis told AFP.
"There has been losses from last year to which have added losses from the first six months of the year," he said adding "the traveller has changed" with the advent of low-cost air travel.
The company said its plans should improve operating results by 55 million pounds (81 million euros) a year. It evaluated at 60 million pounds the cost of implementing the measures.
Most of the savings were expected to feed through by mid-2005, with the remainder coming through by 2006.
Beyond the restructuring plan, the company said it hoped to improve its services to both freight and tourist users.
Freight accounts for half of the ferry operation's net revenue and the company said the market has been growing at six percent a year.
In the tourist sector, which accounts for the other half of net revenues but has been affected by competition from the Channel tunnel and low cost airlines, the company said it planned to offer "clear and consistent pricing with an improved website" and "an enhanced on-board experience".
P and O currently employs 3,600 people on board its ferries and 2,500 others on shore.
Woods said he hoped the planned restructuring would not lead to any strikes by employees as such action would be "in no one's interest".