Finnish ferry operators post heavy losses as margins tighten

Viking Line half-yearly figures show EUR 14 million deficit; Silja Line in similar difficulties

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The familiar ferries of Viking Line and Silja Line, which ply the routes from Finland to Sweden and across the Gulf of Finland to Estonia, are riding very low in the water. Both ferry operators produced recent figures that contained a lot of red ink.
      On Tuesday, Viking Line released its results for the six-month period from November 2004 to April 2005, showing a loss before taxes of around EUR 14 million, or nearly 10% of net sales for the period. One month ago, Sea Containers, the British owners of Silja Line, announced that the white ferries had made a 1Q/2005 loss of EUR 19 million before taxes and appropriations, on turnover of just EUR 120 million.
      While it is true to say that the first months of the year are not traditionally a good time for the ferries, either in passenger throughput or in profitability, the trend is made clear by the fact that Silja's losses were three times the level of the previous year, while Viking Line recorded a fourfold increase on the negative side.
     
The change in conditions in the passenger traffic on the Baltic Sea is plain to read from the financial reports. The downturn in the fortunes of the passenger carriers is based on the expansion of the EU last May into the Baltic States, and the accompanying reduction in the taxation on alcohol in Finland.
      There is no material shortage of passengers, particularly on the Helsinki-Stockholm crossing, but they spend less on board and the margin on sales has declined. Profitability has also been hit by the high price of oil and increased capacity in the market - in the form of competition from Estonian shippers on the Helsinki-Tallinn run.
      It is also believed that Finnish shipping companies are at the end of their rope as far as support grants are concerned. Finland's supports for its shipowners have been at a competitive international level since the beginning of this year, and there is no room for an increase.
     
One area in which the Finnish vessels are hurting badly is in crew payroll costs.
      An Estonian seaman on Tallink comes cheap by comparison with his Finnish colleague on Silja Serenade or Viking's Mariella.
      Researchers argue that the Finnish shipping companies will have to find some means of survival over the short-term, while the current yawning wage-gap exists. With time, wage differentials within the EU will narrow as a matter of course.
     
A further reason for the poor showing of late may be that the old "Swedish boats", large floating restaurants, have outlived their time. In future, it will have to be cargo that takes the lead, as freight rates have rocketed in recent years.
      Silja Line reportedly intends to order a new generation of RO-RO cargo-passenger ferries for its Turku-Stockholm route in order to claw back some of the lost ground.
      It appears likely that cargo traffic between Helsinki and Tallinn, too, will increase, while the supply of superfast passenger ferries between the two cities is already approaching saturation levels.
      There have also been suggestions that Finnish operators should look more closely at the St.Petersburg end of the Gulf.
      The downsides are that harbour facilities and passenger terminals in St. Petersburg are relatively undeveloped and Russian officialdom has thus far taken a rather greedy attitude. Nevertheless, Finns and others are interested in the sights of the city, and it is a given that the large international cruise liners that come to Helsinki use the Finnish capital mainly as a stopover en route to and from the main attraction - St. Petersburg.
      One obstacle to opening up this route is the present visa arrangements. It would be necessary for a much quicker system in order to catch impulse travellers. Pictures.


Links:
  Viking Line
  Silja Line

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