Submission from Roy Pedersen, Pedersen Consulting 24 March 2008

Transcription

1 Dear Sir/Madam Submission from Roy Pedersen, Pedersen Consulting 24 March 2008 Response to the Inquiry into Ferry Services in Scotland I have had the privilege of making a verbal presentation to the Ferry Services Enquiry at Oban on 4 th March. On that occasion I was representing the Highland Council and restricted my comments mainly to matters relevant to that authority. As my personal and professional interest in ferries is Scotland-wide, not least as the original architect of Road Equivalent Tariff, I am submitting this further response on behalf of my consultancy firm. The Call for Views stated that written views of no more than six sides of A4 should be submitted. It is unfortunately impossible to set out the general principles upon which improvements should be based and to apply these separately to the sixty plus Scottish state funded ferry routes with a rational in each case explaining how and why change options are recommended. Whilst attempting to keep verbiage to a minimum, this task has in fact taken up 30 pages. To cover your requirement, therefore, I have prepared an executive summary within the stipulated page limit which summarises in cryptic form the main issues highlighted in the 30 page document [NOT REPRODUCED]. Without the main document, however, I am afraid the full reasoning behind its contents will be lost. In that circumstance, I would be most grateful if you would include this letter as part of my response and draw the main document to the committee s attention. I believe the Transport, Infrastructure and Climate Change Committee have a golden opportunity to set in motion the radical change of policy required to create a cost effective ferry system that can bring hitherto undreamt of benefits to our island communities. I wish it well in this task. Yours faithfully Roy N Pedersen

2 A Better Way to Run Ferries Response to the Inquiry into Ferry Services in Scotland by Roy N Pedersen MA, FRSA, MCIT EXECUTIVE SUMMARY Introduction This Executive Summary covers the main issues highlighted in Pedersen Consulting s full response to the inquiry into ferry services in Scotland by Scottish Parliament s Transport, Infrastructure and Climate Change Committee. It addresses the committee s brief in terms of routes, frequency and timetabling, capacity, integration and competition. The issues highlighted can only be wholly understood by reference to the full report, attached, which sets out a comprehensive analysis of how the Scottish Government may seek better value for money in terms of improved community benefit whilst containing public expenditure. The Scottish Government s Aims The Scottish Government has listed the following inter-related aims among its priorities: sustainable communities, reversing population decline, supporting economic development, accessing mainland services and social integration as priorities. This full response sets out to show how ferry services may best be arranged to fulfil these aims. Scottish State Funded Ferries & Value for Money In contrast with other state subsidised ferry systems worldwide, Scotland does not compare favourably. Subsidy levels as a proportion of operating costs have risen to very high levels, yet fares and charges also remain relatively high and traffic growth is sluggish. It has been argued that a contributory factor to this state of affairs is that even many of the newer vessels employed are of old fashioned design or otherwise less than optimal for their purpose and that the routes themselves constrain traffic growth because they are not best selected to maximise, in a cost effective manner, benefit to some of the island and peninsular communities served. The full response describes a set of principles and ideas that may help focus policy to bring about the kinds of changes needed to improve matters perhaps radically so to the benefit of both local communities and the tax-payer. Road Equivalence and Impedance To explain road equivalence in terms of ferries: roads are the universal transport mode that connect virtually everywhere with everywhere. Where water intervenes ferries act as a floating bridge. However traffic on a ferry crossing is always less than if there had been an actual road across that stretch of water. This constraining effect of a ferry crossing is described as impedance. The degree of impedance can vary greatly depending on: passage time, frequency, hours of operation and price (the latter by no means the most important). The pursuit of road equivalence seeks to make ferry crossings as road like as possible, thereby reducing the impedance effect, by reducing passage time, increasing frequency, extending hours of operation and constraining price. A comparison between the ferries serving the islands of Gigha and Lismore illustrates this effect very starkly. Both islands have similar populations but the vehicle ferry to Gigha with its more frequent, shorter passage and cheaper fares carries some six times the vehicles and passengers as that to Lismore. Gigha flourishes while Lismore stagnates. If these principles of shortening passage time, increasing frequency and reducing fares are applied to the Scottish ferry system, they offer the potential to create a much improved quality of service while actually reducing the burden on the taxpayer. There is much scope for such route shortening in Scotland. Effective application, however, hinges on a number of technical and operational issues.

3 Ships: Old versus New Technology The main cost components of ferry operation are: Capital (annualised to give comparison with running costs), Crew, Fuel (as a rule of thumb, 200 litres/hour/megawatt (MW) of power). Scottish policy has favoured on the longer open sea (Class IIA) routes, large slow roll-on roll-off (RO RO) ferries that are heavily subsidised, expensive to build (Typically 20 million plus), carrying large live-on-board crews and high in fuel consumption of up to 1,500 litres/hour. It is worth noting that this equates to 100 litres per mile, or 2 litres per car per mile at 50% capacity. This is some TWENTY TIMES the fuel consumption of an average car on the road. On shorter more sheltered routes simpler and much cheaper mainly double ended vessels, employing small (3 to 5) live ashore crews, provide more or less frequent passage for vehicles and some foot passengers between landing places equipped with sloping landing hards. Besides these predominant vessel and terminal configurations, there are a few hybrid types. There is virtually no interface between these distinctive operational types such that they may be regarded as being separate fleets. Best Practice Worldwide In a world context the range of vessel designs employed by ferry operators is huge but there are a few examples that offer particularly useful pointers as to possible ways forward in modernising Scotland s ferries to achieve greater road equivalence and reduce impedance. These are: Semi-Fast Vehicle Carrying Catamarans Typically costing million with a capacity of some 350 passengers and 60 to 90 cars, a speed range of some 17 to 22 knots and a fuel consumption of some litres per hour up to one third that of a conventional CalMac Class IIA ferry. High Capacity Ropax Ferries High capacity ROPAX ferries of the Visintini type of similar capital cost, speed and passenger capacity of the NorthLink twins Hjaltland and Hrossay are able to carry over FOUR TIMES the number of trailers High Speed Passenger Ferries These craft may be described as providing a high quality coastal or island bus service, typically with a passenger capacity of around 250, a crew of 3 or 4 and speeds of between 25 and 35 knots and a capital cost is around 3 million. Because of their very low deadweight compared with a vehicle carrying ferry, their fuel consumption is relatively low considering their high speed. Other Options In Queensland Australia, Brisbane CityCat provides a frequent fast river bus service with low wash 22 knot catamarans, a type of service that could be emulated on the river Clyde. To serve New Zealand s Stewart Island an infrequent heavily loss making Government owned ferry service was replaced by a frequent and profitable community owned semi-fast passenger and freight catamaran (crew 3) to cross the often stormy Foveaux Straight. Competition There are two important locations where state owned and subsidised ferries are in direct competition with unsubsidised and profitable private ferry operators. These are: Cowal Inverclyde (private Western Ferries and state owned CalMac) Orkney Caithness (private Pentland Ferries and state owned Northlink) Both private companies have pioneered innovative and cost effective operating methods and have developed new traffic flows at no cost to the taxpayer. The full response looks at how the private sector is capable of introducing more frequent and cost effective ferry services than had been provided hitherto without capital or operating subsidy, in face of heavily subsidised state owned operators. This phenomenon throws up a number of issues, not least the high cost to the

4 public purse of the state run system and its resistance to innovation and more efficient operating methods. It also highlights deficiencies in the current ferry route tendering system. Tendering In essence the single tender specification required bidders to operate the current routes, to the current schedules with the current ships using the same crews under the same terms and conditions and applying the same scale of charges. The opportunity for innovation was virtually eliminated. The process was so complex and expensive to comply with, however, that only CalMac, whose very substantial costs in preparing their bid were met by the Scottish Executive (now Government), was able to bid. No other interested party felt able to proceed with making a formal bid. There is indeed a question as to whether the subsidising of bid preparation of the state owned bidder, but not other private sector bidders is in itself a breach of state aids rules. As may be expected, penalties are payable by the operator for missing performance targets such as punctuality. A private sector operator would have to fund such penalties from its own resources, whereas state owned CalMac would be in the absurd position of paying penalties to its owner, the state, who would be forced to make good any losses, should CalMac s operation fail to cover its costs. The upshot of all this has been considerable additional expense in terms of public funds, no real improvement in performance and little incentive to innovate. Some Possible Ferry Route Alternatives The best way of illustrating how change can be effected in practical terms on the ground as it were, is to consider route by route how improved and more cost effective operating practices may be introduced where practicable to reduce the impedance effect of the passage in each case. These options are summarised here and the full response sets out the rationale behind each suggested option Short Routes: Extend operating hours into evening to allow commuting and social travel on the following routes Cumbrae, Colintraive Rubodach, Lochranza Claonaig, Gigha, Fishnish Lochaline, Kilchoan Tobermory, Sound of Barra, Sound of Harris, Raasay Cowal Inverclyde: Withdraw Dunoon Gourock vehicle ferry and replace by a high speed (3 crew) passenger catamaran to maintain a improved 8 minute rail connection, continue Western Ferries vehicle ferry. Rothesay Wemyss Bay: Move to a hourly rail connected service with extended operating hours and eventually replace current (new) vessels with one semi-fast catamaran vehicle ferry timed to meet all trains Arran Ardrossan: Replace current vessel with two semi-fast catamaran vehicle ferries to give an hourly summer service and extended hours. One vessel in winter. IslayJura; Develop a quicker and more frequent overland route with Lagg Keils ferry in two stages: (1) for light vehicles only and limited road improvements, and (2) replacement of the Kennacraig service with full overland implementation after major road improvements whose annualised costs can be mainly funded by savings of the Kennacraig subsidy. Mull Oban: As Arran replace present vessel with two semi-fast catamaran vehicle ferries to give summer hourly service and extended hours (one semi-fast in winter) supplemented by with high speed passenger catamaran to provide an Oban Craignure Lochaline Tobermory, etc. Colonsay: Employ one of the two Mull vessels in the interim and eventually employ a dedicated vessel with a frequent service linked to the Jura overland (with Oban option). Lismore: Replace the current long infrequent Oban link hourly Port Appin vehicle ferry (2 crew), possibly supplemented by the above high speed passenger catamaran Oban link. Coll Tiree: Replace present long infrequent Oban based service with more frequent Mull overland from Tobermory in the first instance and after road improvements from Calgary. Frequency would be further improved by construction of a Coll Tiree fixed link. Barra Lochboisdale: Replace existing infrequent Oban based service with a dedicated Barra based semi fast catamaran, 17 knots, 180 passengers, crew 10 operating to/from Tobermory on a double daily return schedule. In addition or alternatively a Lochboisdale link with Mallaig, on a similar schedule enabling full afternoon s business by islanders in say Fort William calling en route at Canna and Rum on some sailings. See main report for schedules.

5 Small Isles: Lochboisdale en route sailings as above for Canna and Rum and frequent Airsaig Eigg service with links to Muck and Rum. Mallaig Armadale: Year round semi-fast catamaran vehicle ferry to give hourly service and extended hours to enable commuting and social travel. Skye Lochmaddy: Replace the present single vessel serving Lochmaddy and Tarbert (Harris) from Uig with a separate dedicated semi-fast catamaran vehicle ferry to Lochmaddy initially from Dunvegan and eventually after road improvements from Glendale (Loch Pooltiel) to provide a frequent six return crossings per day service. Skye Tarbert (Harris): As above replace the present single vessel serving Lochmaddy and Tarbert (Harris) from Uig with separate dedicated semi-fast catamaran vehicle ferry to provide four return crossings per day. See main report for schedules. Ullapool Stornoway: Replace existing arrangement with purpose built multi-deck ROPAX ferry working 24 hours. Orkney Caithness: Withdraw NorthLink Stromness Scrabster service (saving 6 plus million per annum) and concentrate all Pentland Firth traffic on Gills Bay with an eventual shorter half hour more frequent Burwick Orkney landfall. Orkney/Shetland NE Scotland: Replace one NorthLink major ferry and two freighters with a multi-deck ROPAX ferry running to Peterhead (and Rosyth if justifiable), retain the other major NorthLink vessel (saving 7 million per annum with no loss of capacity). Orkney Inter-Isles: Introduce a new larger and faster vessel of the semi-fast catamaran type on the South Isles route as per OIC plan. Consider also this vessel type for operation to the Outer North Isles. Should South Isles traffic develop substantially due to proposed container transhipment terminal, there may be a case for upgrading the road between Lyness and North Hoy and to create a frequent vehicle ferry link from there to Stromness via Graemsay. A fixed link between Eday and Westray via Faray and possibly Papa Westray could yield benefits in creating one large island and a much shorter more frequent crossing between Kirkwall and Eday with links to nearby Stronsay and Sanday offering a step change in North Isles accessibility. Extend operating hours of all services to late evening. Shetland Inter-Isles: SIC ferries are in many ways a model of best practice. Lobbies Many, perhaps most, communities fear change and seek to preserve the familiar if inefficient practices of the past. Among the recommendations for change contained in this paper, dissenting voices will be raised in fierce opposition but at times the wider public interest is served by taking a more detached view and overriding loud self interested lobbying where it is not justified. This takes leadership, political skill and informed and reasoned argument. It is hoped that the full response will aid the marshalling of such informed and reasoned argument. A Way Forward The thrust of the foregoing text may be summarised as follows: We inherit a vicious circle of inertia Current ship design, route configuration & operating methods are inefficient The inflexible tender system maintains inefficiency and inhibits innovation There is considerable scope for reducing passage time, increasing frequency, etc. The private sector has skills & ideas But market entry is frustrated by the inflexible tender process Result: high cost poor performance To overcome these multiple deficiencies in the way Scottish state subsidised ferries are administered, funded and operated, a more radical approach is required. The term Lifeline Ferries undermines confidence. A more positive epithet such as Scottish Marine Highways should be considered, thereby also enhancing the idea that ferries are, or should be, an integral part of the national road system. The overall approach suggested in this response is distilled into the following bullet points:

6 Modernisation a more flexible approach Reduce ferry impedance and enhance road equivalence Offer individual route concessions on the basis of innovation/cost effectiveness Reward efficiency gains In re-casting the tendering system, it is strongly recommended that, to reduce monopoly dependency, the routes operated by the smaller CalMac shuttle ferries be dealt with as a separate tender bundle. Where radical change in the modus operandi of Class IIA routes is mooted, these options too should be offered for individual tender giving scope for potential operators to suggest how services may be improved. Researching and administering a tendering and control regime of the kind suggested will take special skills. CMAL may well have a useful role in this regard. There is a good deal of work to be done in refining the way ahead but it is hoped that this summary and the accompanying detailed response to the Scottish Government offers a starting point for planning the important task ahead. Roy N Pedersen Pedersen Consulting