FEASIBILITY STUDY A TRANSPORT SYSTEM LINKING THE ABORIGINAL COMMUNITIES IN NORTH EAST ARNHEM LAND A project of the Burrthi Aboriginal Corporation

Transcription

1 FEASIBILITY STUDY A TRANSPORT SYSTEM LINKING THE ABORIGINAL COMMUNITIES IN NORTH EAST ARNHEM LAND A project of the Burrthi Aboriginal Corporation Prepared by David Denmark an Indigenous Community Volunteer - 1

2 Contents 1. Background Page 3 2. Existing and potential demand Page 3 3. Similar transport arrangements Page 3 4. Identification of possible options for improved transport links Page 4 5. Vessel and other resources required Page 5 6. Financial projections Page Commercial success factors Page Entity which will own, manage and operate the service Page Possible sources of start-up finance Page Required staffing Page How the service will operate Page Main Benefits Page Risk Management and Sustainability Page Assumptions underpinning the project Page Conclusions Page 18 2

3 1. Background The need to travel between the five communities in North East Arnhem Land has been a long held want for the Yolgnu people living in the area and related in some way through their family and kinship ties. In the earlier days when the communities were established by the Missions there was a mission boat that used to go between the communities or the traditional means of dugout canoes. Since the mission days, and into the government run days of governance there has been no organised sea transport. The main form of travel at this time is by a mix of scheduled air services and air charter both of which are very expensive. Informal transport comprises travel by small boats powered by outboard motors which involve long journey times and the inherent risks associated with using small vessels offshore. Overcrowding also constitutes a risk. 2. Existing and potential demand Current options are limited to regular passenger air transport to Miliingimbi (one flight on weekdays and one on Sundays) and Elcho Island (two flights each weekday) 1. These services are expensive with a return air fare Darwin Eclho Island costing approximately $700 and Darwin Milingimbi approximately $550. Charter flights between communities are very flexible but cost in the region of $400 one-way. Passenger capacity depends on the type of aeroplane used but are usually about 5 seats. At Gapuwiyak taxis are used to get to Gove for shopping and other reasons. These cost in the region of $400 for a one-way trip. A taxi trip to Darwin costs $1,000. These prices are inflated due to the need for the taxi to run empty between Gove and Gapuwiyak to pick up the passengers and to return to base after dropping them home again. Price and availability are two major barriers to travel and it would be safe to assume that a cheap, regular ferry service would find a substantial market as long as travel times are reasonable. 3. Similar transport arrangements Two comparable services are the ferry from Darwin to the Tiwi Islands and the Torres Strait service from Thursday Island to Seisa on mainland Cape York in Queensland. 1 Source AirNorth website 3

4 3.1 Tiwi Ferry The Tiwi Pearl is a medium sized catamaran ferry that provides a return journey three days a week, Monday, Wednesday and Fridays between Darwin to Nguiu, a two hour journey. Passengers can travel from Darwin - Nguiu Darwin on the same day but must overnight in Darwin if travelling from Nguiu. Fares for local people are $70 each way ($40 for children). Tourists must purchase a tour which costs $259 plus permit fees for adults and $189 plus fees for children. 3.2 Thursday Island Ferry The Strait Magic is also a medium sized catamaran which carries passengers between Thursday Island and Seisa on Mondays, Wednesdays and Fridays. By using a second vessel (MV Wings) a two way service is provided with departures from Thursday Island at 6:30 and 14:30 and from Seisa at 8:00 and 16:00. Fares are $48 one way for adults and $24 for children and Queensland pensioners. Both services close for periods during the wet season, depending on the weather conditions. At the moment both services appear to be economically viable although it is worth noting that the Tiwi Island ferry fare has recently been increased from $50 to $70. As fuel consumption for ferries of this size is significant ( litres per hour) the cost of fuel is a major cost input and rising costs will bring pressure on service viability. 4. Identification of possible options for improved transport links We have explored two options to provide transport links between Elcho Island, Milingimbi Island and the mainland. These are the introduction of either a large capacity or small capacity ferry service. We are suggesting that the small ferry service be the preferred option for the following reasons: 1. Capital requirement will be significantly lower. The purchase of a large ferry (capacity passengers) will range between $350,000 and $500,000, second hand. A number of vessels have been considered and their details are to be found in an attachment. On the other hand a new smaller ferry (12 or fewer passengers) will cost under $200,000. 4

5 2. Running costs will be very much lower. Fuel consumption of the smaller vessel will be at 20% or less than that of a larger vessel. 3. Maintenance of the smaller vessel will not only be cheaper but there will be no need to interrupt services for the ferry to be taken to Darwin for major work. There is a possibility that some basic maintenance on the hull and outboard motors could be undertaken by local people at Galiwin ku. Otherwise suitable expertise is available at Nuhlunbuy. 4. By using the smaller vessel, as described in the proposed specifications, there will be no need for wharf infrastructure. The proposed vessel could be load/unload passengers on any suitable beach which means that it could also be used to serve outstations and will be more suitable for charter work. 5. The larger vessel would have a very small market for charter work due to the expense and its limited access to suitable berthing facilities. On the other hand the smaller vessel will be suitable for both passenger and fishing charters. 6. The smaller vessel if in Survey 2C could be managed by a Coxswain rather than a Master. In remote communities it may also be possible for the Cox to hold a part-qualification thus increasing the likelihood of finding suitable crew 5. Vessel and other resources required A number of factors need to be taken into consideration when deciding on an appropriate vessel for the service. These include: survey classification; passenger capacity; speed (relates to distances between ports); engines; draft; passenger boarding and disembarking; stability; seating and shelter; and ease and cost of maintenance. 5.1 Survey classification All passenger vessels in Australia are classified under the Australian Survey. The classifications indicate the vessel s fitness for use for different purposes and where it is suitable for it to sail. Each classification as a two digit code such as 1C. The number indicates the use the vessel can be put to. In the case of passenger vessels this number is 1. The letter indicates where the vessel can be operated. C 5

6 means coastal within 15 kms of the shore (including islands), D for harbour work and boats classified E are limited to work on rivers. Sometimes a boat s classification can be upgraded if the hull and engines are suitable for a higher classification. Changes may be as simple as upgrading the safety gear or navigation system. Classifications are issued state-by-state but the same standards apply. The appropriate classification for the vessel we require is either 1C or 2C. 1 indicates a commercial passenger service and 2 is appropriate a for a charter service with a maximum passenger limit of 12 (not including crew). The main advantage of the 1C category is the ability to carry large numbers of passengers, however it also brings some disadvantages including: a more thorough inspection regime to maintain the Survey Category; The requirement that the skipper hold a Master Class 5 ticket; and The requirement for a higher passenger:crew ratio. 5.2 Passenger capacity The demand for the service will, of course, depend to an extent on the fares to be charged. The increase in costs of operating a larger ferry (up to a capacity of 100) will only be met if a significant number of passengers regularly use the service. Initial indications were that the ferry would require a capacity of 50 passengers, however there is no adequate way of testing this assumption. Operating a larger ferry similar to the examples examined in this report would require reaching patronage targets in the range of 65 each one way trip. This would constitute a major risk particularly in the project s early stages as demand for all types of passenger transport service builds slowly and patronage targets are frequently not reached for 12 months or more. The relatively lower costs of operating a smaller ferry (passengers # =<12) mean that fares can be kept in the range of $30-35 for a one-way fare between Galiwin ku and Milingimbi thus reducing the risk to the project and increasing the probability of reaching patronage targets at an earlier stage. 5.3 Speed Given the distances involved (150 kms on a round trip) the speed of the ferry is important, particularly as the ferry will be competing with charter flights that only take 30 minutes. If the ferry cruises at a speed of 10 knots (about 18 kilometres per hour) the journey from Galiwin ku to Milingimbi would take over 4 hours. A boat travelling at 20 knots would only take about 2 hours. In terms of the round journey (allowing for 10 6

7 minutes at each stop and 10 minutes to cross the channel from Milingimbi to the Ramigining barge ramp) the respective times would be 4 ½ hours compared to nearly 9 hours. However, it is noted that, as a rough guide, fuel consumption increases by a factor of 3 in relation to speed. As shorter journey times will encourage people to use the service we recommend that the vessel in question should be capable of cruising at a minimum of 20 knots. 5.4 Engines The Survey regulations that relate to Class C vessels require the use of twin engines for safety reasons. Jet engines are preferred as they have no propellers to be fouled or broken and do not operate as deep in the water, however this option would raise the initial cost of the vessel and may limit the style of boat that can be used. We have been advised that a suitable arrangement would be two 4-stroke outboard motors each of approximately 150 horsepower 2. A rule of thumb that has been suggested is that once you decide on an engine size, opt for a size bigger to allow for unusual stresses and strains, particularly if the engine is to be used on a day-to-day basis. We have been advised that suitable engines would be the Honda BF150 as they have a very good reputation for reliability and will provide sufficient power for the job in hand. These can be currently purchased for approximately $18,000 each, including propeller and extra long shaft. These run on unleaded petrol which is banned in the community, however we have been advised by community leaders that Opal Fuel is available or can be obtained via the Perkins Barge service. Fuel will be one of the biggest cost inputs into the ferry operation. With a large ferry of the type we have considered fuel consumption would be in the range of litres per hour. In the case of the twin outboards it would be much lower at about 20 litres per hour. At present prices this would represent comparative costs for fuel of about $1,600 and $350 per day. 5.5 Draft The draft of the vessel (the depth of the boat below the waterline) is also significant. A boat with a deep draft will have more difficulties at low tides in shallow waters or where there are sandbanks. The smaller ferry will have a significant advantage in this regard, particularly if beach landings are to be considered. 2 From discussions with Engine retailers in Darwin and on the Gold Coast and the maintenance service at Gove. 7

8 5.6 Passenger boarding and disembarking The cost differences between the large and small ferries are very stark in relation to the boarding and disembarking of passengers. A large ferry, unless equipped with a forward folding landing ramp, may require significant berthing facilities, including a wharf (fixed or a floating pontoon), ramps or ladders. The water will also need to be deep enough at the facility (tides permitting) to allow the vessel to come alongside the structure. In terms of the smaller vessel, again a forward folding ramp is preferable but in any case minimal berthing infrastructure will be necessary with passengers either walking down a ramp or embarking/disembarking over the side via steps or a short ladder. A smaller vessel with a shallow draft and forward ramp could embark/disembark passengers at almost any beach or landing ramp. This would give the service a lot of flexibility in terms of landing points and timing of services in relation to the tides. Such a vessel could also service outstations that are close to a suitable beach. 5.7 Stability As this is to be a passenger ferry, passenger comfort must be taken into account. One consideration will be the stability of the vessel. Most ferries are either single or twin hull (catamarans). Twin hull vessels are more stable than those with a single hull. 5.8 Seating and shelter For short journeys in good weather bench seating outside can be acceptable. However the proposed service involves significant journey times and travel all year, often in inclement weather with high winds guaranteed leading up to the wet season and heavy rain for 3-4 months of the year. For these reasons most of the seating should either be inside or under a fixed awning which will protect passengers from wind and rain. In the case of an awning, rollable side awnings should also be fitted to protect passengers from wind, rain and spray. Individual seating should also be available with a preference for coach seating particularly if journeys of 3 or more hours are contemplated. 5.9 Ease and cost of maintenance Due to the lack of suitable facilities at any of the ports of call, vessel maintenance must be carefully considered. There are some maintenance facilities at Nhulunbuy (Gove) which is about 170 km from Elcho Island but it would be necessary to travel to Darwin for heavy facilities if a large ferry were to be used. In the case of a smaller ferry, day to day maintenance could be carried out at Galiwin ku as it appears that there may be local people with the requisite skills. Major maintenance could be 8

9 carried out at Nhulunbuy. If all maintenance is carried out at Nhulunbuy the following indicative prices have been obtained 3 : Minor service every 200 running hours - $500 Major service every 2000 running hours - $2,000 This would total $7,500 per year. These figures are used in the cost model for the project. Costs are estimates only. It should also be noted that if maintenance has to be carried out in Darwin the vessel could be out of service for days at a time due to the long distances involved. Services at Nhulunbuy could, on the other hand, be linked with occasional services to Yirrkala thus avoiding the loss of revenue days Specifications for a suitable vessel These specifications have been developed for a second hand vessel or as a building guide for a new vessel. Meets specifications for Survey Category 2C; Over 7 metres but under 12 metres in length; Suitable for twin outboard engines (approx 220 kgs each); Must meet USL code requirements; Configured for 12 seated passengers and up to 3 crew; Basic navigation gear suitable for use by coxswain; Front loading ramp for embarkation/disembarkation; Twin hull constructed from aluminium; Trailer suitable for towing and beach servicing; Night lights and floodlight for passenger embarkation and disembarkation; Safety gear for Survey Category 2C (12 passengers and 3 crew); Fixed overhead canopy with rollable side curtains; Toilet facility; and 100 litre water tank Boat security Vessel security may be an issue and this will need to be addressed with the purchase of a suitable boat monitoring system. There are such systems available that will automatically provide a message in the following circumstances: the boat is stolen without being broken into (e.g. taken away on a trailer); the presence of water in the boat; or the presence of smoke. 3 Prices from Gove Outboard Repairs. 9

10 The system may also provide for the boat being tracked by GPS so in the event of the boat being removed it can be located. These systems can also be used to tag individual items of equipment such as outboard motors. Such systems can be purchased for $1,000 - $1, Mooring facilities The vessel we envisage will not require fixed mooring facilities. It can be anchored or beached overnight at Galiwin ku although beaching at night is a possibility in order to minimise hull damage and cleaning Bus (Coach) This will be considered in the second phase of the project Office Burrthi Aboriginal Corporation is to establish an office at Galiwin ku which can double as a booking office. 6. Financial projections 6.1 Likely establishment costs The major establishment costs will be as follows: Vessel, engines, security, office set-up, training and ticketing records/infrastructure. Estimated establishment costs are as follows: Purchase of vessel 135,000 Purchase of engines 40,000 Shipping costs 5,000 Purchase of boat alarm system 1,500 Office set-up 5,000 Training 1,000 Ticketing costs 1,500 Total 189,000 10

11 6.2 Likely operational income and costs Income Regular Passenger Service (Double run) 178,200 Charter Services 51,604 Total income 229,804 Expenditure Fixed Costs Insurance 4 2,000 Booking costs 4,000 Interest (Year 1) 21,000 Telecom 1,000 Equipment 2,500 Registrations 500 Total 31,000 Regular Passenger Service (Double run) Variable costs scheduled services Fuel 49,297 Crew (Cox and deckhand) 75,000 Maintenance 3,851 Total 128,149 Charter Services Crew (Cox only) 24,000 Fuel not provided 0 Maintenance 2,400 Total 26,400 Total expenditure 185,549 Profit/Loss 44,255 4 Based on a quote obtained from Nautilus Insurance. Quotation No. PRI

12 6.3 Cost inputs Expenditure Duration of scheduled runs: 4 hrs each leg, 8 hours per day. Interest: Capital purchases - 10% = $18,000 Operating capital - 10% = $3,000 Total = $21,000 Crew: Federal Government suggest NT Barge Workers Award. The pay rates for this Award have been rounded up by 25%. Casual rates - Cox = $30 p/h, Deckhand $20 p/h. CDEP could also be used to subsidise crew wages but this has not been factored into the cost calculations. Fuel: Consumption at 20 litres per hour (advice from Honda reseller is an average of 17 litres per hour). Maintenance: Every 200 hours minor $500 Every 2000 hours major 1,500 Some minor maintenance could be performed at Galiwin ku by local people but the cost difference (if any) has not been factored into the cost calculation. Income: Average load on scheduled services 9 per one-way trip. At 4 trips (legs) per day income will be $1, days per year income = $178,200 Price for charter per day = $ Number of charter days = 100. Total annual income $51, Break even analysis The key input for income is the fare level on the regular service. Our model shows that the service reaches a break-even point, based on seat utilisation of 75% at a one-way fare of $

13 Cost - Income analysis Income/Expenditure per annum $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0 Fare $10 Fare $20 Fare $25 Fare $30 Fare $35 Fare $40 One way fare Income Cost At the proposed fare of $33.00 the service, once reaching the patronage target, should provide a surplus of $45,000 per year. However, we cannot expect to reach the patronage target (75% of available capacity) immediately. If we assume that patronage will start at 50% of the target and grow to 100% of the target within 12 months the cost income comparison will be as follows: Months 1-2 Months 3-4 Months 5-6 Months 7-8 Months 9-10 Months % of Target Avg. seats used per trip Income Cost* 50% ,850 26,525 60% ,820 26,525 70% ,790 26,525 80% ,760 26,525 90% ,730 26, % 9 29,700 26,525 * Comprises all variable costs for scheduled services and 100% of fixed costs Cost - Income analysis Income/Expenditure per month $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0 Month 2 Month 4 Month 6 Month 8 Month 10 Month12 Income Cost We have therefore included in the expenditure the interest costs on $30,000 of working capital (in addition to the interest payments on capital purchases). This loan would be paid out by the end of year 2. 13

14 There will be a loss on operations over the first year of $26,000. However, the operational profit in the second year is estimated to be $43,500 which means that within 20 months the operation will become commercially viable. An operating surplus of approximately $45,000 is forecast for ensuing years, providing income and expenses remain the same. 7. Commercial success factors 7.1 Affordability fares need to be at a level that will not suppress demand. As noted in the Section 2, other forms of transport are very expensive which should make the ferry very competitive. Initial projections suggest that a ferry service, such as the one proposed between Galiwin ku and Milingimbi, could offer fares of between $30 - $40 compared to an air charter cost of approximately $400 or $80 each person if five people were to fly at one time. The cost could also be subsidised from other ventures such as the Good Food Store or Pharmacy by offering travel/shopping deals for customers arriving from Milingimbi or Ramigining but this has not been factored into the cost calculations. The vessel will also be used for charter purposes to bring in additional income. Notional charter fees have been estimated at $65 per hour or about $10 per hour per passenger (based on 6 passengers). 7.2 Reliability a reliable service that operates according to the advertised timetable will be the best advertisement for success. Service times will be developed with appropriate consideration of maintenance down-time, tidal flows and hours of daylight. A balance between speed and fuel consumption will also be sought (higher the speed the more fuel is used). 7.3 Quality the efficient manner in which the service operates will be dependant on the proper maintenance of the vessel and the coach. Breakdowns must be minimised and this will be possible with a proper and efficient asset maintenance program. To this end dual motors will be used and consideration will be given to the purchase of a second-hand back-up motor. Vessel maintenance will be a key activity with maintenance work being undertaken on the motors every 200 hours of use and regular inspections and cleaning of the hull while beached at low tide. 8. Entity which will own, manage and operate the service The service will be owned and operated by Burrthi Aboriginal Corporation. The operation will be managed from a new office to be established at Galiwin ku. 9. Possible sources of start-up finance The financial estimates for this project have been based on securing loans at an interest rate of 10%. We believe this to be conservative in the current economic climate. 14

15 There is a possibility that some or all of the capital costs could be covered by either a government grant or grant from a charitable trust. However this possibility has not been included in the financial projections. 10. Required staffing Staffing will comprise a coxswain, deckhand and a person to take bookings and undertake the administration of the project. The cost of this has been incorporated in the financial projections. We note that the class of vessel we propose for the service can be skippered by a coxswain rather than a Master. Furthermore, in remote areas a coxswain may operate with a part-qualification which increases the opportunities for a local Yolgnu person to carry out the duties. 11. How the service will operate 11.1 Scheduled services The Burrthi transport service will commence activity with a ferry service linking Galiwin ku, Milingimbi and the Ramingining Barge Ramp. Due to the inland nature of Ramingining and Gapuwiyak, a bus may be used to transport ferry passengers to both those locations and this will be considered as part of a future project. According to local community leaders there appears to be significant demand for travel for occasions such as funerals, ceremonies, school excursions, school holidays, football, basketball, initiation, concerts and the like. The establishment of a Good Food Shop and a Pharmacy at Galiwin ku will also stimulate travel demand. A ferry that will take 12 passengers is envisaged, preferably a catamaran, and one that will be robust enough to handle moderately rough seas in the wet season. An 15

16 additional smaller vessel or a larger vessel will be considered once the demand for the service has been established. The following is seen as a possible timetable for travel: Monday, Wednesday, Friday - Galiwinku-Milingimbi-Raminiging Barge Ramp. Tuesday, Thursday and weekends Charter work. Once every two weeks Galiwin ku to Yirrikala and return. The proposed fares and charter rates take into account interest payments, fuel costs, labour costs, an allowance for maintenance and an adequate contribution towards fixed costs Charter services Charter opportunities will also be offered to other clan groups, schools, sporting teams which will mean Burrthi charters the vessel to them provides the crew and charges a lump sum for the cost of the day. Fuel will be charged to the customer as it will not be possible to know beforehand how far or fast the boat may travel. This will not only represent significant income earner on top of the Regular Passenger Transport work but will also provide the flexibility that the community requires. If demand warrants the introduction of a larger vessel at a later date a ferry service from Galiwin ku along the northern coast to Darwin could be considered. This may be attractive to both local Yolgnu people and also have tourist potential. 12. Main Benefits 12.1 Reliability the introduction of a regular service will enable people to know when they can travel and plan ahead whatever their reasons for travel are Affordability the cost of the service will be pitched to be within the reach of most people. The current cost of charter planes makes a visit to another community and expensive proposition especially for a family Safety operating under the controls of NT Maritime Act and the Australian Survey classifications will ensure that the operation adheres to appropriate safety standards ensuring a trouble free operation Social contribution the service provides the opportunity for people to maintain family and cultural links will enable them to keep in contact with friends and families in comfort Access to Services People will also be able to access the new Good Food Store and Pharmacy at Galiwin ku along with other services. 16

17 13. Risk Management and Sustainability 13.1 Key risk factors Passenger load the financial analysis has assumed that an average load of 9 passengers will be achieved. Failure to reach this figure may mean that a smaller surplus will be achieved. The financial model shows that operating losses will occur if patronage falls below 7.5 passengers per service leg (62% of capacity). Vessel malfunction this is always a risk in relation to a transport service. For this reason twin outboard motors will be used in order to assure passenger safety. In the event of a motor being out of commission a replacement will be kept to hand. Weather The vessel may not be able to operate when there are cyclones present, however it should be able to operate for much of the wet season. The cost calculations allow for 250 operating days per year with the remainder being set aside for maintenance, bad weather and other events such as significant community occasions. Crewing the crewing requirements are one of the major reasons for opting for a Survey Class 2C. This class of vessel can be skippered by a coxswain rather than a Master. Furthermore, in remote areas a coxswain may operate with a partqualification which increases the opportunities for a local Yolgnu person to carry out the duties. We have allocated one deckhand to the regular passenger ferry. No deckhand will be used for charter work unless requested by the client Security A Boat Security System will be purchased and implemented as described above. 14. Assumptions underpinning the project The following assumptions underpin the project: That there will be sufficient demand for the service (9 passengers per service leg) for 150 days per year and charters being purchased on 100 days per year. This is well under the initial estimates provided to this consultant. That the cost of fuel will remain under $2.00 per litre for the next two years. That finance can be secured at or below 10% interest rate per annum over the next two years. That the vessel can be in service for at least 250 days per year. 17

18 That the fares and charter prices suggested in the report have been set at a realistic rate. That satisfactory arrangements can be made with local landowners for passenger embarkation/disembarkation. 15. Conclusions This project has been modeled on commercial principles and the cost calculations have excluded potential cost savings such as using CDEP workers or subsidies from government or other operations. As with any other transport service, patronage is difficult to estimate and will take time to build. However, we believe that we have been conservative in our approach, building our patronage assumptions well below what we have been told is probable. The service can be expanded if patronage demands it. This appears to be a feasible operation given appropriate financial and operational management practices are adopted. Prepared by David Denmark Volunteer of Indigenous Community Volunteers on behalf of Burrthi Aboriginal Corporation November