Research and Analysis of Options for Ferry Freight Fares

1 Introduction

1.1 Overview

1.1.1 Transport Scotland's Ferries Plan 2013-2022 recognises the need to develop an overarching policy for freight fares. The aim is to:

  • deliver a new fare structure that is simple, transparent and does not advantage one part of the network over any other part; and
  • balance the wellbeing of communities against the public sector cost.

1.1.2 Building on this, Transport Scotland committed to undertake research designed to inform a comprehensive review of freight fares charging mechanisms and develop options for future fares strategies.

1.1.3 The first research objective was to undertake a review of current procedures and charging mechanisms for the setting of fares for freight carried by CVs and trailers, containers and other means across Scottish Government directly subsidised ferry services and Local Authority run ferry services. It also aimed at undertaking an international benchmarking exercise reviewing how fares for non-CV freight are set in Europe and internationally.

1.1.4 The second objective aimed at developing an over-arching set of principles and procedures for the setting of fares across the Scottish Government subsidised ferry services.

1.1.5 The research was initially agreed to be carried out in two pieces. The first piece of research, the review of current practice and charging mechanisms for the setting of fares for freight carried by CVs was undertaken in-house by Transport Scotland. The second piece of research, the review of current practice and charging mechanisms for the fare setting for freight carried by trailers, containers and other means as well as the best practice review and option development for an over-arching fare regime was commissioned to SYSTRA, together with their partners Peter Brett Associates LLP (PBA), ProVersa Limited and The Maritime Group International Ltd (TMG), in May 2014.

1.1.6 It should be noted that the purpose of these two pieces of research is to propose, analyse and consult on options for revised fares structures. The aim of this exercise is to develop an evidence base which will help to inform Transport Scotland in the review of freight fares policy. The research is not intended to recommend a single option to be taken forward by the Scottish Ministers, rather to develop and consult on a range of in-principle options which could form the basis of future freight fares policy. The findings of this research will be used by Transport Scotland to inform the actual review of ferry freight fares.

Combining the Research

1.1.7 The freight market on publicly supported ferry services in Scotland has historically been one of the more complex and less well understood aspects of the service. Transport Scotland initially commissioned two separate research projects on the expectation that there remained a significant volume of non-CV freight moving on Scottish ferries. However, following an initial review of the non-CV market by PBA, it became clear that such traffic is now either CV-derived (eg drop trailers, wide loads etc) or a very marginal part of the overall operating envelope.

1.1.8 Following this initial study, Transport Scotland judged it more effective to combine the two separate research pieces into a single entity. The single research study was taken forward by the consultants.

1.2 Scope of this Study

1.2.1 This study was commissioned by Transport Scotland and will therefore be used by the agency to inform the review of future fares policies on their two tendered networks - ie the Clyde & Hebridean Ferry Services (CHFS) and the Northern Isles. The option generation and testing is heavily based on future options for these two networks.

1.2.2 However, the research specification for this study specified that it should also consider current practice on the local authority run services as the outcomes of the research may be taken forward or amended by the local authorities.

1.2.3 We have identified six publicly supported ferry networks in Scotland. These are:

  • Argyll & Bute Council;
  • Clyde & Hebridean Ferry Services (CHFS), operated by CalMac Ferries Ltd;
  • Highlands Council;
  • Orkney Islands Council;
  • Serco NorthLink Ferries; and
  • Shetland Islands Council.

1.2.4 The research does not consider services in the Comhairle nan Eilean Siar area (as its services are operated by CalMac) or SPT (as these are passenger only services). In addition, the research also does not include the Transport Scotland tendered Gourock - Dunoon route, as this is a passenger only service. It should also be noted that no commercial ferry services were covered in this study.

1.3 State Aid

1.3.1 A key issue underpinning this research is that of State Aid. State Aid is defined as an advantage in any form whatsoever conferred on a selective basis to undertakings by national public authorities. The ferry freight fares system in Scotland should comply with State Aid regulations.

1.3.2 When taking forward fares options, it is imperative that Transport Scotland consult with the State Aid Unit on the legality of different fares systems and discount regimes. Further comment on State Aid issues is provided throughout this report.

1.4 Note on Terminology

1.4.1 A wide range of terminology specific to the freight & logistics and ferry industry is used throughout this report. To assist in the interpretation of key findings, a glossary has been provided in Appendix A.

1.4.2 It is worth explaining one specific piece of recurring terminology used in this report. When discussing ferry based freight, we refer to two types of vessel:

  • Roll-On, Roll-Off (Ro-Ro) - ferries where vehicular traffic can drive onto and off of the vessel; and
  • non Ro-Ro - ferries where goods have to be lifted, craned or manually handled onto the vessel.

1.5 Structure of this Report

1.5.1 The initial chapters of this report reflect the original differentiation in this research project between CV and non-CV freight. Chapter 2 reviews the current charging practice for CV freight across the study area, whilst Chapter 3 does the same for non-CV freight.

1.5.2 Chapter 4 provides the results of the international benchmarking exercise. Whilst originally undertaken for the non-CV aspects of the study, much of the content is also relevant to the large CV market.

1.5.3 Chapter 5 sets out the option development process. Chapter 6 reviews the consultation feedback on the in-principle options developed and Chapter 7 sets out the response to the consultation questions on surcharges, discounts and policy questions. Chapter 8 provides conclusions and recommendations on how to take the findings of this research study forward.