"Cost Effective Ferries - The Impact of Ship Design, Prices, Frequency and Passage Time" by Roy N Pedersen, MA, FRSA, MCILT - Edinburgh meeting of 8 January 2008

The January 2008 meeting in Edinburgh was addressed by Councillor Roy Pedersen on the subject of "Cost Effective Ferries - The Impact of Ship Design, Prices, Frequency and Passage Time".

The presentation began with a quick look at why ferries are needed and Mr. Pedersen pointed out that they support economic development, improve social conditions, bring islands closer to national life and reverse population decline, a key point that has received much media coverage over the years. With the latter point he drew comparisons between the Western Isles, the Isle of Man and the Faeroe Isles over the last century.

The majority of ferry operations are subsidised and Mr. Pedersen looked at the amounts of subsidy currently being paid to support the various services, drawing comparisons between the subsidy received by CalMac and Northlink Ferries and looking at the fares charged for passengers, cars and commercial vehicles. He then moved on to have a look at the ships used to provide ferry services and as an example took a critical look at the vessels used by Northlink. He pointed out that for the same price as the Hamnavoe, you could get a ship that had virtually identical performance, but with over 4 times the vehicle capacity.

Councillor Pedersen then moved on to consider road equivalence, pointing out that roads are the universal transport mode and that most people and goods travel by road. The road network can be said to "connect everywhere with everywhere" except where there is the need to cross a large stretch of water in which case discontinuity arises. In such cases, ferries act as a "floating bridge". Ferries also constrain traffic, causing what he termed "impedence" and the idea of road equivalence is to make ferry crossings as "road like" as possible. He looked at the effect of the Skye Bridge and the result of the removal of tolls in 2006 that led to a significant rise in traffic.

To illustrate the effect of "impedence" Councillor Pedersen drew comparisons between Caithness and Orkney and showed that the degree of impedance can vary greatly depending on the passage time, frequency of service, the hours of operation and the price. Another comparison between the islands of Gigha & Lismore, both of which have similar populations showed that whilst Gigha was thriving, Lismore was stagnating.

Councillor Pedersen concluded that this was due to the combination of lengthy passage, low frequency and high fare resulting in severe "impedance" on the Lismore route, compared with reduced "impedance" of the short, frequent, cheaper Gigha service. He noted that the short frequent Lismore passenger ferry carries four times the vehicle ferry passenger traffic.

Looking at the demand elasticities, it was noted that passage time, frequency, operating hours and price have a multiple effect on traffic generation and if the dual Lismore service were replaced by a vehicle ferry on the short crossing traffic generation may be computed as 75,000 passengers and 12,000 vehicles could be achieved, driving forward economic development; and at the same time increasing revenue and reducing the operating deficit that requires subsidy. This could be done by reduce passage distance or by using faster vessels or by a combination of both methods.

Councillor Pedersen then looked at the ferry situation in the Pentland Firth where competing services are provided by Northlink and Pentland Ferries. Pentland Ferries currently has a new catamaran type vessel on order costing about one third of the cost of the Hamnavoe, operated by Northlink, yet with a similar carrying capacity. The big difference is that the new vessel is more fuel efficient, has fewer emissions and does not require subsidy. When the new vessel enters service it will have quite an effect on the crossing as times will be reduced and it is expected that there will be a 400% growth in traffic on the route.

The Western Isles depend on ferry services and Councillor Pedersen looked at the various services provided and surveyed the various problems that are constraining operations and services and he used a number of comparisons to illustrate his points. He finished his presentation with a look at Road Equivalent Tariff (RET). This seeks to create an equitable fare structure based on length of passage, and length of vehicle applied as a national system.

However, this tends to discriminate against long routes and is expensive to apply, so there is a variation that could be applied, called the Tailored Taper Tariff (TTT). This offers a more flexible and cost effective compromise, especially if applied nationally. It should be noted that price is only one of the factors in approaching road equivalence. Summing up the presentation Councillor Pedersen said that we inherit a vicious circle of inertia and that current ship design, route configuration & operating methods tend to be inefficient. The current tendering system maintains inefficiency and inhibits innovation, but the private sector has skills and ideas. The problem is that entry to the market is frustrated by the inflexible tender process, resulting in high cost and poor performance.

Solutions could include the introduction of a more flexible approach and individual routes should be offered concessions on the basis of innovation/cost effectiveness, which would make many routes commercially viable. The public sector should provide terminals and roads to connect them and it should be open to the private sector to provide/operate the "sea-roads". Finally, he said that ferries should not be referred to as "Lifeline" ferries but should be called "Marine Highways".

The Scottish Region would like to thank Councillor Pedersen for his presentation and the Royal Scots Club for its excellent facilities.

Report by John Fender.