manshimajin

I suspect that the point you are missing Chris is that the public no longer feel the loyalty to the Steam Packet that they used to and that for one reason or another well recorded on threads at Manxforums, and in the old days on IOM Today, they have feel that the level of service from the company has on occasions been poor. All companies need a loyal customer base. I don't feel 'fleeced' by the Steam Packet but I do think that it could do things better. OTOH it was Mark Woodard himself who signalled to freight customers that the Steam Packet was overcharging them to subsidise passenger rates. Only possible if you have a monopoly and likley to make many of them move to the competition when it appeared.

Barrie where does an understanding of the customer (he/she who pays the bills) fit in your 'world view'? IMO the positive reaction to the Steam Packet being faced with competition is a consequence of some real service problems that the Steam Packet has chosen to ignore. The attitude to the Packet these days has none of the sense of loyalty and pride that existed in the past. One can talk technicalities about chartering and crew rates but at the end of the day customer loyalty is the most important thing for any sustainable business and the one that funds it. Hopefully the Steam Packet will note the fact that the population has not risen as one in its support and that politicians here have not automatically rushed to its aid. For one I believe that there are things that the Steam Packet can, and should, do to rebuild customer loyalty and to underpin profitability. Saying 'woe is me' is not one of them. Ignore the customer and that "lot are standing into danger".

Aren't the comments about uniforms, meat, ITF membership etc etc red herrings? Isn't the issue that the IOMSPC ought to be able to compete with Mezeron very well without government subsidies? How much traffic has the IOMSPC actually lost? What has it done to improve what appears to have been difficult relationships with some of its freight customers? What changes would it like to see to the UA? What would it offer as a quid pro quo for the changes it wants? If the financial stucture is impeding its operations what can it do about it? MW at the time of the fuel surcharge was saying that fuel was the biggest cost (he didn't mention labour or interest payments) - so has what action has he taken to improve fuel useage? On occasions the debate seems to focus on Lithuanian crews versus Manx crews, where the clothes come from, whether the beef is Brazilian or Manx and whether the bread comes from Ramsey bakery. I am not at all sure that these are the key issues...

Are you saying that we should ALL leave it to Tynwald to deal with? BTW in fairness the Castletown Commissioners were not elected to put in those non-functioning £150,000 bollards. Weren't they foisted on them by the DoT and a former electric and odds and sods shop owner?

They may have raised some ideas when they met PG. Possibly fewer sailings to consolidate traffic in the low season? Possibly some reduction in or complete dropping of Irish services? The ability to dispose of one ship? Non-national crews? Sole use of Douglas for freight traffic? PG clearly said that from the Government side any change in the UA would be subject to lower fares (mind you is that discount or standard fares?). The interesting thing IMO is that changes have not been ruled out. If the IOMSPC believe that the current UA is constraining them there would appear to be room to negotiate but they would need to be able to give the Government an attractive benefit to 'sell' the public in return for this.

My impression from what Phil Gawne said in the ITV interview is that if the IOMSPC wanted changes to the UA he would be willing to listen but the quid pro quo would be reduced fares. I found it interesting that he was not ruling out company initiated negotiations on changes to the UA if they could offer something in return.

I thought that Phil Gawne was hinting in the ITV interview that there was room to renegotiate the UA anyway. And the IOMSPC via its MD seem to have been saying that they would like to renegotiate. IMO in these circumstances it is better to see what the deals are/what people want - before offering 'rewards'.

Barrie thanks for your post which is an interesting overview. At the end of the day it is probably not that different to any other business inasmuch as what you borow and what the business is worth if sold are two different numbers +/-. How the banks handle securities that have diminshed in value is something that they are currently dealing with a lot (often because of their unrealistic original valuations). You have explained some of the specific intricacies involved in this type of business. Every business has its intricacies in terms of borrowing and valuation but shipping sounds to have ones that are specific to itself and noone else. If re the Isle of Wight you were referring to my comment further back I think you have missed the word 'synergies'. There is nothing under EU law to prevent companies within and outside the EU sharing certain activities within a 'shared service company'. This very different to the 'merging' that you mention and which I would not think is practical. So for example there might be some synergies in having common booking system software or a common call cente with dedicated lines for each company. Or if there are training or recruitment needs it might be possible to use one lot of staff to do this for the three MacQ companies rather than each having their own resources and facilities. Unless one is on the inside one can't tell what can or can't be done. My point in raising it was that it may be another area in which the IOMSPC could make some effective cost savings. Mind you the main savings may still be in relation to service levels and the possibility to negotiate the UA further as implied by Phil Gawne in the ITV interview.

DFDS have sold out part of their service to Stena because they were losing money on it. irish Ferries exchganed irish crews for European crews to save money. That Sea Container Liverpool-Dublin service was dropped. Stena are stopping the Larne-Heysham run. TBH I don't mind if the IOMSPC can find a profitable niche that takes business off the other ferries (or creates a new market). That is a commercial decision that it can make if it wants to. Just at present however it needs to look at how it organises itself on its core routes now competition has increased - overlook profitable and acceptable service on your core routes and you are in real trouble.

Sean, my point is that a first step in improving profitability MUST be to look at what you are doing now and considering if there are ways of making improvements that go to the bottom line. That is not defeatist. IMO if there are improvents this route is realistic, practical and quickly implementable. The problem IMO on new services is that they are 'late entrants' in a market dominated by much bigger players. It might make sense (and I have said this before) to consolidate their Ireland-IOM crossings on one port convenient for both the Republic and the North (Warrenpoint?). But I am genuinely not sure whether there is a market for Arklow-UK or alternatives. That would be up to them to research and to evaluate against the investment in extra tonnage. Certainly the Cork-Swansea ferry is doing well - it's a great service and very convenient for those of us with places in the South West of Ireland. But that is its competitive advantage IMO - it is a long way away from the other ferry ports so it has a niche that noone else is competing against in that region.

I would have thought that a Dublin-Liverpool route would be a very difficult market to get into against the competition from Stena, P&O, Irish Ferries and DFDS. In my experience the first thing one has to do with a business is to make it effective in its own core maket - and I believe that there are things the IOMSPC can do in that area - particularly as Phil Gawne left open in the ITV interview a possibiity of revisiting the User Agreement. Secondly (I wonder) are there any synergies that can be achieved with the other Macquarie fund owned shipping services - Condor and WightLink. That might be for example in some areas of training, maintenance, IT, administrative services. Maybe there are - maybe there aren't. But might be one for the IOMSPC to explore if they haven't done so already. But the impact will not be in + £millions.

Thanks.

Thanks for that link. Another alternative connection when the IOMSPC is not going to Ireland and we have to make it to Liverpool or Heysham. Added: Just looked at the ships that come with the deal - looks like freight service not passengers. Rats... In the Sea Containers days that there was a service between Dublin & Liverpool using the SuperSeaCat (Viking). I guess that it can't have been that successful as the route stopped operating. Had some 'interesting' crossings. What alternative routes/services did you have in mind BTW?

Are you sure that it's not a management indecision? Absolutely sure that it is a decision Not necessarily a good one though...

Doing nothing is of course a management decision just as any other action is. At the end of the day talk of loans, nationalisation, competition etc etc... can't hide the fact that this is a management issue for the IOMSPC that needs some decisions to be made and actions taken. Hopefully that is what they are doing based on the strategy for the business (sell/hold) and the need to be competitive in service and price.

replied here.

The luck of the Oirish - clearly not. First in best dressed RK . Hard times still ahead for all - UK and IOM included - you can't drop 20% off the tax revenue side without doing some things on the expense side. But no reason to stop continue enjoying life is it?

Holidays?? Jeez, you should be wearing fookin sackcloth and ashes for the next 10 years!!! As an aside from the focus of this thread: Why? Am I missing something? The key export elements of the Irish economy, outside the banks and the fiscal situation (which BTW is in a better shape than the UK's on a per capita excluding the bank snarfu) is doing rather well - 10% up YoY. Looked at another way on the IOM we appear to be losing upwards of 20% of our tax revenue and we are not the least bit worried...

The interview with Phil Gawne above was interesting. Have I got it right? Stripped to the basics his opinion seems to be that Macquarie overpaid for the company, the (Portugese?) bank that has financed the large loan has security over an asset that is not worth what it was and the company needs to reduce debt financing 'by some means or another' - presumably by converting debt to equity financing? At the same time, despite it being 'overvalued' it is a very profitable business and can reduce its pricing for passengers and freight without changing its basic operating model. So would the superannuation funds that ultimately own the company want to put in more capital? If they did they presumably would want value growth and dividends but this would have to be at a lower rate than interest servicing costs to make sense. Are they happy to dilute their holding as an alternative? Are they willing to accept low dividends over some time - presumably they currently see little cashflow because this goes to service the loans which means that they can currently use their own cash to acquire additional fund assets and keep their investments geared? Would they be happy to put capital into an 'overpriced' asset to allow freight and passenger fares to drop and to release the bank from some of its loan? Or can the company restructure its business in such a way as to make itself sufficiently profitable and effective for sustainable operations in a changed and more competitive market place? (The sleeeper from PG) - can they renegotiate a deal on the UA (by concentrating on the UK market only and/or changing service frequency?) to get more profit and to be able to offer lower fares (but how to monitor that too). 4&5 seem to make the most sense to me - maximise effectiveness, bring in some service changes to back up the 'seriousness' of the situation and then talk about renegotiating elements of the UA on the basis of 'if we can agree this we can reduce fares and maintain an acceptable service to you and us. But X,Y and Z have to change for us to be able to do that). That still leaves the selling option open whilst possibly improving profitability to boost value ahead of any sale. In other words a typial management challenge that managers are paid to manage.

I agree with your comments on tourism. Some time back there was a suggestion that we should outsource our tourism promotion to one of the successful tourist bodies in the UK - I still think that (unfortunately as we should be able to do it ourselves) that is a very good idea. Get folk in a tourism board who have done a good job and have a good track record with the wheel they have developed to stop us trying to reinvent a poor copy! There are some wonderful examples of good local promotions in the UK - this simple one for the Ribble Valley is one of my favourites in terms of something that is not complex but promotes business and tourism very well. On the taking a boat off bread and butter routes - quite often last summer the Manannan was doing the run without apparently adversely affecting its other services - TBH the SNAEFELL is getting past it and is awful in anything above a non-flat sea. I acept we all pontificate here and don't have to run the business...but...I am far from convinced that the IOMSPC operates the Irish services as effectively as it might. They will say I don't know what I am talking about - and quite possibly they are right - and possibly they are not. But they have the keys to the ship!

LL you are right about the ships not always being full. I recall that MW said that utilisation is <40% (although he did not define his terms at the time). What was also apparent from the figures was that the whilst utilisation naturally picked up in Summer it was still well below maximum. I agree on the chicken and egg analogy. We compete here with all other destinations that UK and Irish tourists can select. There seems to be a feeling quite often expressed on this Forum that Manx Tourism is a dead duck (particulalry without the bike races). Personally I think we have a lot to offer and our friends who visit love the place and find it very friendly too - and come back. But it would be wrong to pin the probem on the IOMSPC as it is part of a total promotional picture that may not be working very well. I was however intrigued at the time that MW basically wanted to kick into touch the idea that there is a passenger market outside th IOM that is worth trying hard for. It seemed a bit defeatist IMO. But the user agreement says they have to. I presume there are times they are profitable and times when they are not how it comes out overall I have no idea. Maybe they are a loss leader or where in the past to get the near monopoly on the freight. But if they want to drop then they have to break the user agreement just like they would have to break the user agreement if they wanted to drop the Irish routes. Quite correct. I accept personally that to get home from Ireland with the car I have to travel through mainland UK a lot of the time and that the services are there because of the UA. That is my choice. For us the timings of the Irish services are not bad when they are running. But if I may give an example (and one swallow does not make a Summer) - when the volcanic ash cloud was causing people to reconsider destinations the Irish radio did some coverage on places you could get to by sea for holidays from Ireand in Spring/Summer. Every ferry route was mentioned EXCEPT the one to the IOM. We are definitely not 'top of mind' even though we are close by to both UK and Ireland. It will be interesting to see when the Tourism folk start promoting the Island in Ireland this time round - they usually seem to do it later rather than earier. My friends and acquaintances in the Republic are making decisions about 2011 holidays now and over Christmas.

When the service is in place it's good for my needs. When, for much of the year, it is not - then I find the drive round a bit of a bind. Fortunately we have now found a route to Heysham that is totally illogical from the part of Ireland where we have our place - but it is a much more attractive route scenically than some of the others and come what may we have to overnight so we indulge ourselves in enjoying the drive (snow willing) and checking out places en-route. Within your comment there is an issue that keeps coming into my mind. Freight wise there is zero doubt that the IOMSPC market is the Island and its businesses. When it comes to passengers MW stated in the past that his market was the 84,000 inhabitants of the IOM too. That, IMO, ignores the almost 70 million people living around the Island on the West and East rocks.

Tugger I think that you may well be right about change of ownership. I would have thought that the "Macquarie" model is premised on selling at some point anyway. This is in line with a Private Equity/LBO model. IMO there is an enormous difference in strategy between a business being purchased by a rival in the same field seeking to expand its operations through acquisition and a business being purchased as an investment for a group of pension funds not involved in the sector. The present situation, unless managed properly, will reduce the value of the IOMSPC to its owners. I still hold with the view that as much of the value seems to be connected with the 'goodwill' of the almost exclusive use of the Linkspan the timing of sale would need to be whilst there is still value in the UA. Possibly that is why the IOMSPC sought (and received) a 10 year extension to the UA to 2026 - to allow for an orderly sale with value left in the acess to the Linkspan included in the User Agreement?

They certainly look to be an experienced shipping company. Does this give them a commercial advantage over a shipping line owned essentially as a pension fund investment through a Bank?

Kopek, for clarity, the report was in a Latvian journal quoting the Estonian Statistics and it relates to Estonian wages - not to Latvian wages which are lower. There seemed to be some feeling that Estonian crews were somehow not covered under EU wage regulations - BS may be right that IOM, UK and Estonian ships all employ non-EU nationals on much lower wage deals. I don't know if this applies to the ships Mezeron is chartering or to ships trading solely within Europe. Is it any more unfair than the 'open skies' policy that allows airlines with dramatically different wage structures to compete with one another? I can't help feeling that much of what we are talking about is the symptom of the problem - not the problem. Isn't the problem the fact that some customers were not happy with the deal they were getting from the IOMSPC and were therefore only too willing to switch to another provider if one became available? Which is to do with service standards and costs. I thnk Amadeus has a point - in a global economy manufacturing has been sent 'offshore' to lower wage countries. This then comes back to be sold to the folk that used, amongst others, to be employed in manufacturing. On the other hand this is a reversal of the trends from the second half of the 19th and first half of the 20th centuries when the UK and other European countries acted as the importers of raw materials and the manufacturing/industrialised base for their colonies.