Wednesday, April 30, 2014

End of an Era as RoRo Freight and Passenger Ferry to Cease This Summer

Long Standing Route Abandoned Due to Increase in Sulphur Emission Costs
Shipping News Feature

UK – DENMARK – Passenger and freight ferry operator DFDS has announced that it is to end its Harwich, UK to Esbjerg, Denmark route on September 29, due to the costs of the new sulphur emission rules. The majority of the route's current freight volume is expected to be transferred to the Esbjerg-Immingham freight route with passenger services between the two countries to end completely.

The consolidation of the two routes is part of DFDS' strategy to adapt the route network to the introduction of new sulphur emission rules which come into effect on January 1, 2015. The company says that the new rules will considerably increase its costs on the Esbjerg-Harwich route, and with DFDS seeing freight volumes between Denmark and southern England decline in recent years, the financial performance of the Esbjerg-Harwich route will no longer be sustainable.

The loss of tax-free sales and increasing competition from low-cost airlines mean that passenger numbers have fallen from 300,000 to around 80,000. Transport of industrial cargo between the UK and Denmark has also declined. The total revenue of the Esbjerg-Harwich route was DKK190 million (£20 million) in 2013, of which more than half was generated by passengers. As the majority of the route's freight volumes are expected to be transferred to Esbjerg-Immingham, the full-year revenue impact of the route consolidation is expected to be a decrease of around DKK125 million (£13 million). The consolidation is not expected to have any material profit impact in 2014.

DFDS says it has worked hard to cut costs on the route to make it more competitive but without achieving the level of savings necessary to preserve the route. Among other tactics, the route was changed into a combined freight and passenger service, the number of crew on board was reduced, slow steaming was introduced to save fuel, the number of departures was decreased and centralised sales tried to increase passenger numbers with aggressive marketing. DFDS CEO Niels Smedegaard commented:

"Unfortunately we haven't been able to reduce costs enough to enable the route to bear the very high additional costs of around £2 million (DKK18 million) a year. This is what the new environmental law and the requirement to use low-sulphur oil will cost based on current oil prices from 1 January 2015.

"The route is of particular historical significance to DFDS so it's a very sad day for us all. Our regrets go to our many passengers who must now see the last passenger ferry route between the UK and Scandinavia close. It's also regrettable that up to 130 jobs on board and ashore will be affected by the closure, even though we are fortunate that we can offer jobs to everyone on board on other routes."

DFDS has said that it will do everything to ensure its freight customers will still receive a good service on the freight route between Esbjerg and Immingham with two large, modern vessels offering a daily departure each way with a crossing time of 18 hours. Smedegaard added:

"This route will also be hit by the substantial extra costs as a result of the new sulphur rules. We need to keep a tight focus on costs to prevent the transfer of freight to road transport that will otherwise become a consequence of the new sulphur rules. We will therefore step up negotiations with employees, partners and other stakeholders to find solutions to reduce costs and increase flexibility. That will help us ensure the route's development as an important transport route between the UK and Denmark, and also as an important employment base.”

All of the ship's crew will be offered new positions within DFDS. The ro-pax ship that is currently deployed on Esbjerg-Harwich, Sirena Seaways, will be utilised elsewhere in DFDS' route network or chartered out.

From 1 January 2015, the new set of rules will limit sulphur emissions to 0.1% from the current limit of 1.0% in SECAs (Sulphur Emission Control Areas). These areas include the Baltic Sea, the North Sea and the Channel, which are DFDS' primary market areas.

Photo: A DFDS ferry docking in Ejsberg.