Earlier this week the “Seatruck Progress” arrived in Liverpool on her maiden voyage from FSG Flensburg in Germany. The vessel takes Seatruck’s unaccompanied business plan on the Irish Sea to a whole new level. The 142m long, 24m beam, 4 deck ship dwarfs other ro-ro ships. Capable of up to 25 knots, the new ship will take up to 35 13.5m trailers more than the outgoing “P” class vessels currently operating on the Liverpool to Dublin and Heysham to Warrenpoint routes.

But why would Seatruck put on increased tonnage, in an Irish market that has gone through a period of consolidation and capacity reductions in order that ferry companies can stem big financial losses? The simple answer is economies of scale. Seatruck and FSG have considered every cost in detail to produce one of the most efficient vessels in the world, giving Seatruck the advantage of lower operating costs on one of the most buoyant routes to Ireland. As an example, the hull has not got a single parallel line making it uber efficient at cutting through the water. As can be seen in the photos here, take a look at the classic “coke” bottle shape of the hull.

“Unlike the outgoing “P” class ships the 12 drivers will be in shared cabins, but the size and quality of these cabins means that the drivers will still enjoy the excellent standard they are used to. This is one area where costs were cut. After all Seatruck has got to sweat the asset, and make this pay for the Clipper group.

When DFDS stopped the Birkenhead-Dublin route in February 2011, 145,000 units a year dropped into the market place. P&O reacted earlier this year by putting the “Endeavor” on as a 3rd “shoulder” rated service to grab some of the higher paying overnight driving accompanied traffic destined for Dublin. However, the service offering in Holyhead between Irish Ferries and Stena Line is now better than ever, with a sailing  nearly every 4-5 hours, making is difficult to tempt driver accompanied business to Liverpool.

At a time when hauliers are under enormous pressure with increasing ferry prices (see the Ferry companies put the rate squeeze on for 2012 blog – Dec 08th 2012), now that the “Seatruck Progress” has joined the party, with her sister “Seatruck Power” due within the next 12 weeks, Seatruck will have an even better chance at tempting hauliers & distributors to convert to a more cost effective unaccompanied service into Dublin.

For further news and ferry information – please go to www.freightlink.co.uk

Check out Seatruck Ferries “Seatruck Progress” slide show

Its no great secret that apart from Irish Ferries, who just managed to scrape a profit, all of the Irish Sea ferry operators made massive losses during 2010, and are allegedly not, so far, making the required returns in 2011. Seatruck Ferries, P&O and Stenaline have had a difficult year, and the demise of Fastnet Swansea – Cork echos the problem.

At the time of writing, freight rate increases are ongoing. Be prepared for some hard hitting figures as the remaining ferry operators look to draw a line in the sand on competitive rates of recent times. The central route of Birkenhead-Belfast now has no direct long sea competition. You can therefore expect this route to be squeezed extra hard with Stenaline extracting every penny it can out of the market place. That doesn’t mean to say Stenaline will be on its own, as other diagonal Ro-Ro freight routes operated by Stenaline, and Seatruck will equally be under the spot light to make an improved return on investment in 2012.

Stenaline have invested £ 200 million on their Cairnryan-Belfast service, and are unlikely to try and build additional volumes on rate cuts. The new terminal and ships have to be paid for somehow !. P&O are very unlikely to let Stenaline steal a march, and have no doubt looked to tie in large volume carriers.

Despite P&O on the Liverpool-Dublin route having no long sea Ro-Pax competition (DFDS Birkenhead-Dublin route closure in February 2011), weak rate increases, rising fuel costs and expensive tonnage have allegedly wiped out any expected profits for 2011. This is in the face of some very fierce competition when Seatruck introduce their new 150 unit ships onto the Liverpool-Dublin route in December / January. However, this investment will have to be paid for, so expect big freight rate increases.

The question on everyone’s lips in the know is, will the ferry companies be brave enough to tackle the volume hauliers who hold such control over the ferry companies ? This will be the key to turning losses into profit. Or will we see a capitulation to the larger hauliers which will result in the smaller hauliers bearing the brunt of the rate increases and ultimately losing out further to the big boys !!!

On the 31st May 2010 LD Lines added the Norman Trader to their, relatively new, Dover Boulogne route and increased the frequency to 7 sailings in each direction per day. At the time LD Lines M.D. Christophe Santoni declared – ‘The introduction of the second ship to the route reflects our determination to develop and establish the service.’ Yet 3 months later it was announced that the route would close with Santoni stating – ‘A return to profitability can only be achieved for the ferry industry by adjusting supply to demand, increasing prices and market consolidation.’

Santoni’s sentiment was echoed recently by P&O Ferries CEO, Helen Deeble. In August Deeble announced that her company was to undertake a major cost cutting exercise that could include service reductions and job losses. With two new superferries due in the first quarter of 2011 P&O owners DP World will no doubt be anxious that their investment starts to make returns.

The situation at SeaFrance is far worse. With a three month extension to its period of administration due to be granted until the 15th December the future of SeaFrance remains precarious. The only solution to the situation appears to be SeaFrance’s own recovery plan. Financial support granted by parent company SNCF amount to a staggering € 120 million year to date and forms only part of the global funding requirement of an estimated € 190 million. The recovery plan involves 725 redundancies from its 1600 strong workforce resulting in a new system of work patterns on board its vessels. Consultation with staff representatives is due to commence soon which in itself could cause industrial relation problems for the already beleaguered operator as one union official has warned ‘we will do what is required to ensure that SNCF does not forget where its responsibilities lie.’ Add this, to the requirement for SNCF and the French state to present a case for the long term financing of the company to the EC by the 15th of December, then there could be troubled waters ahead. Only the 28th September media reports suggest that SNCF have appointed a subsidiary of French bank Credit Agricole to find a buyer for its cross channel operator.

Amidst this background of uncertainty and cost cutting Eurotunnel has embarked on an aggressive sales campaign which has given them growth of 44% over the last 12 months. Through effective pricing strategies Eurotunnel’s market share has improved at the expense of all the other operators. Over the last year P&O and SeaFrance have lost 70,000 units each whilst DFDS (Norfolkline) have lost 35,000. In percentage terms the decreases are P&O -9.4%, SeaFrance -16.1% and DFDS (Norfolkline) -10.4%.

Commenting on the changing profile of carryings and price cutting P&Os Helen Deeble blamed Eurotunnel for ‘sparking a price war’ and in a letter to staff she added ‘This attack in the form of a price war emanates primarily from Eurotunnel which has slashed its freight rates to win back market share it lost to us after the tunnel fire. This has cost us a loss of volume and a significant downturn in revenues due to the lower prices we are having to charge our customers.’ In a counter to this however Eurotunnel CEO, Jacques Gounon accuses SeaFrance of a very aggressive pricing strategy off the back of not having to pay creditors whilst in administration.

Aside from the claims and counter claims one thing is for sure. Whilst the haulage and courier industries have been beneficiaries in the price war at some point something has to give when you consider the following:

LD Lines – Withdrawn from Dover – Boulogne.

SeaFrance – The future constantly remains uncertain and a solution of one kind or another has to be found. At the moment you couldn’t hazard a guess whether it will remain under SNCF control, come under new ownership or even close.

P&O – With two new superferries due in Q1 2011 offering 7500 lane metres fleet rationalisation must be a consideration which would yield cost saving at the expense of service frequency. With investment of £360 million in new tonnage P&Os owners will demand a speedy return on their investment.

DFDS ( Norfolkline) – New owners of the Dover Dunkerque route DFDS will turn their attentions to the profitability of their newly acquired routes now the process of integration nears completion.

Eurotunnel have forgone their price premium in return for volume improvement through a series of structured price offerings which suggests that a seasonal pricing model may be their answer to the problem of stagnant growth and falling prices.

Only time will provide the answers but whilst the Dover Straits remains in dire straits the next six months will surely see rationalisation and the tide of price cutting will turn, albeit slowly as ferry operators remain demonstratively unsure of what to do next.

For all the latest ferry news, visit www.freightlink.co.uk

• Think about the time of day you want to travel.

• Crossings that leave during the night may sound less appealing but more freight space will be available.

• Avoid fast ferries, these have the highest passenger bias.

• Use ‘freight only’ ferry operators, like Seatruck on the Irish Sea or Cobelfret on the North Sea.

• But above all else, book early, and be open to alternative options.

So, what can the industry do to combat these negative issues. Well, taking out some capacity would be a start, but this is easier said than done. What is stopping consolidation is not the ferry companies’ lack of money to buy their peers, but the European Commission’s competition rules. Both the MD’s of Stena Ro-ro and Norfolkline have recently claimed that these rules made it very difficult to tale over a competitor which had services on the same route. The general view from the ferry industry is that a softening of competition rules would actually help to create a more stable market through consolidation.

Take, for example, the Irish Sea market.

All the operators who have services on the Irish Sea would agree that the market has been tough now for nearly two years. However in this time, a draft of new tonnage has been introduced by companies such as Norfolkline, Seatruck and Stena Line. There has even been a new entrant to the market, Fastnet Line. Carriers such as Norfolkline and Seatruck have replaced older, smaller ships with bigger, newer vessels and Stena Line took the decision to remove their HSS high speed craft from year round use (due to fuel costs) and replace with a freight vessel offering more freight space, and more daily departures than when the HSS was operating full time.
Now, this is a market that is crying out for consolidation. There is not one company who is operating to capacity, and the major players would dearly love to be able to rationalise and consolidate. Indeed at a recent conference in Bremen, Germany the MD of Stena Ro-ro Bo Severed said “On the Irish Sea, there is intense competition, but from a competition rule point of view it is impossible to do something and we really need [consolidation], not only because we want a more stable market and more stable prices, but from an environmental point of view this is crucial. We need to look at ways soften competition rules to get this going”

Consolidation in other industries, such as air travel, is happening now as a direct impact of the global economic downturn and high fuel costs. Companies such as British Airways & Iberia, Untied Airlines & Delta have joined together in consolidating and combining their businesses to offer customers a network of services but to also benefit from “economies of scale”. There are many similarities between the aviation industry and the marine industry. The ferry industry needs “economies of scale”. I wonder how soon it will be before some of the “house hold” names of today’s ferry industry disappear through consolidation and become redundant brand names such as Sealink, Sally Lines and Ferryways?. Only time (and our leaders in Brussels) will tell!