Photo: Graham Wilson |
Calmac representatives meet EU Commissioner
Ferry company's reps meet to 'engage' in formal investigation...
Calmac press release:
Representatives of companies within the David MacBrayne Ltd Group of ferry companies met European Commissioner Jacques Barrot [yesterday] (Thursday, May 1, 2008) in Edinburgh to engage about the formal investigation the Commission has launched into ferry subsidies.
Speaking after the meeting, Group Chairman Peter Timms said: “We were delighted to meet the Commissioner and took the opportunity to reaffirm our position with regard to the formal investigation into ferry subsidies. There are a number of key issues involved and we will cooperate fully with the Commission in their endeavours. We took the opportunity to remind the Commissioner of the importance of lifeline ferries to the communities we serve and also to underline the strategic importance and additional efficiency value of the network we operate. Peripherality and dependence on lifeline services are issues the Commissioner has acknowledged previously and we are grateful to him for his consideration.”
The full text of the submission prepared by David MacBrayne Ltd and presented to the Commissioner was as follows.
Overview
David MacBrayne Ltd (DML) welcomes the confirmation that the European Commission has decided to open a formal investigation into the issues surrounding subsidy support received from the Scottish Government.
The David MacBrayne Group includes CalMac Ferries Ltd (CFL) and NorthLink Ferries Ltd (NFL) which together provide lifeline ferry services to the Clyde and Hebrides (CHFS) and to the Northern Isles of Orkney and Shetland, and Cowal Ferries which provides the service between Gourock and Dunoon.
Caledonian MacBrayne, CalMac and NorthLink are the trading names of the Group. Caledonian MacBrayne services operate to some of the most remote and sparsely populated areas of the West Coast of Scotland and NorthLink provides key links between the Scottish mainland and Orkney/Shetland. Their peripherality is acknowledged in many ways, but the provision of ferry links is the only way by which lifeline supplies are transported to the islands and peninsular communities CFL serves. Few of these areas have any other public transport links with the mainland, and only some have air services. Historically, the absence of any other ferry operators is clearly attributable to the non-viability of services as an economic provision, and is the reason that government grants are essential to avoid rapid depopulation and economic decline.
We are happy to cooperate with this investigation and will help the Scottish Government to provide the Commission with all the information necessary to meet the aims of the investigation. The Group also welcomes the reassurance from the Commission that this investigation “does not question the need for a regular and affordable lifeline ferry service for local communities, nor does it threaten the continued provision of such essential services in the future”.
We understand the issues involved and that the Commission requires more information to check that the mechanisms used in recent years do not fall counter to EC funding rules. We also welcome confirmation that the Commissioner is aware of the importance of lifeline ferry routes to most of the isolated communities that our group serves.
It has always been our principal priority to maintain and to develop where possible the services we provide: hopefully this investigation will clarify any outstanding issues which remain about the way these services are funded and how we operate.
The year 2007 saw the culmination of six years hard work: during this period, the Directors have completely restructured the companies while simultaneously introducing fundamental changes to their day to day management and operations. The benefit of these changes was first demonstrated in 2006 when the company was awarded the Northern Isles Ferry Services contract subsidy, successfully competing against a private sector company, and culminated in the award of the CHFS Contract last year.
We believe these changes, together with over 150 years experience of operating in the CHFS network area, have resulted in value for money contracts which meet the requirements of both the Service Specifications in all respects.
CalMac issues
CFL’s Mission Statement details our determination to providing a safe, reliable, affordable and high quality service, focusing on customers’ needs and comfort, providing value for money to its customers, a stimulating workplace for all its employees and protecting the environment. CFL is committed to the very highest management standards and aims to be acknowledged as the leading UK ferry operating company.
CFL believes that maintaining the existing “bundle” of 24 routes in the format of the current network, which may be further developed with the addition of new routes, best serves the island communities of the west coast of Scotland and the nations’ taxpayers. The integrity of this network leads to efficiency gains in terms of the flexibility and interchangeability of the fleet, crew mobility (including succession and career development), economies of scale, shared costs and uniformity of pricing, marketing and policy decisions, which provide additional value to the substantial sums of public subsidy involved. This also makes best use of the vessels specifically designed to operate on these routes, which face some of the most extreme winter weather in Western Europe.
The creation of Caledonian Maritime Assets Ltd (CMAL) ensures that the CHFS fleet remains in public ownership and available to operators in this and subsequent contracts. However, this has an impact on the Gourock to Dunoon service as the only CMAL vessels available to Cowal Ferries were built in 1974, are expensive to operate, and have only a very short residual service life.
The Commissioner should also be aware of the strength of feeling within the local community about the Gourock to Dunoon service. Although there has been much public debate about the possibility of more frequent and cheaper services, it is clear that there is demand for the town centre to town centre service, integrated with rail services at Gourock, to be maintained by Cowal Ferries with both vehicle and passenger provision.
The risk posed by “cherry pickers”, where new competition might be introduced on a route, even for part of a year, would have a major impact on CalMac’s interests and would inevitably lead to the need for additional subsidy if the existing level of service provision is to be maintained. It is accepted by most interested parties, for example local authorities, that the targeting of the high value (usually high volume) parts of routes by potential competitors would pose a substantial threat to the viability of the subsidised lifeline services of the Scottish ferry network.
We have no issue with calls for increased efficiency; nor do we, having successfully challenged private operators, fear competition on a level playing field where our expertise and experience single it out. However, a very real concern relating to the potential cherry picking of routes is the likelihood that the subsidised service would just be left to retrieve the “leftover”, non-viable, but nonetheless essential services on routes at an increased cost and, therefore, subsidy. Up until now, it is worth noting that the political environment in Brussels, Westminster and in Scotland has generally taken the view that cherry picking is undesirable and an inefficient form of market entry.
The next five years will represent a period of relative stability for the company allowing it to focus on strengthening the CHFS Network. This continuity and sense of strategic development, as opposed to the uncertainty of the pre-tender years, is welcomed by many of the communities CFL serves. The communities continue to support the benefits and advantages of retaining the network approach to the provision of services, and recognise the potential threats of erosion to the basis on which the network gains its strength and stability.
CFL's ship management embodies a culture where, as a lifeline ferry operator, the company and its staff onshore and at sea, have an absolute commitment to caring for the marine environment, to ensuring the safety and security of customers, crews and vessels, and to exceeding the standards set by regulatory bodies in providing lifeline services to the islands.
NorthLink issues
NorthLink operates 5 vessels on 3 routes, whilst CFL operates some 30 vessels on 24 routes. The waters, distances covered, services provided and customer needs are significantly different from those of CFL, therefore the solutions required for the separate operations arte quite distinct.
NorthLink’s smallest vessel is some 10%+ longer than CFL’s largest vessel: CFL’s longest route has a passage time of 5 hours while NorthLink’s main route has a passage time of 12+ hours.
Most islands in the Northern Isles archipelago import much more freight than they export, but Shetland is the exception. The volume exports of fresh fish (farmed and wild) from the islands results in a major freight component of the lifeline ferry services, equivalent to some 23,000 standard 40 tonne articulated trailers per year, mostly destined for export with timing crucial to meeting end customer demands and delivering fresh produce to other EC countries.
In financial terms, although NorthLink-1 (2002-06) had well documented financial difficulties beyond its control, it did also have significant achievements, particularly in substantially growing revenues, minimising costs and in consequence needing less subsidy than forecast. In particular, while the contract for services was re-tendered, NorthLink-1 sought to minimise the use of subsidy and over a 20-month period used £9m less subsidy than forecast.
|
