News / Subsidy loss puts cargo service in doubt
THE MANAGING director of Streamline Shipping Group has vowed the company would continue its cargo service to the northern isles despite the loss of an annual subsidy of £600,000 from May 2014.
Speaking during a meeting of the Shetland external transport forum, on Monday, Gareth Crichton accused the Scottish government of not understanding the market and taking a “cavalier approach”.
The container vessel Daroja, operated by Shetland Line (1984) Ltd, a subsidiary of Streamline, provides a twice weekly service between Aberdeen, Kirkwall and Lerwick carrying around 140,000 tonnes of cargo a year.
Since 2008 the company has operated the service under a public service obligation (PSO), which is not going to be renewed in spring next year.
As of May the company will have to compete with ferry operator Serco NorthLink, a company that receives annually £40 million in subsidy to provide the northern isles lifeline service.
Crichton said: “We have an almost viable business that will be forced out of business in support of a company that clearly is not viable.”
And he predicted freight capacity bottlenecks on the busy routes to and from Shetland should the company be forced to cease operation of the Daroja.
At present NorthLink is said to run at 58 per cent cargo capacity, a figure that was disputed by Crichton.
NorthLink managing director Stuart Garrett was clearly not keen to be drawn into the discussion and would only say that in his view there was “ample capacity” for any extra cargo on board the company’s two passenger and the two cargo vessels.
Crichton added: “We will continue to work very hard to operate a sustainable service. We have customers who have been very loyal to us for many years. We have been around for much longer than either the Serco service or the NorthLink service.
“We have to have a look at what makes commercial sense. If we are not a subsidised operator and we are outside the scheme – and we have been outside the scheme before – it makes life much, much harder.
“We still take the view that the transport minister has it well within his power to take the issue away at relatively low cost,” Crichton said.
Graham Laidlaw, the head of the ferries unit at the government agency Transport Scotland, said that Streamline had known for the last two years that the subsidy was to cease.
He said a lot of taxpayers’ money was spent on operating both shipping services and it “was not the government’s role to cross-subsidise two operators who are in competition with each other”.
Serco NorthLink has already been given permission to halve its freight rates for bulky cargo such a salmon feed, a move that is now likely to be challenged by Shetland Line, Crichton said.
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