Mezeron & Steam Packet Master Thread

[manshimajin]

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.

[Sean South]

Yes of course they should be out there. You're just proving my point. They're afraid of competition. There's a huge amount of business out there and if done properly they should do very well. You seem to be saying that they should not operate anything that has competition...Why? I really, honestly don't understand why you feel they should not operate in a competitive market. I guess it's because, like me, you feel the current Management aren't up to it and I think you're correct there but they could be replaced?

 

No I am saying as a small player you do not go into a market that has already strong competition on it from much larger welll established organisations, especially if to go into that market place it requires a substantial amout of capital. The chances are you will get your back side kicked having lost a large amount of money.

They entered the same market a few years back and failed for none of the reasons you stated. They failed, as I said earlier, because they didn't do it properly. Let's be straight here. The SPCo is the longest running shipping company in the Irish Sea area. Yet it has shrunk in size year on year. Why? Lack of vision. Lack of motivation brought about by lack of competition. And, ultimately, laziness!

It has eff all about management not being up to it and purely down to the fact that it is bound to be a sure fire loss maker! To start up you will need to spend a fair amount of capital. If as you say there is already strong competition then presumably that has already led to aggresive priceing so returns will not be high already. To compete you will therefore presumably have to reduce prices more to attract business from the current players. The existing companies probably already operate bigger ships and fleets so have economoies of sale, they can also probably also afford a price war for a short whilst to get you off the route. The chances of success are minimal as are the returns against capital employed even if succesful.

It has everything to do with Management (or lack of). You waffle on about how you have years of experience in start ups. You say that the SPCo entering a new market would be impossible. I take it you have (or have access to) research to prove this? A few new shipping companies started on the Irish Sea area in the past decade and none failed.

As an individual I might be prepared in a competitive fight to take on anoth

er person. I would not be prepared to take on say a 100's. That is not being scared of competition it is knowing when the odds are stacked against me.

 

As I said previously do you know anything about running a business or the economics of running a business. Let alone running a shipping one.

Actually, I have many years experience in running businesses and all in a competitive environment. Strangely enough we have done a bit of research into the Irish Sea shipping market over the past few weeks and, I believe, you would be proved wrong in your assertions. However I'm sure a man with your vast experience will have much evidence to the contrary?

 

I am no expert in shipping companies but a couple of years ago a client looked at setting up a shipping company. It did not get up off the ground for various reasons. The reason for setting up was that a haulier was spending a fortune on shipping costs and thought it might be worth setting up its own shipping company. The advantage apart from that it was financing itself was that it would ensure a route that was more convenient for it and on which there was only one competition. From all the business projections we did it would have been profitable as probably 50%+ of the space would have been taken up by "their" own trailers. However equally it was apparent that without that it would not have been worth setting up as there was no gaurantee they could have got enough business at the right price to make profitable.

Who'd have thought there was potential for a competitor to sail inrto Douglas harbour and nick the sleeping dog's bone? Someone with a broader vision than your own I'd say.

 

You also drone on at great length about how a small company couldn't take on a big one. I would offer Ryanair and Easyjet as examples to confound your argument. Ryanair started with one dodgy second hand 40 seater aircraft and £150,000. Only twenty years ago. They took on all the big boys in aviation and beat them. Like I say: Motivated management not lazy ones.

Edited December 4, 2010 by Sean South

[Sean South]

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.

That's a fairly defeatist attitude, to be fair. They could also think outside the box and run from, say, Arklow or Wicklow to Holyhead or, indeed Liverpool. It would be attractive for hauliers south of Dublin to not have to trawl through Dublin. They could also look at Drogheda for the same reason. Take the new Cork Swansea service. It started in April this year run by a tourism co-op. They've surpassed their projections every month so far and are doing a huge dent in freight. So much so that Stena et al are crying "Unfair competition" to the Govt. Hence, again I say, there is room for expansion out there if people were a bit less tunneled in their vision.

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.

Ah come on! They've had the guts of 200 years in "it's own market". That's why they are complacent. They need to get back out into the big bad world.

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.

That would take a bit of lateral thinking...

[manshimajin]

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.

[Lost Login]

The SPCo is the longest running shipping company in the Irish Sea area. Yet it has shrunk in size year on year. Why? Lack of vision. Lack of motivation brought about by lack of competition. And, ultimately, laziness!

 

Just possibly because of the complete change in the Tourist market over the last 50 year, competition from airlines etc. However I also do think that it has shrunk year on year. I expect that numbers hit a low point in the early eighties but have probably shown a small recovery since then.

 

I have also have never said a small company cannot take on a big one and be succesful. They can and in general you have to have something different to offer or have a different business model. I do not think those oportunities presently exist in the market that you do. It does not seem that many others do either as I do not see many jumping in to the market place.

 

Without an obvious gap in the market place the only way to be succesful is by taking on the current operators and my gut feeling that if the SP did that they would be the ones to loose out.

[Sean South]

I do not think those oportunities presently exist in the market that you do. It does not seem that many others do either as I do not see many jumping in to the market place.

Really? Well three new routes/operators (Ro-Ro/Ro-Pax) started in the past year on the Irish Sea. I haven't included Mezeron in that either. In shipping terms in the Irish Sea area I'd call that substantial. You wouldn't I take it? How many would you expect in an average year then?

 

And there's (at least) three new vessels on the way for expansion in the coming year...

Edited December 4, 2010 by Sean South

[Lost Login]

I do not think those oportunities presently exist in the market that you do. It does not seem that many others do either as I do not see many jumping in to the market place.

Really? Well three new routes/operators (Ro-Ro/Ro-Pax) started in the past year on the Irish Sea. I haven't included Mezeron in that either. In shipping terms in the Irish Sea area I'd call that substantial. You wouldn't I take it? How many would you expect in an average year then?

 

And there's (at least) three new vessels on the way for expansion in the coming year...

 

 

I think I will go with what the freight link blog says. It does not really look like a prime market to expand into!

 

Too many ships / too many routes / not enough customers?

Monday, June 28th, 2010

The Western European ferry market is having to contend with testing trading conditions at present, and there are a number of things happening that are not making it easy for ferry operators to turn a profit. From environmental compliance, the generally high cost of marine fuel and the introduction of ultra low sulphur fuel in areas such as the North Sea and Baltic Sea, these are all issues impacting on the bottom line of ferry companies over which they have very little direct control. In a weak freight transport market, ferry operators are chasing fewer customers to support their respective services which causes a “price war” on some routes where only the end user (aka the customer) benefits. With ships to fill and schedules to operate, ferry companies have little choice but to drop rates to attract new traffic and to try and keep hold of what they have already got. And so the circle of margin and profit erosion continues……

 

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!

[Sean South]

I do not think those oportunities presently exist in the market that you do. It does not seem that many others do either as I do not see many jumping in to the market place.

Really? Well three new routes/operators (Ro-Ro/Ro-Pax) started in the past year on the Irish Sea. I haven't included Mezeron in that either. In shipping terms in the Irish Sea area I'd call that substantial. You wouldn't I take it? How many would you expect in an average year then?

 

And there's (at least) three new vessels on the way for expansion in the coming year...

I think I will go with what the freight link blog says. It does not really look like a prime market to expand into!

Yeah. You're right. Silly me. What would the actual operators know about it?

The old saying "There are those that do and there are those that talk write about doing" (or not, as the case may be!)

Edited December 4, 2010 by Sean South

[gazza]

I do not think those oportunities presently exist in the market that you do. It does not seem that many others do either as I do not see many jumping in to the market place.

Really? Well three new routes/operators (Ro-Ro/Ro-Pax) started in the past year on the Irish Sea. I haven't included Mezeron in that either. In shipping terms in the Irish Sea area I'd call that substantial. You wouldn't I take it? How many would you expect in an average year then?

 

And there's (at least) three new vessels on the way for expansion in the coming year...

 

 

I think I will go with what the freight link blog says. It does not really look like a prime market to expand into!

 

Too many ships / too many routes / not enough customers?

Monday, June 28th, 2010

The Western European ferry market is having to contend with testing trading conditions at present, and there are a number of things happening that are not making it easy for ferry operators to turn a profit. From environmental compliance, the generally high cost of marine fuel and the introduction of ultra low sulphur fuel in areas such as the North Sea and Baltic Sea, these are all issues impacting on the bottom line of ferry companies over which they have very little direct control. In a weak freight transport market, ferry operators are chasing fewer customers to support their respective services which causes a “price war” on some routes where only the end user (aka the customer) benefits. With ships to fill and schedules to operate, ferry companies have little choice but to drop rates to attract new traffic and to try and keep hold of what they have already got. And so the circle of margin and profit erosion continues……

 

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!

 

so there saying theres to many companys working that sea lane, but on the other hand not one of them will pull out. they must be making something then, or the prize when one gos is worth hangging on for.

 

Plus its allways good to say its not profatable because then you may scare off any new companys that our thinking of joining in.

 

ask any company owner or manager if they make a hugh profits, thye will allways say no the market is tight and we only just making a profit.

Its not as if you would public say, yes we make millions a day loads of room for more to enter the market,

 

Its called protecting your company

Edited December 4, 2010 by gazza

[Sean South]

Spot on there Gazza. Stena alone operate ten vessels on the UK>Ireland routes so could easily rationalise and consolidate if necessary...Wonder why they don't???

[manshimajin]

so there saying theres to many companys working that sea lane, but on the other hand not one of them will pull out. they must be making something then, or the prize when one gos is worth hangging on for.

 

Spot on there Gazza. Stena alone operate ten vessels on the UK>Ireland routes so could easily rationalise and consolidate if necessary...Wonder why they don't???

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 South]

so there saying theres to many companys working that sea lane, but on the other hand not one of them will pull out. they must be making something then, or the prize when one gos is worth hangging on for.

 

Spot on there Gazza. Stena alone operate ten vessels on the UK>Ireland routes so could easily rationalise and consolidate if necessary...Wonder why they don't???

DFDS have sold out part of their service to Stena because they were losing money on it.

Losing money? Really? Source?

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.

Irish Ferries did that years ago. They're on track for a €110 million turnover this year on three routes with a 25% profit... Not bad and let's be fair here: the crew savings haven't been that massive. If you research that you'll see the main reason for the foreign crew was to break the Union hold on ICG Plc.

 

On the Stena drops Larne > Heysham. Again perspective. They're continuing to use Heysham they're just moving from Larne into Belfast Harbour... And, in fact, with the acquisition of DFDS they have more vessels into Heysham.. Not less!

 

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.

I wholeheartedly agree with you that the SPCo needs to concentrate on sorting itself out at home for now. My core point all along is that they should never have found themselves in this pickle with total reliance on one or maybe two mediocre routes. Had they had the vision to spread their wings over the years they would not be so susceptible to getting hammered by a newcomer on their core route. They, ahem, missed the boat (sorry!)... so to speak! Imagine, now, if another Ro-Pax operator decided to look at the IoM? The SPCo would be knackered and an old company like them shouldn't be so precarious.

[Alias]

If you research that you'll see the main reason for the foreign crew was to break the Union hold on ICG Plc.

A company said they didn't sack off the local staff to pay less, it was for other reasons? How odd.

[hboy]

The papers are going to town now talking about nationalisation:

 

http://www.iomtoday.co.im/news/politics/should_packet_be_nationalised_1_2825891

 

The Company as it stands is £200m in debt. Can the Manx taxpayer afford to pay £200m to buy it? No is the answer. That should have taken about 35 seconds of government time to work it out. How would nationalisation even be possible? Its just more ill-concieved bollocks from this government.

[Tugger]

I think the level of indebtedness of the operating company itself is open to debate, hboy. I agree (without reading his comments in detail) that Cannan his talking bollocks (all the evidence I need is that his lips are moving), but I reckon the Aussies are, in the end, going to have to sell, and they are going to have to sell for less than they paid. Conceivably that might be a point where government ownership is an option (though Christ, I really really hope not).