Read Wightlink CEO Russell Kew’s response to an OnTheWight reader’s letter

Chief Executive answers calls for ferry companies to accept they provide vital public transport services.

russell0kew-chief-executive-wightlink

Wightlink boss has volunteered this response to the recent Letter to the Editor by Harbinger. In his own words. Ed


Wightlink has a long and proud history of serving the Isle of Wight and we are determined to protect this heritage into the future. We recognise that Islanders rely on our services and we must therefore act responsibly to secure the long-term future of our service.

We operate without public subsidy, and despite the fact that we have no mandated public service obligations, we take our responsibilities to the Island seriously.

Thousands of loss-making sailings
That is why we run thousands of loss-making sailings each year, operate through the night on our flagship Portsmouth-Fishbourne route, offer discounts for disabled passengers, give half price fares to Islanders who have to travel to the mainland for medical treatment, support hundreds of charitable causes, spend more than £1m every year promoting the Island as a destination, and have invested more than £50m in the last five years in our ports and ships to improve customers’ experiences.

I believe these are the actions of a company which cares deeply for its customers and is part of Island life.

Difficult choices always have to be made
Of course, everyone wants more services at lower cost, but that is a not a reality in either the public or private sector.

Difficult choices always have to be made in challenging financial circumstances and, faced with steeply rising costs, we have the choice of increasing our fares or matching our services more closely to when the overwhelming majority of our customers are travelling. We know how much Islanders care about price and, as a result we believe it is right to control our costs carefully and protect customers from fare increases as much as possible.

26% ticket price rise compared with 81% RPI
It is worth pointing out that, in 1992, the peak day return price for a car+4 was £32.50. In 2012, twenty years later, that cost was £41 – a 26% rise over two decades. Over the same period RPI has gone up by 81% and in the last three years alone, fuel costs have almost trebled.

Islanders enjoy a significant discount (30%) and this year we held almost all our fare increases at or below inflation.

Public ownership?
Clearly it is a matter of public policy whether the cross-Solent route should be publicly owned or subsidised. But, given the significant demands which are already being made on public money, it does not seem likely that subsidising a route which has 138 sailings a day, many of which are already being run at a voluntary loss by their operators, would be a priority.

Ferry services in Scotland are often cited for comparison, however it is rarely commented that these are infrequent (for example the Isle of Bute has just 16 sailings a day, Arran has five and Iona has eight) and that they do not run in the evenings or early mornings.

Determined to improve wherever we can
We know that customers and Islanders feel passionately about our services and we are determined to improve wherever we can.

That is why I am so pleased to be involved with the new Solent Ferry Users Group which I hope will provide an opportunity for more dialogue with our customers.

Russell Kew, Chief Executive, Wightlink

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Thursday, 7th February, 2013 10:42am

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20 Comments

  1. Island Monkey's comment is rated +19 Vote +1 Vote -1

    7.Feb.2013 10:52am

    The ‘we’ he speaks of does not include him. He and his bosses, the Aussie Macquarrie group are recent arrivals to the feeding trough.

    The fact is they made an £8.5 million profit in the past year. To spare you getting your calculator out, that’s about £23,000 every single day of the year.

    To be very fair, they did lose money on a few crossings – but boy oh boy did they make up for it at busy times. These people are now trying to make an even bigger fortune from Islanders and visitors. They will succeed, only because the have cut the services provided.

    What Turner must work on is making sure these cuts are reinstated and that in future, the company under any ownership cannot just pick and choose which ferries it runs. This is a vital lifeline for the Island. Profit cannot be allowed to be the only consideration.

    Reply
  2. Steve Draper's comment is rated -9 Vote +1 Vote -1

    7.Feb.2013 11:07am

    Well stated Russell Kew!!

    Reply
    • Thomas's comment is rated +13 Vote +1 Vote -1

      7.Feb.2013 1:04pm

      Russell Kew’s frenzied counter criticism has shown that the public outcry has irritated an exposed sore. Wounded initially by the soft underbelly of a private company whose only motive is profit not service. Yes that is what it means to run something that should be a public service, service that has to be there in times of need, and should run thousands of loss-making sailings and operate through the night. The “discounts” are often hidden or don’t exist most of the time from Wightlink. Reduced fares, previous to their ownership, were much easier to get hold of and not reliant on books and season tickets often greater than half price for islanders. Your investments are for your capital, which you own, sell on, and move to other routes around the globe or scrap to your convenience. The Ports, which are owned by you or subject to lease, are your property and capital investments. The added value in these investments has been claimed by you. You do not recognise the claims in wages or the cost of travel to islanders or those you call customers but are in fact subject users out of necessity. People who need to travel for medical treatment should travel free and so should children, pensioners and students recognised as by other modes of transport.
      You know as well as us that you have continually risen prices, sometimes twice in a year. Your prices are high, they were high in 1992 but that didn’t stop you raising them. We do not compare with Arran and Iona; we have a population of 140,000 and are the biggest single constituency with vital travel needs. You are our road or rail – a vital connection in the south of England. You know that oil prices are a bogus argument.
      You use our roads and other infrastructure, which you do not pay for, your charity is a pittance and crumbs from under the table and your advertising is a sop. Macquarie/Wightlink is a profitable enterprise. We do not believe your actions are of a company which cares deeply for its customers, so stop whining and cringing either re-instate our service at a reasonable price and timetables or pass it on to others who can.
      The Solent route should be publicly owned or subsidised and similar to the railways it has become an acceptable argument to return to this method of running services. The returns for the economy in reliable cheap transport are already acknowledged as an alternative to austerity and promote growth. For us the island, travel to and from it, and its economy are a priority.

      Reply
  3. Bayboy's comment is rated -19 Vote +1 Vote -1

    7.Feb.2013 2:26pm

    So Thomas, you think that Wightlink has to provide a public service regardless of cost (like the NHS?). Well back in the real world, it seems that Russell Kew cannot win if his answers do not fit with your demands. You live on an Island, you must pay somebody to take you back and forth, they must make a profit, if you don’t like it then leave and yes I was born here – in case you hadn’t noticed, communism failed.

    Reply
    • mat's comment is rated +17 Vote +1 Vote -1

      7.Feb.2013 4:07pm

      A public service can run regardless of cost,Badboy, in the real world these things have happened and still do.You may have lived on an island but are part of the big island above and we are all born to it and public services have always existed. Call it socialism or communism if you want but what is failing is capitalism. You may have lived with public ownership and welfare for years and since WW2 this method was predominant,successful and kept the peace.You obviously didn’t leave the country then because you didn’t like it. With privatisation and capitalism we now have a failed state with a failed economic system. Let us get back to society and build the nation once again.

      Reply
      • Bayboy's comment not rated yet. Add your vote Vote +1 Vote -1

        8.Feb.2013 12:52am

        God, lets not not talk about the NHS. As a country We pay a fortune for a second rate service, only nobody is brave enough to say so. Just look at the 1200 patients allowed to die due to neglect in North Staffordshire. Don’t think it does happen here in St Mary’s. My wife was in St Mary’s for a few weeks and she was disgusted our patients were left all day without seeing a nurse or doctor. Plenty of nurses about but too busy chatting in groups at the central desk. My wife often went to get water for patients. The public is only just beginning to realise how poor the NHS is. Yes, I have paid for private medical treatment. Saw the GP on Monday, followed by an appointment with consultant on Tuesday and operated on Thursday for a non-urgent hernia repair. The NHS can’t compare, although I an still forced to pay for it!

        Reply
    • BRIAN's comment is rated +4 Vote +1 Vote -1

      7.Feb.2013 5:25pm

      As you appear to dislike socialism and cheer all things capitalist,Bayboy, I assume you pay to visit a private doctor and will never go near an NHS ward as it will be a private hospital paid from your own pocket for you.

      Reply
  4. stephen's comment is rated +3 Vote +1 Vote -1

    7.Feb.2013 2:41pm

    This is an extract from Hansard regarding the sale of Sealink with questions asked in the HoL.
    Note in the first question from Lord Carmichael ‘With existing services more or less protected’ and in the reply from Lord Harmar – Nicholls ,’without too many unnecessary conditions … affecting the sale price’.

    So there seems to be a political will going back in 1984 to minimise any Public Service Obligations on the purchaser[s] of Sealink at that time.

    Sealink: Sale Discussions
    HL Deb 22 June 1984 vol 453 c553 553

    § Lord Carmichael of Kelvingrove

    My Lords, I beg leave to ask the Question standing in my name on the Order Paper.

    § The Question was as follows:

    § To ask Her Majesty’s Government whether any decision has been made concerning the future of Sealink.

    § Lord Lucas of Chilworth

    My Lords, the British Railways Board are currently discussing the sale of Sealink with a number of potential purchasers and hope formally to invite bids soon.

    § Lord Carmichael of Kelvingrove

    My Lords, I thank the Minister for that Answer. Is he aware that there is a feeling of great uncertainty and concern among employees of British Rail as to their future? There is obviously concern about their own jobs. They are concerned that if Sealink is sold there should be a guarantee that it will be sold as a single package and that after it has been sold, even as a single package, it will not be broken up. Can the Minister assure the House that the existing services will be more or less protected? Finally, can he give any indication as to how the container traffic is improving—because that was one of the sticking points—particularly in respect of the Holyhead—Dún Laoghaire service?

    § Lord Lucas of Chilworth

    My Lords, so far as the noble Lord’s first two supplementary questions are concerned, I gave his noble friend answers to precisely those two questions on 3rd April, and those answers remain exactly the same. So far as the container traffic is concerned, that is progressing well.

    § Lord Harmar-Nicholls

    My Lords, is my noble friend aware that the questions just put to him from the Opposition Benches suggest that when the sale goes forward there should be all kinds of conditions? If there are, that will affect the price. If, as a result of all kinds of conditions being imposed, the price is much lower than that which the Opposition considers to be right, than the Government will be attacked for selling Sealink below its real value. There have been such attacks on so many other occasions. Sealink ought to be put on sale on merit and without a lot of unnecessary conditions surrounding its sale, which would be bound to affect the price.

    § Lord Lucas of Chilworth

    My Lords, I agree with my noble friend that British Rail are Offering Sealink for sale as an entity, as a complete company.

    Back to Preamble

    Reply
  5. Darcy's comment is rated +8 Vote +1 Vote -1

    7.Feb.2013 4:11pm

    I’m pleased Russell Kew is working with the Solent Ferry Users Group. Sadly during the recent on line debates up until today, the group seem to have been conspicuous by its absence. Any reason?

    Reply
    • biggmarket's comment is rated +3 Vote +1 Vote -1

      7.Feb.2013 5:50pm

      I am frightened to admit it but I have difficulty in disagreeing with the points Mister Kew makes.

      Amongst comparisons made in the earlier letter was with the Isle of Coll. I know this Island having spent many a holiday there in the 70s, 80s and 90s.

      Coll’s year round population is barely 100. The journey to the mainland takes around 3 hours. In the summer there is one sailing a day and in the Winter this is reduced to four boats a week. Winter storms often result in no sailings at all. For example last Tuesday’s boat did not sail so people had to wait 5 days if they wanted to travel to the mainland. Twice this year the ferry duly left Oban but was unable to land due to heavy swell.

      In contrast even though other crossings to the Isle of Wight have been stopped due to high winds in the 6 years I have lived here the Portsmouth/Fishborne route has kept running albeit late.

      Without subsidies quite simply Coll would receive no boats at all. It’s interesting to note the number of sailings between the mainland and IOW per day even without any financial support.

      There is no certainty even if the ferries were nationalised that the services Wightlink has withdrawn would be restored. Remember the axe of Dr. Beeching was wielded when the Railways were publicly owned.

      Surely Mister Kew is right in saying that in the current political climate the availability of public funds to run little used ferries is unlikely.

      This by the way does not mean I like everything about Wightlink. The nonsense for example when a day return is cheaper than a single. The fact that you can’t find a price tariff and only find out how much your journey will cost when you try to book. At least with Cal Mac under the timetable you find the fares.

      It is though a fact that Wightlink has little difficulty filling the ferries at peak times despite the eye watering fares. In contrast the problem is in the late evening and overnight boats where prices are substantially lower. In term time for example who would want to travel to Portsmouth at 1.00AM in winter no matter what the charge is?

      Finally whilst I have every sympathy with those who have been seriously inconvenienced by the recent timetable changes, I wonder how many of those who have written regularly on this subject used the now axed services on anything approaching a regular basis.

      Reply
  6. Harbinger's comment is rated +16 Vote +1 Vote -1

    7.Feb.2013 4:38pm

    I have no doubt that Mr Kew is an honourable man and that he has the best interests of the island (and his company) at heart. My concern however is that without support in the form of a subsidy or PSO for this lifeline service, Wightlink’s (and the island’s) future is in the hands of an international financial company which would appear to be in some difficulty having made questionable acquisitions in the past.
    Macquarie’s vulnerability could impact on Wightlink and ultimately lead to its failure. Just look at the current round of redundancies. If Red Funnel were also to encounter financial problems the sustainability of the island would be in question.
    Calling for a PSO or subsidy for some sailings is not a direct criticism of Wightlink or an admission of failure but should be seen as an opportunity for them to build their business model for the benefit of all of us.

    Reply
  7. Black Dog's comment is rated +14 Vote +1 Vote -1

    7.Feb.2013 4:51pm

    I have read and re-read Mr Kew’s response and all I can say is – spoken like a true accountant.

    Mr Kew, consider your argument, that Wightlink make many loss making sailings – If you owned a shop or Hotel would you measure every hour or days profitability? NO. I do not know of any company in any field that measures profitability in this way. can you imagine BT doing this?

    I have no doubt that you have times during the day and night that your ships sail at a loss. However, I do not believe that you have done enough to encourage freight and or passengers on to those crossings. When times are hard your role is to get a bigger slice of a smaller cake – Not Cut services. Company History shows that companies who follow the CUTTING ETHOS eventually fail because they have nothing left to cut.

    Your comfortable relationship with Councillor Pugh has not helped as I believe your role and your duty to is to the company that pays you a salary. You should have insisted that the IOW Council not close Libraries, Tourist Information Centers and worked as a more aggressive partner to promote the Island as a place for tourists to come, instead of allowing the council to erect psychological signs on your ferries saying the Island was closed for tourism. Guess what? This might have actually increased the number of vehicles using Wightlink.

    Far be it for me to teach granny to suck eggs but have you studied contribution theory.

    Let me explain:
    You go to a wholesaler and buy 10 shirts for £10.00 you then go to the market and sell five of those shirts for £10.00 (Costs covered) The following day you sell the remaining 5 shirts at £0.50 each (at an apparent loss) This shows you a £2.50 overall profit = 20% profit Ta-Da Contribution Theory. The Airlines practice this very successfully.

    I applaud your contact with the ferry users group. However, the fact that your owners continue to repatriate all of Wightlinks profits under the guise of some PAYDAY LOAN INTEREST RATE does put you in the came category as Starbucks and therefore subject to a potential Boycott.

    Think hard Mr Kew this matter is far from over.

    Reply
  8. adrian nicholas's comment is rated +4 Vote +1 Vote -1

    7.Feb.2013 7:18pm

    Is Russel Kew therefore claiming that the Isle of Bute’s tiny population and related economic consequences are somehow size and consequence to the IOW?

    I also failed tho realize that Maquarrie/wightlink and its rather interesting tax arrangements – were somehow for ‘charitable’ essential community beed and re-investment purposes and that its exorbitant fares and dwindling timetable was run solely on that premise and not profit…?

    Perhaps, therefore, can we expect this sainted company to be applying for charitable status ?

    Perhaps, given his view – Islanders might further wish to nominate his worthy company for inclusion in the Lottery and a ‘community support’ grant assistance bid….?

    Reply
  9. playingthenumbers's comment is rated +12 Vote +1 Vote -1

    7.Feb.2013 9:07pm

    Itsy-bitsy omissions from Mr Kew’s otherwise frank response. Private equity funds have seen the price paid for Wightlink more than double in the same two decades; the transfer in 2001 (RBS) to 2004 (Macquarie) added 77%. (Red Funnel’s price has tripled!)

    The locked-in market share, consistent revenue, I can see the attraction for a PEF. However with the increase in purchase price, there was a need to raise the fares, Wightlink obliged– which was obvious, fares relate to the increasing purchase price paid for the business, given that the EBIT remains relatively constant.

    Then Wightlink undertook the business ‘risk’ (as was their right) to invest in new, larger ferries, just before one of the biggest spikes in oil price ever recorded. Again the added capital costs incurred by Macquarie for the new fleet motivated Wightlink to seek increased returns, which they have done by initially raising prices & then by removing services.

    For anyone who bought a house at the same time as Wightlink’s top-of-the-market deals were taking place & is now living in negative equity, this might sound very familiar.

    Except of course the business is not a house, in which someone can hand the keys back. It is a 170-year-old ferry service, with dominant market share, whose actions, whether they like it or not present a systemic risk to the economy & welfare of the Isle of Wight.

    This last reason is enough for ferry companies to be recognized to be strategically important.

    The problem is what to do when a company controlling strategic infrastructure makes investment decisions, which over time go bad. There is no scope for price rises, incomes are falling, the real economy has tanked and commodities are rising; cutting services is damaging the economy and on top of that, Mac need to make the margin calls for its investors (pension schemes). It’s not at all easy.

    As a thought, have Wightlink modelled what would happen if they radically reduced prices and opened up capacity for low cost commuter routes? – it would certainly benefit islanders who would bring their wages back to the island, in turn reinvesting these wages in local services, which will improve our tourism appeal. Mr Kew mentioned securing the long-term service, but he never mentioned a long-term plan, perhaps there isn’t one?

    Reply
  10. girloncliff's comment is rated +1 Vote +1 Vote -1

    8.Feb.2013 12:15am

    Population of Iona – 125. One hundred and twenty-five.

    Reply
  11. adrian nicholas's comment is rated +1 Vote +1 Vote -1

    8.Feb.2013 2:16pm

    For those keen on Russell Kew’s reply and comparison to IOW – here are a few statistics’

    Isle of Bute, . Its resident population was 7,228 in April 2001.[4] – IOW population 142,000

    In the north, Bute is separated from the Cowal peninsula by the Kyles of Bute. The northern part of the island is sparsely populated, and the ferry terminal at Rhubodach connects the island to the mainland at Colintraive by the smaller of the island’s two ferries. The crossing is one of the shortest, less than 300 metres (330 yd), and takes only a few minutes but is busy because many tourists prefer the scenic route to the island.
    source http://en.wikipedia.org/wiki/Isle_of_Bute

    Economy

    The Mount Stuart Trust owns 28,000 acres on the island and is wholly controlled by five members of the Marquess of Bute’s family, plus an accountant and lawyer; none of whom live on Bute.[19]
    Farming and tourism are the main industries on the island, along with fishing and forestry.

    So Russell please expand on your business model of how an island of just over 7,000 mainly crofters, owned by effectively one landowning family compares to an island of some 140,000 and an overall econ gdp worth approx. £1,491 m ?

    Reply
  12. Colin's comment is rated +1 Vote +1 Vote -1

    12.Feb.2013 12:04pm

    Anyone interested in reading about how Macquarie manages it’s other UK businesse which dwarf the investment in Wightlink should read the article on page 9 of the Sunday Times business section dated 10.02.13. entitled “Enter the vampire kangaroo”. Wightlink’s structure is no different from any of the others with the aim according to the article of whittling down it’s tax
    payments in the UK to nil.

    Whilst I am sure the local management is genuine enough, the owners are stated as taking advantage of the law by using tax breaks, subsidiaries and tax havens.

    So don’t expect any good news any time soon.

    Reply
    • Darcy's comment is rated +1 Vote +1 Vote -1

      12.Feb.2013 1:31pm

      Thanks for that Colin. One tiny bit of good news might be that Barclays Bank is apparently closing its corporate tax-dodging unit. Lets hope that will be the first of many.

      Reply
  13. Joseph Wolton's comment not rated yet. Add your vote Vote +1 Vote -1

    2.Dec.2014 5:48pm

    We need to save the (Mv St Helen) from going to the breakers click here https://www.facebook.com/pages/Save-the-Mv-St-Helen-1983-Wightlink-Ferry/325210787680324

    Reply
  14. Joseph Wolton's comment not rated yet. Add your vote Vote +1 Vote -1

    2.Dec.2014 5:50pm

    click the Link and Like this page we don’t want the (Mv St Helen) going to scrap so please share the facebook page on and create a lifesaving challenge to safe the (Mv St Helen)

    Reply

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