BAA settles retail dispute with Eurotunnel

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UK major airports operator BAA says it has resolved its six-month dispute with trans-English Channel tunnel operator Eurotunnel over the poorly performing retail concessions in Calais in France and Folkestone in the UK.

In an out of court settlement ending the 15-year contract with the tunnel operator, BAA will carry out a phased handover of the retail facilities to Eurotunnel through 31 March 2001.

The move, which ends legal proceedings against Eurotunnel initiated by BAA last June, comes less than three weeks before the two companies were due to face each other in the UK's High Court.

BAA took over the running of the concessions in July 1999 at the time when intra-European Union duty-free was abolished. That hit the income of the rail company which sought to offset the damage by raising rail ticket prices, leading to lower passenger numbers and consequently weaker BAA sales from the retail operations at each end of the tunnel.

The airports operator, which experienced poor performance at other retail operations following the abolition of duty-free, said it had based its business plan on passenger figures "warranted" by the train company.

Under the initial contract agreement, BAA was allowed to request renegotiation of the contract if passenger numbers fell more than 25%. Eurotunnel said the fall-off in passengers was not that steep - a claim that BAA disputed.

Announcing an end to the dispute, BAA and Eurotunnel say in a joint statement that they have reached "a mutually agreeable settlement of contractual issues" relating to the operation of the retail facilities.

Although BAA is thought to have lost around £20 million ($29.9 million) since the start of the contract, the airport group would not comment on whether the settlement included any compensation or release any other financial terms.