On meeting the MD of the Steam Packet Company

I attended a meeting with the Steam Packet Company yesterday, where Brian Thomson (Managing Director) took questions from candidates. Seven of us were there alongside him: myself, David Ashford, Anthony Allen (who joined part-way through), Daniel Davison, Simon Williams, Juan McGuinness and Peter Shimmin. Here's a summary of the discussions.

What's wrong with the Manxman

In his opening remarks, Brian explained that Manxman's problems come down to the bearings wearing out. He believes Douglas Harbour is the likely cause, since other operators using Heysham haven't seen the same issues. The damaging material in Douglas Harbour isn't so much silt as rocks and stones, and it needs a deeper form of dredging than is currently carried out. He had a technical term for it that I didn't quite catch.

He was clear that if the shaft and bearings turn out to have material defects, that would be a warranty issue with the manufacturer's supplier and would be persued, but for now the stones and rocks in the harbour look like the main culprit.

I asked whether deepening the harbour might open up access to smaller cruise vessels (not the giants that need deep water berths, but the smaller ones) and he thought it might. David Ashford noted that a dedicated deep-water cruise berth had previously been found to be far too expensive.

A note on misinformation

Brian was clear in his opening statement that there's a great deal of misinformation circulating on Facebook, with myths about pricing and vessels being repeated.

Where the profits go and where the discounts come from

I asked whether the roughtly £8-10 million profit the Steam Packet makes each year is paid back to Treasury (the sole shareholder) as a dividend, or held as reserves. Brian confirmed it's mostly retained as reserves, and that those reserves then fund the discounts offered later. He gave an example of the "children travel free" promotion, with the cost being absorbed by previous profits.

Simon Williams asked whether the old "buy four sailings, get the fifth free" style of discount could make a return, and whether a flat 10% resident discount might be useful instead, though he felt current prices were reasonable. Brian explained there are discounted prices available for each sailing, but they often sell far in advance, so anyone booking later misses out.

This tied into a point Brian was very keen to make: there are no dynamic pricing algorithms on the booking website, something he had confirmed with the company that built the website. What people perceive as prices rising after they've costed up a ticket is usually other customers buying the cheaper tickets in the meantime. Once the discounted tickets are gone, later bookings cost more so the later you book, the more you're likely to pay.

When the Mannanan replacement came up later, I asked about the depreciation on £120 million, since that would make the profit on the accounts look smaller than the cash reality. He confirmed that new vessels are depreciated over 25 years, so the impact on profits - and therefore on the discounts those profits fund - would be minimal.

A gap in the student discount

I asked why student discounts for travel to and from university only apply to foot passenger fares. Students and parents often travel together in a car to head off to university, and can't claim the discount even when the car belongs to the student. With the driving age here being 16 more Manx students are heading off with their own cars. Brian called it an excellent idea and a gap in their discounts, so I hope it's something the Steam Packet take forward.

The Manannan replacement

I asked about the replacement for Manannan, which was originally expected to be finalised this year. Brian confirmed an extension is in place and that the company hopes to invest around £120 million in a replacement vessel by 2030, which would coincide with the 200th anniversary of the Steam Packet.

However, the Steam Packet's preferred option is a more conventional vessel that can also carry some freight, rather than a fast craft. I asked what the crossing time would be for that boat to Liverpool, and he said around 3.5 hours. That prompted my follow-up: how would the Steam Packet serve people who want a Saturday day-trip to the Liverpool shops? At 3.5 hours each way, the time actually spent in Liverpool gets much shorter, especially now the terminal is a little further from the city centre. He conceded that if the demand is for a fast craft, there are potential vessel options that are faster than Manannan.

Carrying dangerous goods

While on the subject of Manannan, I raised something that has frustrated Isle of Man target shooters for years: the Manannan can't carry ammunition, despite being an ex-military vessel. Would any new vessel be able to carry dangerous goods? Brian explained the restriction comes from the aluminium hull and this is also the reason there are no deep-fat fryers allowed on board in the kitchens! I don't expect ammunition carriage to be a major issue for the Steam Packet, but with more than 800 firearms certificate holders on the Island, it was worth asking while I had the chance.

Docking in Dublin, and the Larne route

Brian confimed there's a Steam Packet project looking at what's needed to allow Manxman to dock in Dublin. This appears to be an EU regulation matter - the vessel needs to be certified or documented in some way that it already is for UK ports - and they're working on it.

He also said that the Larne sailings appear to be doing well so far, with 350-450 passengers over this last sailings, though he didn't say whether these were mostly Manx residents heading to Ireland, or Irish and NI visiters coming the other way.

On the KPIs of the Sea Services Agreement

My final question to Brian was about the key performance indicators (KPIs) within the Sea Service Agreement, and whether he felt they were too easy to achieve, and therefore needed raising? My point being that if the KPIs are easy to meet then it could stifle attempts to exceed them and do better. Brian confirmed that they did need looking at but didn't clarify futher, which does make me wonder if we were aligned on that. At the moment the KPIs are around frequency of sailings to the north west of England, freight capacity, volume of discounted seats etc. I was very suprised to learn that minimum levels of punctuality and reliability (the two metrics on the Steam Packet website) are not included as KPIs in the sea service agreement. Perhaps this is something that could also be looked at in a review of the Sea Service Agreement.

There were a few other questions asked by candidates that were specific to their constituencies, so I won't steal their thunder, but overall it was a very informative meeting and I was glad of the opportunity to ask some detailed questions.