Increasing interest for ferry lines
On December 1st, 2002 LATLINES company, which until then provided for ferry line traffic between Riga and Luebeck, was legally affiliated to DFDS Tor Line. The merging process went on step by step and from the beginning of year 2004 we operate as a DFDS Tor Line company, just like other agent and daughter companies of one of the leading European ferry operators, – Zigmunds Jankovskis, managing director of the Latvian representative office, comments on the new stage of DFDS AS company development.
Speaking about the new company name – our services were well recognized under Latlines brand. There are not so many companies familiar with the DFDS Tor Line name, therefore we often have to clarify and explain. To evaluate affiliation on the whole, we can say for sure that the new owners brought along more financial opportunities to develop ferry business and reflected positively for our clients.
Improving traffic with Germany
First issue for the new owners was more decisive approach for development of the ferry route between Riga and Germany. From January 2003 two vessels of higher capacity started operation on the route, which are even more suitable for the local market and in June 2003 one of the ferries was substituted by one of a higher capacity. Today we provide for four departures from each port in Riga and Luebeck. Those are high capacity and ice-class vessels therefore we were able to keep up with the schedule even in the severe winter conditions of winter 2003. In February 2004 ferry named Kaunas started operation on the line (instead of Mermaid of lower capacity); its capacity comprises 1500 line meters and 250 places for passengers. Such choice has been done on purpose, in order to meet the market tendency of ferry business in the region. Operators use Ro-Pax type of vessels to combine cargo and passenger transportation.
Demand for Ro-Pax vessels
This choice is influenced by several factors. First of all, due to economical development of the Baltic States and Russia amount of ferry transportations have considerably increased. Also trade volumes have tendency to rise and thus increase interest for ferry services. While passenger transportation is rather a seasonal business and after September 11th it faces notable decline. In summer, cargo volumes will decrease due to holiday period, though ferry lines will concentrate more on tourist service, and vice versa in winter. This system provides for active ferry line operation all year round. And this tendency is being taken into consideration when constructing new ferries. We believe that we have achieved perfect correlation of freight and passenger capacity.
Who proposes better conditions
Further development of the ferry business at a large scale depends on a tax policy of the port of Riga and stable operation conditions in the terminal. Terminal operating our vessels is in non-solvency position for more than a year, which does not favor stability and holds back ferry business development. Unfortunately for the time being there are no alternatives for Ro-Pax vessels’ operation in the port of Riga. Unless we have this stability, e.g. by way of concluding a five-year cooperation contract on harbor dues discounts, we are ready to invest and increase number of calls by means of extra vessels’ operation on the route. It would increase cargo turnover and income of the port and the city. It is also possible that we do not content ourselves with only one ferry line from Riga. Today rather real and well-grounded seems opening of a ferry route between Riga and South of Sweden. The project can be realized in several ways, e.g. substitute on of the Riga – Luebeck ferries by a faster vessel and include an additional call in Sweden on a schedule. There may be different variants. Main thing is to have stable cooperation conditions with the port of Riga for a longer period. This subject is sufficient not only for us, but also for other companies in the port. Companies do not know what conditions they will have to meet in a year's time and any kind development in not a case any more. Management of the port and city of Riga should be more flexible towards those, who provide for work in the port and for income in the city. Within import to Russia the lion's share falls to Moscow and St. Petersburg, besides cargoes in St. Petersburg arrive through Moscow, it is connected with the particularities of Russian Customs legislation. While Riga is the straightest way for these transportations.
A slow progress
A barrier preventing transit through Latvia, also effecting ferry services, is customs control and difficulty in receiving visas for the Russian hauliers. Possessing Schengen visa (from May 1st, 2004) was to provide for a passage through Latvia, although it is not coming true. Officials of Latvia will have to simplify the current situation of visa issue and introduce necessary changes. Since this concept corresponds to the one of EU, I am sure this will come to reality, thus putting the ferry business into a favorable position in the view of Russian road hauliers. There is certain improvement. For example, frontier offices claim that from May 1st, 2004 EU citizens will be passing a rather formal passport control and the border crossing will take considerably less time. As concerns Russian trucking companies, we are ready to offer several options that would make a transit through port of Riga profitable, including collective discounts for the ferry line services.
Price policy is not the only reason
It is always a fact that the price is too high for the customer and too low – for operator. In our case utilized capacity of the vessels show that the price policy for the both parties is optimal. However price is not the only important factor for the hauliers. For instance, our ferry line keeps precisely to the arrival and departure schedule, which is possible to realize with high-powered and fast ships that we possess. Also having a skilled crew is important, since navigation in the Baltic Sea has its own peculiarities and differs from that in other seas. DFDS Tor Line vessels apply to an open flag policy and employ a crew familiar with the navigation in the Baltic. Result shows in real situations when one has to decide how to keep up with the schedule in unfavorable weather conditions and provide for a complete cargo safety. It is a pity, but we know cases of chartered vessels with crew from Greece, Turkey and Indo-China countries, having no experience to operate in the Baltic Sea. And this is not only regarding the schedule adherence in the unfavorable weather conditions, but also cargo lashing and consequently its security and on the whole – vessel exploitation policy. DFDS Tor Line invests a lot in keeping vessels in good condition – maintenance and equipment of the vessels, conveniences and service for the passengers, etc. This way unplanned delays due to technical failures is not the case. All features are maintained on an operational level. Even a non-professional sees what is a condition of the passenger cabins or lashing equipment.
DFDS Tor Line follows a fleet renewal policy on the market, thus average age of the vessels is 10 years and less. The company purchased two new vessels from Polish ship builders in 2002, with a capacity of 2 400 line meters and 450–600 passenger places. Cruising speed of these new Ro-Pax type vessels is 22 knots. In the German shipyards 5 more units are to be built. More than half of the order is already fulfilled and the last two ships are on the final stage of construction. Head office of the company considers to change the project and increase amount of the passenger places on the vessel. Probably some of the new vessels will operate on the Riga – Luebeck route. Capacity of one vessel is 3 900 line meters and speed – 22,5 knots. Operation of these vessels in the port of Riga very much depend on the port's policy, i.e. if it hold to a stable price policy for its clients. Riga – Luebeck route today is the longest cargo – passenger route operated by DFDS Tor Line ferry company, therefore priority criteria is schedule adherence and speed.
Entering the EU
When drawing an operation and budget plan for year 2004 we tried to analyze and consider possible shifts on the transport market services and how big will be demand for the ferry services. We came to the conclusion that after 10 new countries enter the EU the market will change gradually, without drastic fluctuations. On the one hand, without customs procedures on the borders in a range of countries, road transportation should become more operative. At the same time all the East European nuances will remain in passport control on the borders which will be followed by unplanned loss of time or money. Another reason favoring ferry transportation is the increasingly strict Polish approach towards truck drivers to follow the working and resting times. I believe control on such level is to arrive in the Baltic States as well. Germany is developing the Road Toll Collect project, which will be brought into life already by January 1st, 2005, whereupon road hauliers will be charged for the covered kilometers. After EU expansion fuel costs will gradually rise, which will be followed by a strict control on the import of cheaper fuel from the neighboring countries. Meanwhile we cannot compare diesel prices for trucks and ferries. Ferry fuel cost is being influenced by the world tendencies and we already operate according to these prices. Today fuel price comprises 25% of the line operation cost. As a result, fuel price for the road transport will be increasing until it reaches the European level, while in ferry business it remains more or less stable. After EU expansion customs procedures will be left out, including those in our terminals, which decreases the vessel operation time in the port. If there are even more up-to-date vessels used in Riga, this factor may directly provide for more calls in the port having the same number of vessels. To summarize our vision of the future changes due to the expansion of the EU, the demand for ferry services will grow. Therefore when drawing up the budget plan for the current year we disregarded the fact of the EU extension and held to the stable price policy for our clients.