strategic analysis of caledonian macbrayne
TRANSCRIPT
Assignment
Strategic Analysis of Caledonian MacBrayne
Course: Strategic Management
Code: MGT-4802
Prepared For:
Major General Alauddin M A Wadud (Retd.)
Professor, FBS, BUP
Prepared by:
Maisha Rahman (1203002)
Jabid Raiyan (1203020)
Mubarrat Shadman Chowdhuty (1203030)
Abdullah Muhammad Dhrubo (1203032)
Rahiq Ahmed (1203052)
BBA Batch – 03
Bangladesh University of Professionals
Mirpur, Dhaka
August 23, 2015
Introduction
Caledonian MacBrayne (Scottish Gaelic: Caledonian Mac a' Bhriuthainn), usually shortened to Calmac, is the major operator of passenger and vehicle ferries, and ferry services, between the mainland of Scotland and 22 of the major islands on Scotland's west coast. Since 2006 the company's official name has been CalMac Ferries Ltd although it still operates as Caledonian MacBrayne. In 2006 it also became a subsidiary of holding company David MacBrayne Ltd, which is owned by the Scottish Government. CalMac Ferries Ltd (CFL) is a wholly-owned subsidiary of David MacBrayne Ltd, which is wholly owned by Scottish Ministers.
Previously operating as Caledonian MacBrayne Ltd, CalMac was created in October 2006 to bid for the Scottish Government contract to operate Clyde & Hebrides Ferry Services, which it subsequently won.
At the same time Caledonian MacBrayne Ltd changed its name to Caledonian Maritime Assets Ltd (CMAL) and retained ownership of the vessels and piers which it leases to the operator of the Clyde & Hebrides Ferry services (currently CFL). CMAL is also wholly owned by Scottish Ministers but is entirely separate from CFL. Although they have the same shareholder, each has its own Board and their relationship is solely contractual.
CalMac Ferries Limited has one wholly owned subsidiary; Caledonian MacBrayne Crewing (Guernsey) Limited, which employs and supplies all sea going staff (approx 770) to CFL. There are currently 27 routes within the network. In the 12 months to December 2014, nearly 4.7 million passengers, 1.1 million cars, 93,000 commercial vehicles on 130,000 annual sailings.
Company History
Caledonian MacBrayne has a long history stretching back more than 160 years. Its name is synonymous with the west coast of Scotland, providing vital lifeline ferry services and carrying millions of people each year to and from the islands and remote peninsular communities. It has been, and remains a major local employer, both on shore and at sea. This short history summarises the key milestones from its inception in the 1850s to the modern, award-winning operator it is today: Caledonian MacBrayne started life in 1851 as a steamer company under the name of David Hutcheson & Co. The main sphere of operation was from Glasgow through the Crinan Canal to Oban and Fort William and then on through the Caledonian Canal to Inverness.In the late 1870's the Hutcheson brothers retired leaving the firm in the hands of David MacBrayne to which the firm was renamed. Throughout the late 1870's and 80's the MacBrayne empire continued to expand with a mail run to Islay, Harris and North Uist from Skye and an Outer Isles run from Oban to Barra and South Uist. In fairly quick succession new railways began to reach the West Coast - at Fort William, Kyle of Lochalsh and Mallaig and the fleet rosters were altered to meet the new situation. There followed a period of new ship building, largely for the mail routes to the islands and remote mainland communities.
Following the Great War of 1914 - 1918 David MacBrayne was operating a much-reduced fleet and this eventually resulted in the company's withdrawal from the tender for the mail contract. Thanks to a rescue operation jointly with LMS Railway and Coast Lines Ltd a new company was formed - David MacBrayne (1928). 1948 saw the nationalisation of the LMS shares in the company and the acquisition of the ships.
Five years later the state-owned Scottish Transport Group (STG) was formed to operate not only MacBrayne's services but also those of the Caledonian Steam Packet Company (CSP) on the Clyde together with the dominant Scottish Bus Company. Soon after, the shipping companies were amalgamated and renamed Caledonian MacBrayne Ltd; lorry services were operated by MacBrayne Haulage while David MacBrayne was retained for certain minor services. The CalMac vessels soon sported the red CSP lion in the yellow disc in the centre of the red funnel. From the sixties to the mid-eighties many improvements and refinements took place in order to complete the modern roll on-roll off ferry revolution and ensure that all vessels were operated to the maximum levels of safety.
In 1990 Caledonian MacBrayne threw off the umbrella of STG and became wholly owned by the Secretary of State for Scotland (now the Scottish Government.)In 2006 the then Scottish Executive, decided that under EU rules ferry services were required to be put out to tender, but this presented an issue as the vessels required to operate the services, and many of the ports to which services ran, were owned by Caledonian MacBrayne Ltd, giving it an unfair advantage over potential competitors. The solution was to rename Caledonian MacBrayne Ltd as Caledonian Maritime Assets Ltd (CMAL) in order to retain the vessels and ports in state ownership, and a separate ferry operations company, CalMac Ferries Ltd, was created. It is a wholly-owned subsidiary of David MacBrayne Ltd, which is wholly owned by Scottish Ministers. (CMAL also retained ownership of the Caledonian MacBrayne brand, which CalMac uses as a trading name under licence from CMAL. The lion rampant device is also used by CFL with the permission of CMAL.) CMAL is also wholly owned by Scottish Ministers and is based in Port Glasgow, Inverclyde. CFL and CMAL are two entirely separate entities. CFL provides certain services to CMAL under contractual arrangements.
In 2007 the contract to provide services under the Clyde and Hebrides Ferry Service (CHFS) was awarded to CalMac Ferries Ltd for a period of six years. CMAL leases the vessels and piers to the operator of the Clyde Hebrides Ferry services (currently CFL) and is also responsible for the procurement of new ships and the maintenance and development of port facilities in its ownership. (Some ports are owned by local authorities or private harbour trusts/ authorities.)In 2013, Transport Scotland, which is part of Scottish Government, announced it was to extend the period of the CHFS contract by a further three years, and go out to tender for a new contract to commence in October 2016. This process is now underway.
Strengths, Weaknesses, Opportunities and Threats (SWOT) Analysis
STRENGTHS WEAKNESSES
Relatively sheltered route offering access to western coast of Scotland and beyond
Established shipping route with buoyage Lower impact on climate compared to moving
passengers and cargo by land vehicles Some existing infrastructure that could be
utilised and developed further to support increases in shipping.
Number and size of vessels currently unable to support increased in ferry routes or frequency
Existing shore facilities and infrastructure may not be suitable or available for loading and discharging vessels
Poor transport links, i.e. road and rail Low residential population size may be
unable to justify cost of increased passenger services
Volume of goods requiring shipment may not be great enough to justify increased investment
No designated shipping lane in SOM to safeguard best route, environment and other users
OPPORTUNITIES THREATS
Potential for increased transportation of goods on and off Mull and Morvern e.g. forestry, aggregates, nationally and internationally by sea to reduce economic and environmental costs.
Increased frequency of ferry sailings at peak or popular times.
Fast ferry services between Mull, Morvern, Ardnamurchan, Coll/Tiree and Oban.
Possibility of trade between sectors at sea e.g. supply of fish/seafood and other products to shipping in transit
Potential for lack of support for increases in shipping activity due to public perception of risks and impacts
Potential for increases in shipping to result in an unacceptable increase in the risk of pollution, grounding, collision and interaction with other marine sectors and the natural environment.
Road equivalent tariff scheme on ferries may result in more visitors to locations in the scheme and less to those outside i.e. Mull, Morvern
Finance for business/infrastructure development and marketing
Fuel prices
SUPPLIER POWER
CalMac’s suppliers include those who sell them ferry and its spare parts. There are few sellers with intense
competition. Besides CalMac is a giant buyer. Therefore, suppler power is low.
BARRIERSTO ENTRY Government policy: Getting license for this business is difficult. So barrier is high. Capital requirements: There is high capital requirement to get into the market. Therefore, barrier is high. Brand identity: CalMac has high brand equity. Therefore, it will be difficult for other players to enter the market.
THREAT OFSUBSTITUTES -Substitute: Airway-Switching costs: Buyers have no switching cost.-Buyer inclination to substitute is low because of price.
BUYER POWER Buyer volume: Volume is low. Thus
buyer power is low. Buyer information: Buyers have
information. This gives them some power.
Price sensitivity: Buyers are not highly price sensitive. Thus, they have less
power.Threat of backward integration: There is no threat of backward integration.
Substitutes available: Air way is available but too costly.
DEGREE OF RIVALRY
-Exit barriers: High-Fixed costs/Value added: High -Industry growth: High -Switching costs: Low -Brand identity: High -Diversity of rivals: Low
1.1 Porter’s 5 Force Analysis of CalMac
2.1 Bargaining Power of Suppliers
The term 'suppliers' comprises all sources for inputs that are needed in order to provide goods or services.
Supplier bargaining power is likely to be high when:
The market is dominated by a few large suppliers rather than a fragmented source of supply,
There are no substitutes for the particular input, The suppliers customers are fragmented, so their bargaining power is low, The switching costs from one supplier to another are high, There is the possibility of the supplier integrating forwards in order to obtain
higher prices and margins. This threat is especially high when The buying industry has a higher profitability than the supplying industry, Forward integration provides economies of scale for the supplier, The buying industry hinders the supplying industry in their development
(e.g. reluctance to accept new releases of products), The buying industry has low barriers to entry.
In such situations, the buying industry often faces a high pressure on margins from their suppliers. The relationship to powerful suppliers can potentially reduce strategic options for the organization.
2.2 Bargaining Power of Customers
Similarly, the bargaining power of customers determines how much customers can impose pressure on margins and volumes.
Customers bargaining power is likely to be high when
They buy large volumes, there is a concentration of buyers, The supplying industry comprises a large number of small operators
The supplying industry operates with high fixed costs, The product is undifferentiated and can be replaces by substitutes, Switching to an alternative product is relatively simple and is not related to
high costs, Customers have low margins and are price-sensitive, Customers could produce the product themselves, The product is not of strategical importance for the customer, The customer knows about the production costs of the product There is the possibility for the customer integrating backwards.
2.3 Threat of New Entrants
The competition in an industry will be the higher, the easier it is for other companies to enter this industry. In such a situation, new entrants could change major determinants of the market environment (e.g. market shares, prices, customer loyalty) at any time. There is always a latent pressure for reaction and adjustment for existing players in this industry.
The threat of new entries will depend on the extent to which there are barriers to entry. These are typically
Economies of scale (minimum size requirements for profitable operations), High initial investments and fixed costs, Cost advantages of existing players due to experience curve effects of
operation with fully depreciated assets, Brand loyalty of customers Protected intellectual property like patents, licenses etc, Scarcity of important resources, e.g. qualified expert staff Access to raw materials is controlled by existing players, Distribution channels are controlled by existing players, Existing players have close customer relations, e.g. from long-term service
contracts, High switching costs for customers Legislation and government action
2.4 Threat of Substitutes
A threat from substitutes exists if there are alternative products with lower prices of better performance parameters for the same purpose. They could potentially attract a significant proportion of market volume and hence reduce the potential sales volume for existing players. This category also relates to complementary products.
Similarly to the threat of new entrants, the treat of substitutes is determined by factors like
Brand loyalty of customers, Close customer relationships, Switching costs for customers, The relative price for performance of substitutes, Current trends.
2.5 Competitive Rivalry between Existing Players
This force describes the intensity of competition between existing players (companies) in an industry. High competitive pressure results in pressure on prices, margins, and hence, on profitability for every single company in the industry.
Competition between existing players is likely to be high when
There are many players of about the same size, Players have similar strategies There is not much differentiation between players and their products, hence,
there is much price competition Low market growth rates (growth of a particular company is possible only at
the expense of a competitor), Barriers for exit are high (e.g. expensive and highly specialized equipment).
3 Use of the Information form Five Forces Analysis
Five Forces Analysis can provide valuable information for three aspects of corporate planning:
Statical Analysis:
The Five Forces Analysis allows determining the attractiveness of an industry. It provides insights on profitability. Thus, it supports decisions about entry to or exit from and industry or a market segment. Moreover, the model can be used to compare the impact of competitive forces on the own organization with their impact on competitors. Competitors may have different options to react to changes in competitive forces from their different resources and competences. This may influence the structure of the whole industry.
Dynamical Analysis:
In combination with a PEST-Analysis, which reveals drivers for change in an industry, Five Forces Analysis can reveal insights about the potential future attractiveness of the industry. Expected political, economical, socio-demographical and technological changes can influence the five competitive forces and thus have impact on industry structures.
Useful tools to determine potential changes of competitive forces are scenarios.
Analysis of Options:
With the knowledge about intensity and power of competitive forces, organizations can develop options to influence them in a way that improves their own competitive position. The result could be a new strategic direction, e.g. a new positioning, differentiation for competitive products of strategic partnerships (see section 4).
Thus, Porters model of Five Competitive Forces allows a systematic and structured analysis of market structure and competitive situation. The model can be applied to particular companies, market segments, industries or regions. Therefore, it is necessary to determine the scope of the market to be analyzed in a first step. Following, all relevant forces for this market are identified and analyzed. Hence, it is not necessary to analyze all elements of all competitive forces with the same depth.
The Five Forces Model is based on microeconomics. It takes into account supply and demand, complementary products and substitutes, the relationship between volume of production and cost of production, and market structures like monopoly, oligopoly or perfect competition.
4 Influencing the Power of Five Forces
After the analysis of current and potential future state of the five competitive forces, managers can search for options to influence these forces in their organization’s interest. Although industry-specific business models will limit options, the own strategy can change the impact of competitive forces on the organization. The objective is to reduce the power of competitive forces.
The following figure provides some examples. They are of general nature. Hence, they have to be adjusted to each organization’s specific situation. The options of an organization are determined not only by the external market environment, but also by its own internal resources, competences and objectives.
4.1 Reducing the Bargaining Power of Suppliers
4.2 Reducing the Bargaining Power of Customers
Partnering Supply chain management
Partnering Supply chain management
Supply chain training Increase dependency Build knowledge of supplier
costs and methods Take over a supplier
Increase loyalty Increase incentives and value
added Move purchase decision away
from price Cut put powerful
intermediaries (go directly to customer)
4.3 Reducing the Treat of New Entrants
4.4 Reducing the Threat of Substitutes
Increase minimum efficient scales of operations
Create a marketing / brand image (loyalty as a barrier)
Patents, protection of intellectual property
Alliances with linked products / services
Tie up with suppliers Tie up with distributors Retaliation tactics
Legal actions Increase switching costs Alliances Customer surveys to learn
about their preferences Enter substitute market and
influence from within Accentuate differences (real or
perceived)
4.5 Reducing the Competitive Rivalry between Existing Players Avoid price competition Differentiate your product Buy out competition Reduce industry over-capacity Focus on different segments Communicate with competitors
Article 1: Done By – Maisha Rahman (B1203002)
The CalMac strike: What's it all about?(https://commonspace.scot/articles/1699/the-calmac-strike-what-s-it-all-about)
RMT union says it has not been given assurances on jobs, pay and pensions for CalMac staff
CALMAC staff have begun three days of industrial action after last minute talks between the RMT Union and CalMac to avert the action broke down on Monday evening.
Staff have begun a 48-hour overtime ban before staging a 24-hour strike on Friday, and RMT's Scotland organiser Godon Martin warned there will be "widespread disruption throughout the CalMac network".
What is the dispute about?
The dispute centers around the fact that Calmac's contract to run ferry services in Scotland is going out to tender - which means other companies can bid to run them - and staff and unions say they have not been given assurances about their jobs, pay and pensions.
Mick Cash, general secretary of the RMT said: "RMT wants cast iron assurances and we want them now. We are prepared to engage in meaningful talks around that agenda as we prepare for the first phase of industrial action."
Nearly half of CalMac's 14,000 staff are in the RMT, which represents ferry crews, and over 90 per cent who returned their ballot backed strike action.
CalMac is hopeful that it will be able to run the majority of services over the next two days but almost all sailings will be cancelled on Friday as there needs to be a certain number of crew working for the ferrys to go to sea.
CalMac managing director Martin Dorchester said: "We have made several serious concessions to the RMT including a commitment on no compulsory redundancies in our bid submission in return for the RMT calling off the industrial action planned for this week. Unfortunately this was rejected.
"We were also willing to work together with both the RMT and TSSA over the coming days to agree a form of words in our collective agreements which would provide greater protection to employees around terms and conditions of employment but without success."
What is the tendering process?
The Scottish Government must ensure the provision of transport for islanders. This means that it must make sure there is an operator to run ferry services. CalMac, which is state-owned, runs most of the services currently.
Tendering - a process which enables other companies, including private operators, to bid to run public services - is necessary under European law. Private company Serco, who won the contract to run Shetland and Orkney ferries in 2012, is in the running for the Clyde and Hebridean ferry routes.
There are fears that Serco winning the tender will result in privatization of the service. Many of the routes are not profitable and the government subsidy awarded was £90m in 2013/14, although £1.9m was then returned to the government.
There are concerns that privatization will result in a poorer, more expensive service.
Transport minister Derek MacKay has repeatedly said this tender will not result in privatization of lifeline services, telling the Scottish Parliament: "All of the vessels and ports currently in public ownership will remaining public ownership and, together with Clyde and Hebrides services, remain under public control by Scottish ministers throughout the contract."
What do islanders think?
Many islanders accept Calmac’s reasons for striking but are angered that it comes at a time that will cause maximum disruption as school holidays are just starting. Alternative timetables are running across the network.
Cash told the communities affected: "The last thing that (the staff) would want is to inconvenience their own friends and neighbors but when you have had your arm twisted up your back, and you know exactly what is looming on the horizon, there comes a point when you either make a stand or you roll over.
"Our members have chosen to make a stand in ballots showing over 90 per cent in favour of action – our trade union is proud of them."
A campaign has seen CalMac staff agree to run a ferry from Oban to Castlebay at 12.45am on Saturday in order to get runners to the island for the annual Barrathon half marathon.
Article 1 Synopsis
In this article it talks about the dispute of not giving the given assurances on jobs, pay and pensions for CalMac staff also the disagreement centres around the fact that Calmac's contract to run ferry services in Scotland is going out to tender - which means other companies can bid to
run them. The Rail Maritime and Transport union (RMT) declared a dispute with Caledonian Mac Brayne, known as CalMac, in May stating that pensions must be protected and staff must be kept on with the same pay and conditions regardless of who wins the contract for the routes when it goes out to tender.
CalMac is hopeful that it will be able to run the majority of services over the next two days but almost all sailings will be cancelled on Friday as there needs to be a certain number of crew working for the ferrys to go to sea. CalMac managing director Martin Dorchester said: "We have made several serious concessions to the RMT including a commitment on no compulsory redundancies in our bid submission in return for the RMT calling off the industrial action planned for this week. Unfortunately this was rejected. Tendering is a process which enables other companies, including private operators, to bid to run public services. Argyll Ferries RMT members have also been out on strike alongside CalMac workers, although the SNP have insisted that the Argyll Ferries contract is not up for tender. The RMT, however, have argued that Argyll Ferries relies upon CalMac engineers and expertise, and that any change to Western Isles route would affect Argyll Ferries. For this many islanders accept Calmac's reasons for striking but are angered that it comes at a time that will cause maximum disruption as school holidays are just starting. CalMac and Argyll Ferries are both part of the state-owned David MacBrayne Group.
Article 2: Done By – Jabid Ryan (B1203020)Keep CalMac and carry on: Brian Wilson tackles 5 myths, half-truths & downright lies over ferry group's futureBY BRIAN WILSON, Daily Records
(http://www.dailyrecord.co.uk/news/scottish-news/keep-calmac-carry-on-brian-5971526)
FORMER Labour MP Brian Wilson has strong links to Scotland’s western islands and has campaigned for improved transport links to the area.
He believes the Scottish Government have painted a misleading picture of the issues at hand.
Wilson says the Record’s campaign to Keep CalMac Public has sent a crucial message – all Scotland has a stake in safeguarding services on which west coast communities depend. He added: “The SNP have taken refuge behind a script which lurches between dodgy half-truths and downright lies. Each must be nailed and ridiculed.”
Even if Serco win, the service will not have been privatized
THIS is a bizarre re-writing of what “privatization” means. From Nicola Sturgeon down, the SNP claim the operators’ “ownership status” does not matter because they would still be working within the terms of a public contract.
By that definition, nothing has been privatized – railways, Royal Mail, NHS contracts – because they’re all governed by terms laid down by Government. That is not how the SNP defined privatization in the past, when Westminster was the villain.
If Serco secure the billion pound contract for eight years, CalMac will be dead. The private sector will be in control – and the history of privatization confirms they will then use that position to rewrite the rules.
The Scottish Government have been forced into this by European law.
IT is far from clear that Brussels has any interest in forcing a competition for lifeline ferry services, though the issue has been waved under its nose by pro-privatisation forces in Edinburgh. The unions believe, as do I, that ministers should have sought a derogation in line with the Altmark ruling which exempted lifeline transport from competitive tendering. At very least, this would have sent a signal of intent to defend CalMac.
SNP ministers did the opposite. In their 2012 Ferries Review, on which the competition is based, they boasted of how many operators would bid for west coast routes and the money to be saved in reduced subsidy through competition. There was no reluctance in any of this.
Labour and the Liberal Democrats did the same thing when running Holyrood.
THIS is, at best, a half-truth with the important half ignored. The Scottish Executive – wrongly in my view – went along with inviting tenders. But they worked with communities and unions to ensure the rules would exclude a private operator.
It worked – and CalMac wer sole bidders. So, contrary to what the SNP suggest, there has never been a competition of the kind we are now witnessing.
As Manuel Cortes, general secretary of Transport and Salaried Staff Association, said: “They frightened off privateers whose aim was to make a quick buck by slashing jobs and conditions. Consequently, CalMac stayed in public hands”. That approach could not be more different from now.
There is a level playing field for CalMac to compete on.
THE untruth of this explains the reasons for industrial action. Serco are in business to make profit out of public subsidy – it is what they do all over the world. They would use the same methods as other privateers, starting with terms, conditions and pensions of the workforce.
On pensions alone, CalMac would be at a £60million disadvantage if they bid on the basis of their current scheme while Serco are allowed to offer only minimum provision. That’s why it’s important the contract insists, no matter who wins, they will inherit prevailing terms and conditions – including pension obligations. The Scottish Government have refused to accept this – a clear litmus test of their preferred outcome.
Even if that is all true, there’s nothing we can do about it now…
BY hiding behind lies and half-truths, SNP ministers have got themselves into this mess. At the outset, they had grounds to disqualify Serco because of their negative balance sheet.
Any government are duty bound to assure themselves the contenders for contracts have the wherewithal to meet commitments. When the CalMac contest began, Serco were about to raise an emergency £555million bail-out from shareholders as well as launching a fire sale of assets. Would you trust your lifeline to such a company?
It should be pointed out to Serco it might be in the interests of their lucrative wider dealings with the Scottish Government if they stopped trying to wipe out CalMac.
But if they keep trying, there must be a level playing field – and a fight to the death in the interests of communities which rely on a company who exist only to serve.
Article 2 Synopsis
Brian Wilson is the former labour MP of Britain who has to have strong links to Scotland’s western islands and has campaigned for improved transport links to the area. He claimed that Scottish Government gave a misleading picture of the issues at hand later added that says the Record’s campaign to Keep CalMac Public has sent a crucial message all Scotland has a stake in safeguarding services on which west coast communities depend. He also said “The SNP have taken refuge behind a script which lurches between dodgy half-truths and downright lies. Each must be nailed and ridiculed.”
If though Secro wins and gets the advantages still CalMac would be still working within the terms of a public contract and the service will not be privatized. One thing that can effect CalMac is that if Serco secure the billion pound contract for eight years, CalMac will be dead. The private sector will be in control and the history of privatization confirms they will then use that position to rewrite the rules. At very least, this would have sent a signal of intent to defend CalMac. Many council leaders from the Clyde area gather to show support for the Daily Keep Calmac and “Carry On” Campaign. Labour and the Liberal Democrats did the same thing when running Holyrood. They worked with communities and unions to ensure the rules would exclude a private operator. It worked and CalMac were sole bidders. So, contrary to what the SNP suggest, there has never been a competition of the kind we are now witnessing. There is a level playing field for CalMac to compete on which explains the reasons for industrial action. Secro mentioned that they were here to only make profit out of public subsidy it is what they do all over the world. They would use the same methods as other privateers, starting with terms, conditions and pensions of the workforce. On pensions alone, CalMac would be at a £60million disadvantage if they bid on the basis of their current scheme while Serco are allowed to offer only minimum provision. That’s why it’s important the contract insists, no matter who wins, they will inherit prevailing terms and conditions including pension obligations. The Scottish Government have refused to accept this a clear litmus test of their preferred outcome. If everything is true then there is nothing that can be done. Just because of hiding behind the lies and half-truths, SNP ministers have got them into this muddle. At the outset, they had grounds to disqualify Serco because of their negative balance sheet. Any government are duty bound to assure themselves the contenders for contracts have the wherewithal to meet commitments. When the CalMac contest began, Serco were about to raise an emergency £555million bail-out from shareholders as well as launching a fire sale of assets. Would you trust your lifeline to such a company? But if they keep trying, there must be a level playing field and a fight to the death in the interests of communities, which rely on a company who exist only to serve.
Article 3: Done By – Rahiq Ahmed (B1203052)
Loss of Northlink tender hits profits at MacBrayneGreig Cameron, Deputy Business Editor, Herald Scotland
(http://www.heraldscotland.com/business/13127342.Loss_of_Northlink_tender_hits_profits_at_MacBrayne/)
PUBLICLY owned ferry operator David MacBrayne has seen its revenue slide from £201.6 million to £155.7m and pre-tax profits halve as a result of losing the Northlink ferry tender. The annual report of the company, which runs Argyll Ferries and Caledonian MacBrayne, said total passenger numbers declined from 5.2 million to 4.8 million with poor weather cited as having an adverse impact.
The financial statement details a £40,000 payment to former chief executive Archie Robertson for loss of office after he stepped down in August last year.
Mr Robertson also received a salary of £136,000, a performance payment of £28,000, pension contributions of £28,000 and benefits with a value of £12,000.
The accounts for the 12 months to March 31 show David MacBrayne posting pre-tax profits of £20.4m, down from £4.1m in the prior year. The document also shows the company brought in £70.8m from fares and other income while it also got more than £86m of grants from the Scottish Government.
That compares to fares of £85.6m and net grants of around £116m in the previous financial year.
The Northlink service, which goes to Orkney and Shetland and is now run by Serco after it secured a six-year contract worth £243m in May last year, brought in only £20.2m of revenue and £325,000 of operating profit compared to almost £70m and £1.3m of operating profit.
The David MacBrayne workforce fell from 1667 to 1374, according to the annual report. Writing in the accounts, Chairman David McGibbon said: "The Gourock and Dunoon service, operated by Argyll Ferries, continues to be challenging, with campaigners seeking the return of a car ferry to the routes. Following a very tough winter, the reliability of the service was hit hard."
A spokesman for the group said trading since the year-end had been mixed, with extremely busy periods at the height of the summer weather along the Clyde contrasting with a relatively static performance on more northerly ferries.
Mr McGibbon confirmed that several new initiatives are being launched in the coming months. He said: "Work is progressing to improve our customers' experience of our services, including the revamp of our ticketing and online booking system and introduction of wi-fi across the fleet. Our rolling programme of boat replacement also continues, with the MV Loch Seaforth on schedule for the Ullapool-Stornoway route next year and our two new innovative diesel hybrids MV Hallaig and MV Lochinvar also due to enter service in the coming months."
Article 3 Synopsis
Caledonian MacBrayne is one of the largest ferrying company in Scotland. But for the recent event of losing tender to another ferrying company “Northlink” the revenue has declined. The revenue reduced sharply from £201.6 million to £155.7m. Even the number of passengers has also reduced and to make it worse the weather is adverse. The company has incurred serious cost as their CEO Robertson stepped down. Their number of workers have also shirked.
Mr McGibbon of MacBrayane has said that several initiatives have been taken to change the situation. A leading company is now having difficulity to maintain it position in the market. These steps will change the scenario that’s his hope.
Some of those initiatives are:
Improving Customer Services. Online ticketing and booking. Digital environment i.e. allowing free wi-fi in the fleet. Including some improved and advanced ships. Replacing some old boats as well.
Article 4: Done By – Abdullah Muhammad Dhrubo (B1203032)
Public sector ferry giant worth £270m a year to Scotland's economy, study finds
Helen McArdle, Transport Correspondent / HeraldScotland
(http://www.heraldscotland.com/news/13211518.Public_sector_ferry_giant_worth___270m_a_year_to_Scotland_s_economy__study_finds/)
FERRY giant CalMac is worth £270 million to the Scottish economy according to a major new study highlighting its value to rural and island communities.
The report by the highly respected Fraser of Allander Institute will be unveiled today at the second annual Scottish Transport Conference in Edinburgh, where Transport Minister Derek Mackay is the keynote speaker.
The report finds the ferry and port operator supports a total turnover of nearly £270 million in companies across Scotland. The figure is calculated as a combination of the jobs and wages supported by CalMac's own spending, and the jobs it enables on Scottish islands by transporting the tourists which enables other businesses to thrive.
It estimates the state-owned ferry operator enables 3,247 jobs and £53.4m worth of wages in Scotland's island tourism industry.
It also confirms that CalMac, one of the largest companies headquartered in Scotland and the UK's largest ferry network operator, employs 1476 people and supports a total of 5883 jobs in mainland and island communities across the country. It also carried 4.6 million passengers in 2014 and was the main channel of support for commercial activity on the islands, transporting 92,734 commercial vehicles between the mainland and the islands in 2014.
Stewart Dunlop, the researcher who compiled the report, said: "The results demonstrate that the company's activity in transporting tourists to the islands has a very considerable effect on the local tourism industry.
"CalMac is clearly the key channel of support for commercial activity on the islands it serves.
"Items exported from the islands include food and drink products, notably high value exports such as whisky and shellfish, both of which contribute significantly to total Scottish exports.
"In terms of imports, CalMac's activity covers the majority of items sold by local retailers, including fuel, food, mail, medical supplies, oil, gas, and utilities, without which it would be difficult to maintain an acceptable quality of life on the islands."
Average wages at CalMac are 12 per cent higher than the average wage in Scotland, according to the report.
The operator is a major employer in Argyll and Bute, the Western Isles, Inverclyde and the Highlands, with a combined workforce of 782 across these four regions and a total annual wages bill of £26m in these areas alone - an average of £33,248.
Salaries across its entire Scottish workforce cost the company £41m, meaning that a typical CalMac employee earns £27,778 a year.
Martin Dorchester, managing director of CalMac Ferries Ltd, said: "The Fraser of Allander's report outlines in detail the extent of the contribution which CalMac's people and operations make to Scotland's economy across all these key areas.
"As we move forward, our ambition is to further enhance our support for the communities we serve and continue our investment in customer service."
Article 4 Synopsis
CalMac is worth £270 million to the Scottish economy. Its total turnover in Scotland is around £270 million. It provides 3,247 jobs and £53.4m worth of wages in Scotland's island tourism
industry. It employs 1476 people and supports a total of 5883 jobs in mainland and island communities across the country. It also carried 4.6 million passengers in 2014 transporting 92,734 commercial vehicles between the mainland and the islands in 2014. CalMac is a crucial channel of support for commercial activity exporting from the islands include food and drink products and importing fuel, food, mail, medical supplies, oil, gas, and utilities. Average wages at CalMac are 12 per cent higher than the average wage in Scotland. It spends a total of £41m in salary in Scotland, meaning that a typical CalMac employee earns £27,778 a year.
Article 5: Done By – Mubarrat Shadman (B1203030)
Calls for end to ferry monopolyBy Kit Fraser
Political correspondent, BBC Scotland
(http://news.bbc.co.uk/2/hi/uk_news/scotland/7596857.stm)
Two of the first submissions to the European Commission inquiry into Scottish ferries have called for the breakup of Caledonian MacBrayne's monopoly on Clyde and Hebridean and Northern Isles routes.
They were compiled by two noted transport experts, one of whom is an SNP councilor.
Both argued CalMac was heavily inefficient, with private operators better able to provide services, but the operator has long warned against the risk of "cherry picking" routes.
CalMac, along with Northlink Ferries, is under EU investigation amid complaints that subsidies they received breached competition law.
Roy Pedersen - a transport consultant, SNP Highland councilor and former deputy chair of the authority's transport committee - pointed to the example of Western Ferries and Pentland Ferries.
"In both of those cases, private operators are providing a high-quality service at modest cost to the public - at no cost to the Exchequer at all," he said.
"In that situation, parallel routes are operated by the state sector, the services are heavily subsidized."
The second submission to the Brussels inquiry came from Alf Baird, of Napier University.
"Subsidy is increasing all the time, but that subsidy is being used to finance high operating costs, it's not coming through in reduced charges to the user," said Prof Baird.
"It means the economies of the islands aren't really benefitting. Who's benefitting here is, to a large extent, the ferry operator, staff and management."
Those points, and the example set by CalMac's only current competitors, have chimed with the Scottish Tories' outlook.
The party's Holyrood transport spokesman, Alex Johnston, said: "In both these cases, we see independent ferry operators who are able to compete against subsidized competition.
"That indicates to me that the private Scottish ferry industry, small as it is at the moment, is able to compete on an economic basis.
"That's why it's important that we give them the opportunity to expand and become better at providing public services."
Mr Pedersen has called for CalMac's monopoly to be broken up, by offering each individual route to private bidders instead of lumping almost all Clyde and Hebrides routes into a single bundle.
Both he and Prof Baird argued the state-owned ferry company was serving both taxpayer and island and remote communities badly.
Long inquiry
Prof Baird has gone further, calling for the privatizing or scrapping of CalMac - but how would the loss-making lifeline routes be safeguarded and fares protected?
"That is overcome quite easily by the imposition of tariff ceilings on certain routes, if prices can be agreed with an operator," suggested the academic.
"The increases in prices can be kept to certain levels below inflation, perhaps, like the Isle of Man does."
He added: "In almost all other parts of the world, ferry services are provided by the private sector. They are reliable and there's little public concern about them continuing."
CalMac has insisted that maintaining the current situation, where the Clyde and Hebridean routes are offered as a package of 24, best served island communities and the taxpayer.
The operator said allowing private operators to pick the most profitable routes would lead to the need for more subsidy, to keep up existing levels of service provision.
It had become widely accepted, CalMac argued, that the targeting of high-value routes would pose a substantial threat to the future of subsidized lifeline services.
The European Commission investigation is expected to last up to 18 months, but these early submissions may set Brussels on a course of demanding radical reform of Caledonian MacBrayne - for so long as much a part of the Highlands and Islands as rain and midgies.
Article 5 Synopsis
The article is about a recent scrutiny faced by CalMac Ferries Ltd. CalMac Ferries Ltd (CFL) was created as a wholly owned subsidiary of David MacBrayne Ltd which in turn is wholly owned by the Scottish government. According to the article European Commission is investigating Scottish ferries industry as they believe Caledonian MacBrayne's is enjoying monopoly on Clyde and Hebridean and Northern Isles ferry routes.
European Union (EU) competition law concerning regulation of competitive markets in the EU, was set to ensure that corporations do not create cartels and monopolies that would damage the economic interests of society. The EU inquiry led by two renowned transport experts are investigating complaints that subsidies that CalMac receives from the government is a breach of EU competition law. Both the experts pointed out that the government owned CalMac was highly inefficient in providing service, whereas the private ferry companies like Western Ferries and Pentland Ferries, though small compared to CalMac; had been providing quality service at a reasonable cost to the public.
The second inquiry report was submitted by Alf Baird, of Napier University. He stated that the subsidy paid from the taxpayer’s money is used to fund the inefficient, high cost operations of CalMac. CalMac’s monopoly wasn’t helping island community rather its helping the ferry operators, its staff and management.
The suggestion by Prof Baird in the report is more severe from CalMac’s point of view. He suggested to dismantle CalMac altogether or privatize it completely because it is failing to perform its role of providing cheap quality service to the public. He argued that in almost all other parts of the world the ferry service is privatized and they are operating quite efficiently. He also assured that the government could still ensure public interest by setting a price ceiling on fares and the competition in private sector will automatically drive the price down. The added benefit is that the redundant wastage of taxpayer’s money in the name of subsidy will all be stopped.
The EU investigation is still months ahead to reach conclusion but it have already made the future of CalMac very uncertain.