Fares

The consultation paper noted that, although there are seasonal and islander fares (a discount of 30% year-round), travel on Northern Isles Ferry Services can be expensive for some. Transport Scotland was interested in hearing views on future fares policy.

The Road Equivalent Tariff (RET) is a distance-based fares structure with a formula for calculating fares comprising:

• A fixed element (to ensure services remain sustainable and to cover fixed costs such as maintaining harbour infrastructure and vessels); and
• A rate per mile (calculated by Transport Scotland analysts, using contemporary independent research by the RAC).

RET fares were rolled out across all Clyde and Hebrides Ferry Services (CHFS) routes by October 2015. In the Islands Connectivity Plan Strategic Approach Transport Scotland committed to considering changes to how the RET formula is applied on longer routes (for example Aberdeen – Kirkwall - Lerwick). This could include reducing the mileage rate or capping at the current mid-season fare.

Introduction of Road Equivalent Tariff fares

Question 4 – Would you like to see the introduction of Road Equivalent Tariff fares for islanders on the Northern Isles Ferry Services routes, with fares changed to be directly proportional to distance?

Responses to Question 4 by respondent type are set out in Table 10 below.

Table 10: Responses to Question 4 by respondent type

Type	Respondent group	Yes	No	Total
Individuals	NIFS network resident - Orkney	195	37	232
Individuals	% of NIFS network resident -- Orkney	84%	16%	100%
Individuals	NIFS network resident - Shetland	287	268	555
Individuals	% of NIFS network resident - Shetland	52%	48%	100%
Individuals	All other individual respondents	47	32	79
Individuals	% of all other individual respondents	59%	41%	100%
Individuals	Total individuals answering	529	337	866
Individuals	% of individuals answering	61%	39%	100%
Organisations	Farming or land management organisation	0	1	1
Organisations	Freight company or representative body	0	2	2
Organisations	Local authority or transport partnership	2	0	2
Organisations	Other business or representative body	3	0	3
Organisations	Port/harbour authority	0	1	1
Organisations	Public body	0	0	0
Organisations	Trade union	0	0	0
Organisations	Voluntary sector organisation	2	0	2
Organisations	Total organisations answering	7	4	11
Organisations	% of organisations answering	64%	36%	100%
Total	Total respondents answering	536	341	877
Total	% of all respondents answering	61%	39%	100%

A majority of respondents – 61% of those who answered the question – said they would like to see RET fares for islanders on NIFS routes, while 39% would not. However, while 84% of Orkney residents agreed with RET fares, this fell to only 52% of Shetland residents.

Around 835 respondents explained their answer.

Reasons RET fares on NIFS routes are supported

The high cost of travel to the Northern Isles, a desire to see reduced fares, and fairness in relation to other areas of the ferry network were the more frequently given reasons for supporting RET fares for islanders.

Respondents from Orkney were most likely to cite fairness as a reason for supporting RET fares with some noting that these fares are already available on services in the CHFS area. This view was apparently linked to an expectation that application of the RET formula would reduce fares to Orkney, and two ‘Local authority or transport partnership’ respondents and a ‘Public body’ respondent expressed a view that the current RET formula would indeed reduce fares across the Pentland Firth.

In contrast, the most frequent point from Shetland residents was that they would support RET fares only if prices were reduced as a result. Shetland residents were also more likely to feel that they had not been provided with sufficient information on the impact of RET fares to allow them to answer the question.

Event Feedback

Feedback from the event in Stromness included:

“Fare parity with Western Isles a must.”

“Okay for islanders with discount. Also good for 'oldies' with travel vouchers. But expensive for others without RET - need to get this sorted.”

Reasons RET fares on NIFS routes are not supported

A view that RET fares might be more expensive, particularly for Shetland, was the main reason for not supporting their introduction. Again, these points were more likely to be raised by Shetland residents than those from Orkney. Some respondents expected that while Orkney residents would benefit from RET fares Shetlanders could be disadvantaged.

Other issues raised

Other points, raised by both those who supported RET fares and those who did not, included that the RET formula would require adaptation for longer routes, with a ‘Local authority or transport partnership’ respondent noting that application of the current formula on the Aberdeen-Kirkwall-Lerwick route could lower some visitor passenger fares, but significantly increase islander car fares when compared to existing islander discount levels. This issue is considered further at Question 5.

There were also concerns among ‘Individual’ respondents that lower fares risked increasing demand from tourists, thereby making current capacity problems worse, with an associated view that reduced fares should be reserved for local residents. However, a ‘Local authority or transport partnership’ respondent highlighted the economic benefits tourism bring to island economies and an ‘Other business or representative body’ respondent argued that RET fares should be extended to residents in remote mainland areas such as Caithness. A ‘Port/harbour authority’ respondent suggested residents in the KW1 postcode area. A specific concern raised by a ‘Trade union’ respondent related to the number of motorhomes travelling on CHFS routes and the disproportionate deck space that they occupy, with an argument that this outcome should be avoided on NIFS routes.

Another ‘Trade union’ respondent highlighted the importance of financial sustainability for the operator, highlighting concerns that a fare policy that overly reduces revenue could impact both investment in new vessels and staff training and lead the operator to seek cost savings, including labour cuts.

Points were also raised with respect to the existing islander discount scheme which some respondents saw as acceptable or preferable to RET fares and others suggested should be retained even if RET fares are introduced. However, there was also a view that island residents should not pay seasonal fares.

Other suggestions with respect to RET fares included that they should apply to:

• overnight accommodation, as this is an essential part of travel on NIFS routes.
• Pentland Ferries services.
• road freight vehicles longer than the 6m cap applied on the CHFS network.

Event Feedback

Comments from attendees at the event in Lerwick included:

“Need islander discount all year at lower rates.”

“One price for tickets, cabins etc for islanders for all year – we need the lifeline service all throughout the year – shouldn’t be seasonal pricing for islanders.”

Application of the RET formula on longer routes

Around 505 respondents answered Question 5, although with frequent comments including that the respondent did not understand the RET formula or had not been provided with enough information (for example price comparisons) to be able to give an informed view.

Otherwise, the most frequent comment was a desire for fares for islanders to be reduced, by whatever mechanism, with a ‘Public body’ respondent arguing that any changes must result in reduced costs for islanders.

There was also support for:

• a revised pricing structure including a reduced mileage rate.
• including accommodation costs in the RET formula or retaining the existing resident cabin discount, and exploring further relief where overnight accommodation is unavoidable.
• capping fares at mid-season levels or at low season levels - the latter effectively removing seasonal pricing for islanders.

Illustrating potential worries that fares might go up if RET pricing is introduced, a small number of respondents (all Shetland residents) expressed concern that a fare from Aberdeen to Lerwick might be increased by the added distance required to call at Kirkwall in comparison with a direct route. They saw this prospect as unfair.

Other points on potential application of a revised RET formula included that:

• development of any new formula should involve local businesses and proposals should be subject to public consultation.
• islander discounts should be protected so that residents’ fares remain affordable and clearly distinct from visitors’ fares.
• hybrid models (such as applying RET to passenger fares while capping or adapting vehicle and cabin charges) should be considered.
• the model should ensure financial stability for the operator as well as affordability for passengers and any new model should be fully costed to provide for long-term investment in fleet renewal and workforce development.

Dynamic pricing

Responses to Question 6 by respondent type are set out in Table 11 below.

Table 11: Responses to Question 6 by respondent type

Type	Respondent group	Yes	No	Total
Individuals	NIFS network resident - Orkney	158	53	211
Individuals	% of NIFS network resident -- Orkney	75%	25%	100%
Individuals	NIFS network resident - Shetland	441	160	601
Individuals	% of NIFS network resident - Shetland	73%	27%	100%
Individuals	All other individual respondents	44	47	91
Individuals	% of all other individual respondents	48%	52%	100%
Individuals	Total individuals answering	643	260	903
Individuals	% of individuals answering	71%	29%	100%
Organisations	Farming or land management organisation	0	1	1
Organisations	Freight company or representative body	0	1	1
Organisations	Local authority or transport partnership	0	2	2
Organisations	Other business or representative body	1	1	2
Organisations	Port/harbour authority	1	0	1
Organisations	Public body	0	1	1
Organisations	Trade union	0	1	1
Organisations	Voluntary sector organisation	1	1	2
Organisations	Total organisations answering	3	8	11
Organisations	% of organisations answering	27%	73%	100%
Total	Total respondents answering	646	268	914
Total	% of all respondents answering	71%	29%	100%

A majority of respondents – 71% of those who answered the question – said they would like to see more dynamic pricing for visitors, while 29% would not. While similar proportions of Orkney and Shetland residents supported dynamic pricing (75% and 73% respectively) among other individual respondents (predominantly residents on the Scottish mainland and visitors/tourists) 52% disagreed. Organisational respondents who expressed a view were also likely to disagree with dynamic pricing.

Around 710 respondents explained their answer.

Reasons dynamic pricing for visitors is supported

The most frequent view at Question 6 was that tourists should pay more than local residents for ferry travel or, alternatively, that costs for islanders should be reduced. The need to manage demand (particularly at peak season) in view of limited capacity and a perception that the current service is designed / operated for the benefit of tourists rather than islanders were also cited, although some respondents who supported dynamic pricing added that they would not want to see higher prices discourage tourism.

Reasons dynamic pricing for visitors is not supported

The most frequent reason for not supporting dynamic pricing for visitors was a disagreement with the principle of dynamic pricing. There was also a view that what is required is more capacity not reduced demand, and concerns with respect to potentially negative impacts on the tourism sector and, by extension, on island economies. A specific concern was that, if already expensive fares for tourists are increased further, these visitors may decide not to travel. Highlighting the importance of tourism in the Northern Isles, a ‘Public body’ respondent reported that 2024 visitor spending was estimated at £78m for Orkney and £53.4m for Shetland while a ‘Voluntary sector organisation’ respondent noted that the Shetland Tourism Strategy Refresh 2024-26 identifies ‘cost of travel’ as one of the main threats to tourism in Shetland. They saw dynamic pricing as likely to make this situation worse. As an example of the problems that might be caused, a ‘Local authority or transport partnership’ respondent noted that, as tour operators need to set prices a year or more in advance, unpredictable fare levels could undermine their ability to market Shetland effectively. They argued that any form of dynamic pricing that is introduced should be transparent, predictable and capped, with safeguards for residents and price certainty for tour operators.

An alternative perspective was that many tourists already book well in advance and dynamic pricing for visitors could provide an even greater incentive to do so.

Other reasons that dynamic pricing was not supported included:

• a risk of creating additional complexity around fares.
• a preference for a standard rate with an islander discount applied.
• unfairness, if being in a financial position to book early allows access to lower fares.
• potential costs for island residents if services procured from the mainland are subject to increased fares.
• the recent removal of peak rail fares across Scotland, with an associated argument that, for fairness, the same policy should also be adopted across the ferry sector.

Concerns relating to friends and family discounts

Both respondents who supported dynamic pricing and those who did not, raised issues around potential impacts on friends and family who, it was feared might be penalised by dynamic pricing. It was noted that family visitors who may be more likely to want to travel at popular times are already not eligible for discounted fares during school holidays.