Gourock-Dunoon: Gateway to the Scottish ferry network Professor Neil Kay, 1st December 2013 (Adapted from Gourock-Dunoon Market Engagement Information Day presentation, Scottish Government Offices, Victoria Quay, October 2013)

2 Strategic coastal transport links F B B = Forth Bridges (avoids 38 mile detour) F = Gourock-Dunoon ferries (avoids 84 mile detour) “A strategic link between the western coast of Scotland and the central belt” Mr Gordon Ross, MD Western Ferries August 2013)

3 The Base Case Gourock- Dunoon is one of the busiest ferry routes, not just in Scotland but in Europe – with the potential to be even busier MVA consultants for the Scottish Government found that a two-vessel ro-ro vehicle and passenger town centre to town centre service would be commercially viable, capturing 56% of the (unsubsidised) car market on the route and with a defensible annual subsidy of up to nearly £3mill for foot passengers Suppressed demand and future growth opportunities mean that the revenue potential of the route may be greater than projected, while other considerations mean the cost basis may be lower than projected

4 The vessels would have to be built

5 The six year contract 6-year public service contract with compensation/subsidy for the foot passenger aspect has implied risk for new-build vessels; what if the contract is not renewed after 6 years? However recent public service contracts for provision of ferry services in Northern Europe under EU law have been allowed for much longer periods such as 11 years (Transport Scotland) The Commission accepts that longer contracts may justified in some cases, only that the case has to be made A strong case could be made for a longer contract to perm new build in in the present case (see previous slide)

6 CMAL charges CMAL introduced revised set of harbour access charges, Spring Initial analyses (MVA Report) suggests projected CMAL charges on a vehicle-passenger Gourock-Dunoon service would be substantially above costs if based on these posted charges EU case law ( Scandlines Sverige AB and Sundbusserne v Port of Helsingborg) suggests these charges could be deemed excessive pricing under EU Article 82. Transport Scotland communication recognises possibility of revising port charges at Gourock to bring in line with actual costs of port operation there. Calculations using methods cited by Commission suggest fair port charges at Gourock would substantially reduce operator costs and increase profits for vehicle–passenger service there. Calculations available from present author on request.

7 Western’s Competitive Response Competitive response by Western Ferries to entry would have to be credible and sustainable The new town centres service estimated to capture 56% car-based market share with just two vessels (MVA report). Western would have a 44% market share with a cost and capacity base designed for more than double that. It would have a four vessel fleet and four linkspans with revenues less than half of what these were built for. What would/could its competitive response be? You just have to do the maths on what would be a sustainable competitive response by Western

8 Finally Further enquiries or requests to discuss further welcome, please contact Chair of Dunoon-Gourock Ferry Action Group, Susanna McCorry Rice at: or Neil Kay at: All contacts will be treated in the strictest confidence