Research and Analysis of Options for Ferry Freight Fares
4 International Benchmarking
4.1 Overview
4.1.1 One of the initial tasks on the non-CV research was to undertake an international benchmarking exercise reviewing how fares for non-CV freight are set elsewhere. Whilst this research was initially focussed on non-CV freight, there were a number of crossovers with standard CV freight. This chapter sets out the findings of this benchmarking exercise - the full paper is provided as an addendum to this report and is available on the Transport Scotland website.
4.1.2 The purpose of this exercise was to understand the rationale for fares setting and the mechanics of the fares system in different national and institutional contexts. We do not compare the level of fares per se, rather the rationale underpinning how the fares are set.
4.1.3 We divided the benchmarking exercise into three distinct sections:
- European Union Member States which operate publicly supported ferry services (the classification into which Scotland falls);
- non-EU states which operate publicly supported ferry services; and
- commercial operators.
4.2 Research-Wide Findings
Types of Goods and Trends in Carriage
4.2.1 Two of the most critical factors in operating a successful ferry service are reliability (in terms of maintaining the published timetable) and the minimisation of operational downtime (ie time not spent at sea). An important determinant of both of these factors is the turnaround time of the vessel in port, which is a function of the time required to unload and load passengers, vehicles and freight from the ferry.
4.2.2 In addressing this need, our research on best practice suggests that the majority of non-CV freight, particularly on high volume routes, consists of drop trailers, mafi trailers and project specific freight (e.g. wind turbine towers); effectively wheeled freight that is quicker and easier than loose freight to marshal on and off of the ferry. These non-CV freight types are both very closely linked to conventional driver accompanied CVs. The goods being conveyed are typically no different and are often shipped in similar quantities to CV freight, but the solution is used to maximise the efficiency of road logistics by avoiding the expense and dead time associated with a driver and tractor unit sitting idle for extended periods on longer routes.
4.2.3 The exceptions to wheeled non-CV freight are on the lifeline routes serving very small island communities in countries like Ireland and the Netherlands. Some of these routes do not carry vehicles or, where they do, it is uneconomical for a haulier to serve the island. In such cases, the ferry itself almost becomes the haulier offering the groupage service, providing tariffs for a huge range of individual products and commodities.
4.2.4 The trend in ferry operations suggests that ever increasing competition within the ferry industry, as well as competition with other shipping services and other modes of transport will make "asset sweating" ever more important (the key to this being quick turnaround times). This would suggest that the trend towards standardising freight carriage onto wheeled vehicles will accelerate except on the smallest of routes or where vessel turnaround time is not a high priority.
Determinants of Fare Structure
4.2.5 The determinants of the fare structure for all types of freight are in almost all cases defined by one or more of the limitations of the vessel. Public sector and tendered operators will typically use a single metric as the basis of the fare, whilst larger and more complex commercial operators will use sophisticated matrices combining each of these factors. The determining factors of the fare structure commonly include:
- available lane meterage (length and width);
- weight;
- height; and
- volume.
4.2.6 The most common determinant of the fare, both for CV and non-CV freight is lane metres, as this is effectively the capacity constraining factor on the car deck. This typically takes the form of an increment per lane metre or half lane metre for freight over a defined length threshold. On some routes, the lane metre charge is applied on the basis of bandings.
4.2.7 A common practice across all types of operator is the application of a surcharge where a piece of freight is wider than one lane on the car deck (typically defined by a standard width rather than the actual width of any given lane on any given ferry). The level of this surcharge varies, with some operators only applying a small additional fare and others applying a surcharge of up to 100%.
4.2.8 Some smaller ferry operators use weight as a determinant of the fare, particularly for non-vehicular freight. This is common on routes where the vessels are small and may have a deadweight constraint placed upon on them. Height or total vehicle dimensions are also used as the basis for fare charging on some routes with smaller vessels, such as in the Åland Islands.
4.2.9 Large commercial operators with sophisticated booking systems are often capable of tailoring each of the above factors to develop bespoke fares, particularly for out of gauge loads.
What is included in the Fare?
4.2.10 The fares charged by the majority of ferry operators are for quay-to-quay transport only. This will include the marshalling of the freight onto the ferry, transit and unloading. The majority of operators tend to include berthing and pier dues within the fare. A small number of operators will charge a handling fee for unaccompanied freight (such as drop trailers), whilst some operators will offer optional add-ons such as time charged quayside storage space.
4.2.11 A small number of operators will offer integrated freight services, which include collecting goods from a landside address; transport to the port; loading onto the ferry; transit on the ferry; unloading from the ferry; and delivery to the final destination.
4.2.12 The majority of commercial operators will charge a fuel surcharge or bunker adjustment factor to insulate them against future fuel price increase. Fuel prices are generally the second largest operational cost for a ferry operator and even small increases in oil prices can have a significant impact on profitability and operational viability. A fuel surcharge allows the operator to insure themselves against unexpected increases in fuel costs.
Demand Management
4.2.13 A number of publicly supported ferry operators in Europe and beyond make use of peak and shoulder-peak pricing to encourage commercial traffic (CV or otherwise) to travel on less busy or dedicated freight services. This is a practice which could be considered in Scotland where capacity constraints currently exist or where they may emerge as RET for passengers and cars is rolled out.
Differences between Commercial and Tendered Services
4.2.14 The majority of tendered operators apply a consistent and advertised tariff to all customers using their services. The fares are often directly specified or subject to a fare cap defined in the PSC. This practice is common when the contracting authority chooses to influence fares with a view to promoting social objectives, such as maintaining island communities. Any discounts offered on tendered services are typically universal, such as off-peak rates, free returns for empty specialist trailers, island based discounts or multi-journey ticket books.
4.2.15 This approach is directly at odds with that adopted by commercial operators. The non-CV freight market is highly competitive and relatively low margin, meaning operators must use innovative pricing approaches to maximise capacity and profits. It is common for a small number of customers to account for a large volume of the freight carried by a particular operator. This volume provides a base demand for running a service and securing more high value carryings. With this in mind, operators develop bespoke rate cards for customers, with large buyers benefitting from significant volume related discounts.
4.3 European Union Member States Operating Publicly Supported Ferry Services
4.3.1 The table below summarises the charging mechanisms for non-CV freight in European Union Member States which operate publicly supported ferry services.
| Operator | Country | Types of Non CV-Freight Carried | Determinants of Fare | Composition of Fare |
|---|---|---|---|---|
| Bornholmer Færgen | Denmark | Drop trailers, agricultural vehicles, specialist plant & equipment and loose cargo | Contractual requirements stipulated in tender - maximum fares for each user class. |
Standard tariff with price per incremental lane metre. Loose cargo charged on basis of weight bandings up to 25kg |
| Scandlines | Denmark | Agricultural vehicles & specialist plant and equipment. | Commercial |
Standard tariff with price per incremental lane metre. Surcharges for wide loads and heavy loads. |
| AS Saaremaa Laevakompanii | Estonia | Trailers | Contractual requirements stipulated in tender. |
Fare based on weight. 50% supplement on peak services. Surcharges for wide and high loads. |
| SNCM | France | Not known | Commercial on 'Open Routes', defined by PSC on 'Closed Routes' | Unknown but likely to be based on a number of factors (lane metres, width, weight, choice of sailing etc) |
| Reederei AG EMS | Germany (Lower Saxony) | Various non-CV vehicles and loose packages. | Commercial |
Highly disaggregated freight tariff based on lane metres. Weight based charge for loose freight - levied on a declining per kilogram basis. Surcharge for wide loads. |
| Reederei Norden Frisia | Germany (Lower Saxony) | Trailers | Commercial |
Fare based on weight. Headage charges for the movement of livestock. |
| GmbH | Germany (Lower Saxony) | Various non-CV vehicles and loose packages. | Commercial | Highly disaggregated freight tariff combining lane metres, weight, headage and piece rates. |
| Schifffahrt und Inselbahn AG Wangerooge | Germany (Lower Saxony) | Various non-CV vehicles and loose packages. | Commercial |
Highly disaggregated freight tariff combining lane metres, weight, headage and piece rates. Rate includes onward rail travel on the island. |
| Neue Pellwormer D'schaft | Germany (Schleswig Holstein) | Unknown | Commercial | Fares appear to be based on lane metres but this has not been verified. |
| ANEK | Greece | All freight is CV based. | Defined in PSC / Commercial |
Fares are based on lane metres with peak pricing to manage demand. Surcharges applied for cargo deemed as "irregular". |
| Blue Star Ferries | Greece | All freight is CV based. | Defined in PSC / Commercial |
Fares are based on lane metres with peak pricing to manage demand. Surcharges applied for cargo deemed as "irregular". Port surcharges also levied. |
| Superfast Ferries | Greece | All freight is CV based. | Defined in PSC / Commercial |
Fares are based on lane metres with peak pricing to manage demand. Surcharges applied for cargo deemed as "irregular". |
| Hellenic Seaways, Minoan Lines and NEL Lines | Greece | All freight is CV based. | Defined in PSC / Commercial | Unknown but likely to be based on a number of factors (lane metres, width, weight, choice of sailing etc) |
| Wagenborg | Netherlands | Agricultural vehicles & trailers | Commercial |
Fares principally based on incremental lane metres. Summer / winter pricing differential. |
| Doeksen | Netherlands | Agricultural vehicles & trailers | Commercial | Fares based on incremental lane metres and piece rates. |
| TESO | Netherlands | Agricultural vehicles & trailers | Commercial |
Fares based on incremental lane metres. Surcharge for wide loads. |
| Transmaçor | Portugal (Azores) | Trailers | Licenced by local government | Fares principally based on weight although trailers charged on under/over 2.5m lane metre bandings. |
| Atlânticoline | Portugal (Azores) | Trailers | Licenced by local government | Fares principally based on weight although trailers charged on under/over 2.5m lane metre bandings. |
| Naomh Ciaran II Oilean Cleire Ltd | Ireland (Cape Clear) | Passenger only - carries only loose freight | Defined in PSC | Fares loosely correlated to weight. Piece rates prominent. |
| O'Malley Ferry Services | Ireland (Clare Island) | Tractors, trailers and loose freight | Defined in PSC | Highly disaggregated freight tariff combining lane metres, weight, headage and piece rates. |
| Destination Gotland | Sweden (Gotland) | Drop trailers, agricultural vehicles, mafi trailers, specialist plant & project cargo | Defined in PSC |
Fares are based in incremental lane metres, with a surcharge for wide loads. A surcharge is also applied for the handling of drop trailers. |
Non-EU Member States Operating Publicly Supported Ferry Services
4.3.2 The table below summarises the charging mechanisms for non-CV freight in non-EU Member States which operate publicly supported ferry services.
| Operator | Country | Types of Non CV-Freight Carried | Determinants of Fare | Composition of Fare |
|---|---|---|---|---|
| Bornholmer Færgen | Denmark | Drop trailers, agricultural vehicles, specialist plant & equipment and loose cargo | Contractual requirements stipulated in tender - maximum fares for each user class. |
Standard tariff with price per incremental lane metre. Loose cargo charged on basis of weight bandings up to 25kg |
| Ålandstrafiken | Finland (Aland Islands) | Trailers and tractors | Set by local government | Fare based on height. Season tickets available. |
| Corsica Ferries | France (Corsica) | Not known | Commercial - economy pricing model. | Standard tariff with price per incremental lane metre. |
| SNCM | France | Not known | Commercial on 'Open Routes', defined by PSC on 'Closed Routes' | Unknown but likely to be based on a number of factors (lane metres, width, weight, choice of sailing etc) |
| Reederei AG EMS | Germany (Lower Saxony) | Various non-CV vehicles and loose packages. | Commercial |
Highly disaggregated freight tariff based on lane metres. Weight based charge for loose freight - levied on a declining per kilogram basis. Surcharge for wide loads. |
| Reederei Norden Frisia | Germany (Lower Saxony) | Trailers | Commercial |
Fare based on weight. Headage charges for the movement of livestock. |
| GmbH | Germany (Lower Saxony) | Various non-CV vehicles and loose packages. | Commercial | Highly disaggregated freight tariff combining lane metres, weight, headage and piece rates. |
| Wyker D'schaft GmbH | Germany (Schleswig Holstein) | Loose packages and small freight | Commercial | Fare based on weight. |
| Neue Pellwormer D'schaft | Germany (Schleswig Holstein) | Unknown | Commercial | Fares appear to be based on lane metres but this has not been verified. |
| ANEK | Greece | All freight is CV based. | Defined in PSC / Commercial |
Fares are based on lane metres with peak pricing to manage demand. Surcharges applied for cargo deemed as "irregular". |
| Blue Star Ferries | Greece | All freight is CV based. | Defined in PSC / Commercial |
Fares are based on lane metres with peak pricing to manage demand. Surcharges applied for cargo deemed as "irregular". Port surcharges also levied. |
| Superfast Ferries | Greece | All freight is CV based. | Defined in PSC / Commercial |
Fares are based on lane metres with peak pricing to manage demand. Surcharges applied for cargo deemed as "irregular". |
| Gozo Channel Lines | Malta | Trailers | Defined in PSC | Fares based on lane metre bandings. Surcharge for wide loads. |
| Wagenborg | Netherlands | Agricultural vehicles & trailers | Commercial |
Fares principally based on incremental lane metres. Summer / winter pricing differential. |
| Doeksen | Netherlands | Agricultural vehicles & trailers | Commercial | Fares based on incremental lane metres and piece rates. |
| TESO | Netherlands | Agricultural vehicles & trailers | Commercial |
Fares based on incremental lane metres. Surcharge for wide loads. |
| Transmaçor | Portugal (Azores) | Trailers | Licenced by local government | Fares principally based on weight although trailers charged on under/over 2.5m lane metre bandings. |
| Atlânticoline | Portugal (Azores) | Trailers | Licenced by local government | Fares principally based on weight although trailers charged on under/over 2.5m lane metre bandings. |
| Naomh Ciaran II Oilean Cleire Ltd | Ireland (Cape Clear) | Passenger only - carries only loose freight | Defined in PSC | Fares loosely correlated to weight. Piece rates prominent. |
| Clare Island Ferries | Ireland (Clare Island) | Tractors, trailers and loose freight | Defined in PSC | Highly disaggregated freight tariff combining lane metres, weight, headage and piece rates. |
| Trans-Mediterranea | Spain (Balearic, Canaries and North Africa) | Unknown | Defined in PSC / Commercial | Unknown but likely to be based on a number of factors (lane metres, width, weight, choice of sailing etc) |
| Destination Gotland | Sweden (Gotland) | Drop trailers, agricultural vehicles, mafi trailers, specialist plant & project cargo | Defined in PSC |
Fares are based in incremental lane metres, with a surcharge for wide loads. A surcharge is also applied for the handling of drop trailers. |
Non-EU Member States Operating Publicly Supported Ferry Services
4.3.3 The table below summarises the charging mechanisms for non-CV freight in non-EU Member States which operate publicly supported ferry services.
| Operator | Country | Types of Non CV-Freight Carried | Determinants of Fare | Composition of Fare |
|---|---|---|---|---|
| Red Funnel Ferries | England | Drop trailers and loose freight (via CV groupage services) | Commercial | Unknown but likely to be based on a number of factors (lane metres, width, weight, choice of sailing etc) |
| Wallenius Wilhelmson Logistics | Worldwide | Wide range of cargo from industrial supplies to rail rolling stock. All goods consolidated onto CVs. | Commercial |
Based on a number of factors (lane metres, width, weight, choice of sailing etc) targeted at achieving revenue maximisation. Bespoke prices for regular customers. Fuel surcharges levied on all goods. |
| Black Ball Ferry Line | USA | All freight carried on CVs. | Commercial | Fares are based on the incremental lane feet. |