Rural Economy and Connectivity Committee

Meeting date: Wednesday, January 25, 2017

Official Report 600KB pdf

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Clyde and Hebrides Ferry Services

Good morning. Welcome to the third meeting in 2017 of the Rural Economy and Connectivity Committee. Everyone present is reminded to switch off their mobile phones.

Apologies have been received from John Finnie.

Agenda item 1 concerns the Clyde and Hebrides ferry services. We will take evidence from representatives of David MacBrayne Ltd on ferry services in Scotland. I welcome Martin Dorchester, the chief executive, and Robbie Drummond, the group finance director. I invite Mr Drummond to make an opening statement, but ask for it to be kept as short as possible.

I am the group finance director of David MacBrayne and Martin Dorchester is the chief executive. We are pleased to be here this morning to talk about the David MacBrayne group and the contract to run the Clyde and Hebrides ferry services.

We were delighted to win the contract, and I would like to publicly thank our many supporters across Scotland for the visible and positive support that we received. I particularly want to acknowledge the cross-party support that we received from MSPs and MPs, including some who are here today.

For those who are not aware, the David MacBrayne group is a private company that is solely owned by the Scottish ministers, governed under the Companies Act 2006, with an independent board that is appointed by the Scottish Government. We are proud to be owned by the people of Scotland and we are aligned to delivering the policies and objectives of the Scottish Government. We are also proud to be a living-wage employer and to have been named the Scottish living-wage employer of the year in 2016. We aim to recruit locally in order to support local sustainability and community success.

Over the past few years, we have undertaken a series of improvements in terms of safety, new technology and customer communications. Our success in offering a good and safe service has been validated externally with a series of national and international awards. We have also worked well in partnership with our colleagues in Transport Scotland and in communities to deliver significant changes to improve our services, including new routes, increased sailings and, indeed, new vessels.

Last year was an important one for the group. Of course, the key highlight was the award of the eight year, £1 billion CHFS contract, which started in October 2016. In addition, our expertise was recognised by the Ministry of Defence, which awarded us a 35 year, £1 billion contract to operate Marchwood, the ministry’s key strategic military port. That contract supports our ambition to move into new markets and use our skills, knowledge and experience to drive a much wider benefit for Scotland.

I will focus some brief comments on the CHFS contract. Three parties are involved in managing the services, and each has its own set of responsibilities. Transport Scotland is responsible for the procurement of the services, setting the service specification for routes and timetables and setting the fares and other policies, such as future vessel and infrastructure investment. The second party is Caledonian Marine Assets Ltd, which is wholly owned by the Scottish Government, although it is entirely separate from David MacBrayne Ltd. CMAL is responsible for procuring and owning the vessels, which are funded by the Scottish Government, leasing the vessels to the ferry operator and owning and maintaining the 22 harbours. The third party is David MacBrayne Ltd, which is responsible for operating the public service contract, which we do through our subsidiary company, CalMac Ferries Ltd. The contract stipulates that we lease the vessels from CMAL and that we pay harbour access dues to CMAL and other independent port operators.

Our aim is to deliver a good service for our customers and to create long-term sustainable economic value for our communities and the Scottish Government. However, we recognise that we operate an ageing fleet, sailing into ageing port infrastructure, and face increasingly difficult weather conditions on the west coast of Scotland. Inevitably, those factors will impact service, but we work hard to minimise that disruption and to communicate changes to our passengers.

Digital connectivity is also challenging across our network. We have invested in improved connectivity across our 80 sites, which has been much more difficult than we originally anticipated. However, that investment will offer an improved service for all our customers—tourist and business—which will help to support economic sustainability.

We work really hard to retain the support of our communities and key stakeholders, and we are therefore grateful for this opportunity to talk to you in that context. Martin Dorchester and I are happy to take questions from the committee.

Thank you for that opening statement. Mairi Evans will ask the first question.

You mentioned how the David MacBrayne group of companies is owned, managed and financed. Could you give us some more details on that?

The David MacBrayne group is a private company that is owned by the Scottish ministers and run as a private company. We do not receive any direct grant in aid, and we go out to win public contracts and earn profits through those contracts.

Could you say more about the finance side?

We bid for and win contracts, and are paid to run those contracts. We are paid a level of subsidy to manage the CHFS contract. Likewise, we are paid to run the contract for Marchwood. We do not receive any direct grant from the Scottish Government.

The Marchwood contract is obviously quite financially significant. Could you explain your involvement in it and say a little bit about what is being done there?

Certainly. That is a long-term contract. Marchwood is the key military defence port from which munitions and goods go out across the world. Our role is to act as a sub-contractor to the MOD to manage the port and the operations. There is a wider opportunity to commercially develop some of the site to bring into the port new services and operations that would generate additional revenue for the group.

It was great to hear you ask my finance director to be brief, convener. That was terrific and I will make a note of it.

I will address two points, the first of which is on our structure and ownership. If you think of us as a private company with shareholders, our shareholders are the Scottish Government. We generate revenue by bidding for and winning contracts, which gives us a mix of fare-box revenue from customers and what we sell through retail and the amount of subsidy that is aligned to a contract. That is how we generate our revenue.

On Marchwood, I will phrase things slightly differently. We bid, as a joint venture, to win a contract to deliver services in Marchwood, but we will not deliver the services. We set up an organisation there that we sit behind, and it will procure from us the services that it needs on things such as finance and marketing. We do not go in there day to day and run the organisation; we sit above it and it delivers the contract. We will get the fee for the services that we provide and when that business generates its margins at the end of the year we will get the premium from that. Does that help?

It is obviously an important contract that could lead to other things, if ports or hubs were established elsewhere.

Do you invest the premium that comes back from that in ferry services that you are providing in Scotland, or does it go to the shareholder?

It could do both. We have the same discussion that anyone would have with the shareholder, in which we say how much profit we have made. Within the CalMac contract there is a clawback facility that pulls it back in. There would then be the opportunity for the DML group to consider what it wanted to do with its profits and how it should invest them. As you would expect, we would talk to the shareholder about how we wanted to invest in future.

When do the contracts start?

We took official handover on 1 December 2016 and it is a 35 year concession, which the Scottish Government might want to consider for ferry services as well.

So the year end for the reporting period will be December 2017.

The operating year end will be December 2017, but we will report on the fiscal year: April to April.

At that stage we will be able to see how much money you will be investing back into the ferry service.

I have a very small question. I know that you ran an Irish ferry service for either Northern Ireland or the Irish Republic. Is it part of your business plans to opportunistically bid for contracts outwith Scotland where it appears that that will complement what you are doing and enable you to make money?

Yes. We actively look at what opportunities are out there and we do what all businesses do: we look at the risks around those opportunities and ask ourselves whether we believe that we can—to be blunt—make money out of them.

Gail Ross has a quick question on the back of that.

Do you operate any routes at a loss?

We could get into a discussion about what we mean by “loss”. The reality is that we run a fundamental lifeline service. If you look at it discretely, yes, we run at a loss. However, we bid for the contract and get the subsidy plus the revenue to do that.

To clarify, all our contracts, including the CHFS contract and, indeed, the Gourock to Dunoon contract, are run profitably.

Will you be bidding for the northern isles ferry service?

We absolutely will.

I know we have a lot to get through, so I apologise, but the opening statement opened up a raft of questions for us.

It was meant to do the opposite, Jamie.

09:45  

It was very informative. Perhaps, for the committee’s benefit, you could provide post the meeting a nice little flowchart of how the companies interlink. I was interested in the arrangements for the leasing of vessels and the relationship with the franchise. It is all a bit confusing, to an extent.

Your shareholders are the Scottish Government, which is issuing tenders for new services. You were successful in one of those tenders and will probably bid for others in the future. Given that situation, have you ever come across any conflict of interest in the sense that it is absolutely in the Government’s interest to give contracts to a company that it already owns as opposed to going out to the wider commercial market? That is not a criticism; it is just an observation.

I have heard companies say that we did not win the tender and I say, “Well, we did.” There are strict rules on the governance of the issue of contracts and those contracts are then published for people to see. We are confident that we as a company do not get a free pass, but win what we compete for. The committee scrutiny and the scrutiny that the civil service that issues contracts is put under show that that is the case. We are confident that we compete and win on a level playing field.

Good morning, gents. You have just won the new contract, which kicked in on 1 October. Congratulations on that. One of the key things that you said during the bidding process was that you would increase passenger/vehicle traffic by 10 per cent and commercial traffic by more than 12 per cent over the contract period. I am interested in how you intend to do that. If you do not manage to do it, what effect will it have on your finances and the need for taxpayer support to see you through?

There are two key ways in which we want to grow passenger numbers. The first is by working harder on how we work with local organisations and market our services. Can we work with our partners and target our customers better? We are investing in some technology that allows us to target customers better and offer more interesting routes for them to get on to the islands and use the services that are there, perhaps considering some of the off-peak areas. Some really clever, commercial, targeted marketing will help with that. We are working closely with VisitScotland and local marketing organisations on that.

Capacity constraints are an issue for us, particularly in the summer. We have some initiatives to consider how we ensure that the vessels travel as full as possible. We are thinking about how to solve that technically and how we reduce the number of no-shows and ensure that people can get on the boats. That will help to increase the revenue.

We are confident that, over the contract period, we can grow revenue by 10 per cent. We have committed to doing that. You talked about risk. If we do not achieve that, the risk sits with us. It is a fixed-price contract and, if we do not achieve the target, we will have to deal with and manage that.

If you do not achieve it, will the taxpayer not end up with a bill at the end of the contract period?

As I said, it is a fixed-price contract, so the amount of subsidy that we receive over the eight years is the amount within which we have to manage. If we do not generate the amount of fare-box revenue that we need, we will have to address that.

It is worth pointing out that we also talked about increasing our on-board spend. We have initiatives to make that more effective and provide a better, more attractive service for customers in our food and retail offerings. That will help with the objective of growing revenue.

However, deficits in companies fall to the shareholders, surely.

If we do not hit our revenue targets, we have to cut our cloth accordingly. That is how we operate as a business. As Robbie Drummond said, it is a fixed-price contract. There is no get-out-of-jail-free card for us.

Are you saying that there would be no more money and it would just be a reduction in services?

No. I am saying that we would have to find other ways of managing that. If we think about it in terms of layering, we have a specified minimum level of service because we run a lifeline service, so that will not diminish. Built above that, we have revenue projections for things that we could do. We would know what money we would have to invest in marketing to drive sales for those projections. However, if money was not available, we would have to cut our cloth accordingly without diminishing the level of service.

Do you want to follow up on that, Stewart, or do you have a question on something else?

It is a tiny point. I just heard a reference to a 10 per cent revenue increase, but my notes say that it is a traffic increase. I want to be clear which it is.

It is revenue.

Thank you.

The next question is yours, Stewart.

My question can be dealt with very briefly.

You are managing us very well.

I am a techie, so there is a danger. I want to ask about smart cards, which you are introducing. What do you think the benefits of smart cards are? My wallet increasingly has smart cards. I have two ITSO smart cards—ITSO is the United Kingdom Government standard that is used widely by transport organisations. I want to be clear that you are seeking to ensure that your smart card service will not be exclusively available through a smart card that has “CalMac” on it. People who want to use smart ticketing want to have one piece of plastic only for that. That is also an issue for other transport organisations, but where do you stand on it?

Any technology that we introduce is introduced for the benefit of customers. Smart and integrated ticketing will drive real benefits for customers. However, you can be assured that any technology that we will use will be integrated with that of other transport operators, including rail and bus operators, so the smart cards will be interchangeable in that sense.

It is wrong to look just at smart cards, though, because the next technologies are looking at using mobile phones and credit cards in the same way—that technology is coming down the line. We will be clever at how we introduce the technology that we will use. We are talking to our partners in the transport industry and to Transport Scotland to ensure that we have the right solution.

So when a customer buys a through ticket that covers the cost of ferry and rail, they will be able to use their smart rail card, for example.

Yes, that will be the intention.

Good morning, gentlemen. In order to win contracts, companies sometimes make quite a lot of promises. For example, the new Clyde and Hebrides ferry services contract indicates that CalMac will, among other things, create a new director of community and stakeholder engagement post, retain its head office in Gourock and ensure that all existing routes and services will continue to operate as before. In addition, there is the fundamental promise in the contract that CalMac plans to increase opportunities for local employment, including more apprenticeships. Where will CalMac do that and how will it do that?

One benefit of our shareholder structure is that we have envelopes within which we can choose how to spend our money. What I mean by that is that I do not necessarily have to go for the cheapest deal for something; if the money is in my envelope, I can spend it locally, so that is what we do. We have committed to supporting local businesses. For example, over 60 per cent of the food that we sell on board our vessels now comes from local suppliers. We can now give them three, five or eight-year contracts, which enables them to get through the hard period of survival that all organisations go through. We advertise locally, so our first-cut recruitment for that is from local businesses.

Because of the way in which we are structured, we do not go and give money, as it were. However, we support local businesses with longer-term contracts or with employment. Along with Highlands and Islands Enterprise and other organisations, we run the vital spark programme, which operates out of Dunoon, Rothesay and Campbeltown, to generate start-up businesses. The benefit that we bring is that, if someone has a start-up business and it is a good idea, we will give them a three-year contract.

What we do on apprentices is, in a way, both sad and good. CalMac is the largest employer of apprentices in maritime shipping, with 30 a year. Despite the size of the maritime industry, we are the largest player in it with regard to apprenticeships. It is a big challenge. We take on an apprentice and put them through their training. They then have to get employment somewhere else to get their deep-sea training, so we keep our fingers crossed that, further down the line, we will get back the investment that we have put up front.

We bake in those commitments as key performance indicators—as measures for us as a business—so every year we will do that, and then we will seek to grow it. Over the past five years, we have consistently grown our business and, at the same time, we have grown the number of people who we recruit into our business. We have a relentless focus on doing that. I understand Richard Lyle’s point about companies making commitments. That is one of the commitments that we are more comfortable delivering against, and it is a great benefit.

Thank you. We will move on to a more specific area.

I will move on to the Gourock-Dunoon ferry service contract, which is relevant in my region. I am sure that other members will come in off the back of my questions.

In light of the lack of information from the Minister for Transport and the Islands on where we are with that, can you shed some further light? Specifically, has Argyll Ferries submitted a bid? We know that there are four unnamed participants on a short list for that service. After your answer, I will ask for some more specifics on the route and the nature of the contract.

On the specific question of whether we have submitted a bid, we have entered into the initial process, which was to qualify through the pre-qualification stage for the next round. We submitted a bid under the name of CalMac Ferries Ltd.

Is everyone clear on how the bid process works?

You can explain it, but I ask that you or Robbie Drummond do it as briefly as possible.

The bid process usually works like this. The initial stage, which is called by different names, is usually a pre-qualification stage. That is when the whole range of people who want to bid for a contract is brought down to a short list. That is the stage that we have been through, under the name CalMac Ferries Ltd.

The next stage is for the tenderer, in this case Transport Scotland, to issue what is called an invitation to tender—an ITT. On the back of the invitation to tender, the procurer will invite bids. The short list of parties will then have a period to submit their bids into the process. That might take anything from one to three months, depending on the size of the contract.

That is helpful.

One of the peculiarities of the Gourock-Dunoon contract is that there is a passenger service as well as a vehicle element. Our briefing note says:

“Bidders have been asked to tender for a passenger service, whilst being encouraged to provide an unsubsidised vehicle carrying service.”

That is quite a loose term. Do you have any comments on the relationship between the subsidised passenger service and the commercial viability of a vehicle-carrying service? I have had representations from various community groups on both sides of the river that are concerned about the nature of the company that is awarded the contract and whether there will still be a vehicle service, given that it cannot be subsidised under state-aid rules. Do you have comments or views on that issue?

As of today, the Gourock-Dunoon service is only a passenger service. The service down the road is a vehicle service. We have not seen the invitation to tender, so it is difficult to comment, but my understanding is that, once it is issued, it will be open for bidders to bid on either a passenger-only or a passenger and vehicle service.

The decisions that any bidder will have to make will be based on the passenger bit being subsidised—it can be paid for running the passenger bit—but the vehicle service having to stand on its own two feet and be profitable. That cannot be subsidised or cross-subsidised. Any bidder will have to go through the process of determining whether it can put on a vehicle service and make it run profitably, when there is a very competent operation down the road that is already running vehicle services. It is difficult to comment further until we see the shape of the invitation to tender.

10:00  

Can you confirm, for the record, that you have submitted a bid for the passenger-only element and that you have yet to establish whether you will submit a bid for the vehicle element?

No—we have not submitted a bid yet. All that we have done is pre-qualify. To pre-qualify, a bidder must demonstrate that they are financially sound and that they have the necessary competence and capability. On that basis, the procuring body selects the companies or individuals—in this case, there are four—that it thinks are best placed to offer the service. We have not done any more than pre-qualify.

Okay. I think that one of my colleagues wants to ask a specific question about the prerequisites of the tender.

Convener, I am happy for Jamie Green to finish his line of questioning before I come in.

Okay. I have a brief question about the requirements to have half-hourly services at certain peak times and to use vessels that are a minimum of 40m long on the route to make it a robust service. I now understand that you have not submitted a bid. What are your views on those two parameters for the tender process? Do you have any thoughts on whether those things are achievable or doable?

Anything is achievable or doable; it is a question of how much you are prepared to pay for it. You asked about the requirement to use a 40m boat. I currently run a 67m boat on that route.

For clarity, the reason why no bid has been made is that there is nothing to bid against. Once we see the shape of the invitation to tender, we will make a decision. We are talking about a procurement cost of £30 million for a 40m boat, which is a big cost. That is worth noting. If the invitation to tender says to provide a 40m boat and a half-hourly service, we will calculate how much that costs. That is how we would put our bid together.

Thank you.

I am a Glasgow MSP and I use the ferries occasionally, although I am not that familiar with them. It puzzles me—I think that it would puzzle my constituents—why, when we have a stand-alone commercially viable ferry service that operates roughly between Gourock and Dunoon, we are even thinking about subsidising another one. When it comes to the bus services in Glasgow, for example, if there is a commercial route, we cannot have a competing subsidised route.

I am not sure what you want me to say about that. I run a business, and if someone puts out a contract, I will bid for it. The decision about whether to put out a contract is not ours to make.

I accept that that is a policy question.

I have another question, which you might not be able to answer, either. If I had a pot of money for a subsidy, should the first thing on the list be what, in effect, is a second ferry between Gourock and Dunoon? Perhaps your service has some specific benefits. Is it better than the other service because it is more town centre to town centre and it links with the railway? Is that part of the issue?

Yes. I will be brief. The passenger-only Gourock to Dunoon ferry serves the railhead at Gourock and is a town centre to town centre service. The Western Ferries service, on the other hand, is a linkspan to linkspan service that is predominantly geared to driving traffic. The Gourock to Dunoon service provides a ferry between a railhead and a town centre. That is how it is set up.

How do the passenger numbers compare at the moment?

I do not know about the figures for Western Ferries, because it carries predominantly vehicle traffic. We carry 300,000 to 350,000 foot passengers a year.

Thank you for answering that. We take the point that the question about why we need a subsidised service on the route is one that we will have to put to the minister when the opportunity arises.

Please do not tell him that I said that.

Stewart Stevenson and Rhoda Grant have questions.

This question may be seen to be rhetorical. Given that the town centre to town centre sailing is about 50 per cent longer than the linkspan to linkspan sailing that is operated by the commercial operator, is it not fundamentally difficult to make a vehicle service commercially viable when the cost of the sailing—which is where a lot of the costs are going to come—is 50 per cent higher without particularly obvious benefits? When there were two vehicle sailings, the commercial operator got something like 85 per cent of the traffic anyway. Is it not always going to be a very big commercial ask to make a vehicle service from town centre to town centre work?

Yes.

That is a fair comment. As I said earlier, when the ITT comes out, we will have to make an assessment about whether we will bid for the passenger element. If we want to bid for the vehicle element, we will need to know the commercial parameters of that and how we could make that work from a standing start of zero traffic. That would be hard.

Thank you, Martin, for your short answer to that short question from Stewart Stevenson.

My constituents in Dunoon tell me that they want a town centre to town centre service that is reliable and comfortable. One of the on-going issues has been that the service is not altogether reliable and, even when the boat can sail, it is not very comfortable and does not feel particularly safe. That is why some of the things that we have been talking about may end up in a tender document. Is there a way of ensuring reliability and comfort other than by saying that the boat should be 40m long and should carry cars as well, which would make it a bigger boat? Is there another way to address the concerns that may be more cost effective?

To be brutally honest, I am not sure that there is. We would never run an unsafe service, but the reality is that we run two small boats on the Clyde and there is some challenging weather on the Clyde. Also, to address Stewart Stevenson’s point, there are speed restrictions on the Clyde. That is a challenge unless we use a big, heavy boat. However, if we moved from using MV Ali Cat and MV Argyll Flyer, which cost between £5 million and £8 million, to using a 40m-plus boat, which would cost between £25 million and £30 million, there would be a substantive step up in costs.

There are things that we could do with the timetable; there are things that we do to manage the service better; and we are working to improve the facilities on our vessels. We would bid better this time than we did last time, and we would make improvements that we perhaps should have made six years ago. There is room for improvement, but some of it is at the margins. If you want a significant improvement, the cost will be significant.

Thank you. The next question is on a slightly different subject.

Good morning. I want to touch on the Scottish ferry services plan, which runs from 2013 to 2022. My question is in two parts. The first part is specifically about the Clyde and Hebrides service contract, which sets out a number of long-term developments such as additional sailings and continued improvement of winter services. Can you provide a progress update on the delivery of those requirements under the plan?

We have made a number of those on-going improvements to the services that we run to Barra, from Oban to Craignure, and to Colonsay, and the things that we are doing now are an iterative part of that. Timetable enhancements have been, in part, delivered—we are part of the way through that work—and we are deploying the vessels in line with that. As the new tonnage comes on, over the next two to five years, that will allow us to further develop the services. We are on track with our progress.

That is good to hear.

The plan also outlines a schedule of harbour works at Wemyss Bay, Tarbert and Gourock, and it proposes replacing four vessels by 2019 and six vessels by 2025. How are you getting on with that?

We are on track. The work at Gourock is 99 per cent done—we always end up with little bits of snagging—and the work at Wemyss Bay has been completed. I encourage anyone who has not been there to go there, given that road equivalent tariff is in place there and it is commutable from Glasgow. We are on track, as we hoped to be.

Good. What feedback from the public has there been?

We get mixed feedback, as members can imagine. One of the fundamentals is that we deliver a lifeline service, and the moment I start to close down infrastructure, challenges are created for communities that have only the ferry. I think that we managed Gourock and Wemyss Bay very well.

I do not know whether anyone here has been to our offices in Gourock. From my office, you can see when one of the bigger boats comes in—we usually run the small boats out of Gourock. When we closed Wemyss Bay and brought people from Bute to Gourock, it was, with the best will in the world, tough for people to walk up and down the gangplank with their shopping. We helped as much as we could. If you talk to people now, you will get very positive feedback. There are still things that we could do better, but the interface has improved. The work was done to time, which is a benefit, but there is still more to do. I think that the feedback has been pretty good.

Thanks.

I want to ask about MV Lord of the Isles. It had a period in dry dock and then a thinning of the structure was discovered and it is away again. Why was that not discovered when the vessel was in for maintenance? My understanding is that that thinning was discovered before Christmas, but the vessel ran until after the Christmas period. How crucial are those repairs if it was still able to run?

I wish that my technical director was with me now.

Has anyone been on MV Lord of the Isles? I know that Stewart Stevenson has, and I think that Rhoda Grant has. It has 5,000 tonnes of metal, and the spots of damage were about as big as the area around the top of the glass of water that I am holding up. Because of the severity of that damage, that work had to be done. A person could drive to the garage with a crack in their windscreen, but they would not carry on with a service. There was that element.

When vessels go into dry dock, they go in with a large work schedule of what we do, which we monitor. The challenge is that MV Lord of the Isles is a 30-plus-year-old vessel that has gone through major surgery in dry dock. That is deep, invasive work. When it came out, we found that there were some more latent issues with it that we needed to look at. Therefore, it is back in now, and it should be back out next week. That is my understanding from yesterday.

We can run with and manage a fault. It takes quite a while for our ships to go in and get docked. I could put in a vessel that needs a minor piece of work, but that could tie it up for a week, as it might need to go down or up to a yard to have that work done. A minor piece of work on one of our vessels is quite major, and such work could not be done while the vessel sat in the port. Therefore, MV Lord of the Isles had to go off.

I think that I may have made a long answer wrong.

10:15  

And it is due to be replaced by 2025—is that right?

I think that that would be a really good thing.

You are not giving a commitment. [Laughter.]

That was a nice try, and a good dodge from Martin Dorchester.

I have a couple of questions about the Mallaig to Lochboisdale service which, in the wintertime, is perhaps not as frequent as people would want it to be. There are also issues about reliability. I visited Mallaig harbour and its staff were unaware of any issues with the harbour, so I am not quite sure where the reliability issues come from.

Mallaig and Lochboisdale are the two most difficult ports to take a vessel into. Getting MV Lord of the Isles into Mallaig is one of the most difficult things to do. We have to be realistic about that. If you imagine trying to do a handbrake turn with a 90m vessel weighing 5,000 tonnes, that is not far short of what we do in Mallaig. The reliability of the service in the winter is affected by that, as going in and out of Mallaig and Lochboisdale is a real mariner’s challenge.

There is an area where we, as a company, need to be strong going forward. I will generalise slightly, but Rhoda Grant will know the issues. We spend an awful lot of money in berthing fees for people to keep updating their harbours for us so that we can make decisions for masters coming in based on very recent knowledge. One of the challenges is that, for a long time, we have had older ports and infrastructure and not everyone has perhaps been as on top of their ports as we need them to be, or as we need to be. We now have a summer service between Lochboisdale and Mallaig, which gives masters more confidence—they are learning about going in and out of those ports. I believe that the winter service will start to improve because the masters will have confidence from having gone into the ports so many times.

In addition, we are getting much better at ensuring that the ports and harbours that we are going into are getting dredged and repaired properly. That gives the masters confidence that when they go in they will not scrape the bottom. It might be worth sharing, for when there is a challenge for anyone across the network, that we operate on 1m clearance going into some of our ports and harbours. The bottom is 1m off the boat and we regularly come close to grounding. Most people think that it is the wind that creates a problem for us. It is not just the wind—it is also the sea swell and the sea state. When we go in, we have got very little clearance across the bottom of the boat.

We are doing a mixture of things that will improve Mallaig to Lochboisdale over the next few years. One of the biggest of those is the fact that we are doing the summer service now, which helps us for the winter service because we are getting a better understanding of the route.

Will you be listening to people’s wishes and aspirations for more ferries in the winter?

I always listen to them. Whether we can afford more ferries is a challenge for us.

The second issue relates to something that was said earlier. We run in the region of 5,000 empty sailings. Part of the reason for that is that, in the winter, the capacity in our vessels is colossal. Over a full year, we run at about 30 per cent capacity. It is almost like saying that the M25 is not that busy at 2 o’clock in the morning, which is true. In the winter, our vessels very rarely run full or half full. The issue is how we best manage that level of capacity. Where we can, we will, and we have done that pretty frequently.

I have a final question about the Mallaig to Armadale service. MV Coruisk was built for that run. More bespoke boats are being built, so that they fit with the harbours and the journey requirements. The ferry has been moved and, as you can imagine, the people in Mallaig and Skye are unhappy about that.

Last summer, a lot of businesses lost money because buses could not get across to Skye. Given that Mallaig was the last place where a bus could be taken over the sea to Skye on a ferry, which is what tourists want to do, it seems a bit perverse to remove the ferry from that route when it was built for that purpose. If the boats that are promised for routes are moved elsewhere, the service will not be improved. What comfort can you give to the folk in Skye and Mallaig that they will get their boat back?

I cannot give them the comfort that they will get their boat back. I have been pretty clear about the matter. This year, we are putting a two-boat service—MV Loch Fyne and MV Lord of the Isles—on the Mallaig to Armadale route. I could make a whole raft of points about that but, in general, we have put substantive support—marketing, commercial and other help—into that route. The number of people using the route was up year on year. There are challenges to how we market it. We have a limited number of vessels to deliver a limited number of services and we have to manage the network as best we can. We are committed to supporting the Mallaig to Armadale service. We regularly meet local residents and talk to them about some of the issues.

Skye is a great tourist destination. We have put in place a robust service there for this year. We need people to get behind the service and to support it as best they can and we will support them as best we can. We have put the best service that we can on that route currently.

I will interrupt at this point. I am grateful for that full answer and, because I have an interest in Skye, I perhaps let you go on longer than I should have. We are quite tight for time, so I would urge everyone to keep the questions and the answers as short as possible.

Gail Ross has a follow-up question. We have four questions after that and a limited timescale.

If you cannot answer my question now, I would appreciate it if you could provide a written response to the committee.

On the Mallaig to Armadale route, you operated a single vessel in 2015 and three vessels in 2016 and you will operate two vessels in 2017. What is the difference in operating costs in those three years?

I would have to come back to you on that.

I would appreciate it if you could.

I am happy for there to be a written answer to the committee on that issue.

I will combine two questions. How does co-ordinating your timetables with rail or bus services—for Ardrossan and Largs it would be rail; for somewhere like Kennacraig it would be bus—work and are there penalties for either side if you miss each other?

We work very hard to try to make sure that we are co-ordinated, and we spend a lot of time working with communities and trying to match up the rail and the bus timetables with our services. That is not always possible, but we try as hard as we can to do that. One of the—

Do you set the ferry timetables first and expect the trains to fit in—or vice versa—or is it not as simple is that?

It is not as simple as that.

You do not need to go into all the detail.

We would like it to be that simple.

Clearly, we cannot demand that rail matches our services, so there is a discussion—a negotiation—with other transport operators. The discussion involves communities. In our bid, we made a commitment to appoint a full-time transport integration manager. Their full-time role will be to work with the other transport operators and communities to try to ensure that it is as connected as it can be.

If the train is late and you wait for it, is there a penalty for you?

Potentially—it depends on how late it is and how long we would be delayed.

How our contract works is that we are penalised when we fail to meet our reliability targets, when we do not sail, and we are penalised on punctuality grounds. For the shorter routes, the penalties start when we are five minutes late; for the longer routes, the penalty start time goes up to 20 minutes. There is a penalty regime if we sail late. Clearly, waiting would have an impact. It would also impact on the passengers, so it is not as easy to say that we would wait on the train, because there might be other passengers impacted with further and on-going transport and connections.

That is fine.

The other area that I want to touch on is disability. Clearly, you are running quite big ferries and quite small ferries. I was on Muck and Eigg not so long ago; the boat goes in and the wave comes across and you jump to avoid the water. Obviously, if you are in a wheelchair you cannot do that.

Where are we on disabilities? Is there a limit that you cannot go beyond for the smaller islands?

Yes and no. We work closely with different organisations to improve access, but the reality is that the ferries are 35-year-old pieces of kit and they were built in different times. We incorporate access into new build when we can.

If you have been on Muck and Eigg, you will know that, locally, islands and communities find their own ways to deliver access, and we work closely with them. The nature of some of the islands that we go to and of the infrastructure means that it is difficult to change things.

In our bid, we made a commitment to spend significant amounts of money on improving the facilities in the vessels and ports and we are running equality impact assessments to see what we can do at a reasonable cost.

It is always easier with the bigger boats in the bigger harbours; the smaller boats and smaller ports are more difficult.

Yes, that is right. We are running impact assessments and are committed to spending some money. We are trying to do what we can.

It would be useful to have an update on that when you have come to decisions. The whole aspect of access is important.

It is an experience to go on a ferry. I would love to go to all the places that Rhoda Grant and John Mason have mentioned. You see the films of people going “doon the watter”, as they used to say. It is a wonderful experience and I have promised myself that, when I retire, I will go round Scotland on your ferries to all those wonderful places.

How do you take the views of your passengers and freight customers, and how do you report on the actions you take in response to what people say? How do you tell customers how you will improve the service?

We do what you would expect all transport operators to do. We run surveys and focus groups and capture passenger experiences. Any committee members who represent areas on the west coast will know that our customers are not shy in coming forward and seem quite familial. We get a lot of feedback locally that people send us. We capture that and send it back out to people. We attend regular ferry user groups and take feedback, not only about timetables but about the experience and what can be done to improve it.

We do standard benchmarking against other operators. We look not just at other ferry operators but at who is the best at what they do in other areas. We look at what Virgin Atlantic is doing on planes, for example.

We do all the bog-standard things—surveys, user groups, focus groups. We have much more community activity and engagement than most other organisations do. To go back to Rhoda Grant’s point, it is good and bad depending on the wish list that people hit us with.

The point is that you are part of the community and like to blend in with the community.

We do that when we can.

Thank you. That concludes the questions, although we had a few more that we wanted to ask you. Before I address those, does Martin Dorchester or Robbie Drummond want to make a brief closing statement to cover anything that we have missed that you would like to bring to our attention?

Thank you for being so gentle with us, which we appreciate. On the point on timetables, there is a nuance that should not be forgotten, which is the tide. One of our challenges is that if a boat hangs about too long, it will not get out of the harbour. That is an interesting debate to have with the train people.

Will someone from the committee trigger a request for the things that you have asked us for, or do you want us to take the points away and feed material back?

The clerks will write to you with a list of the questions to which we are expecting answers. We may add one or two more that we did not ask today because of the timing.

In five years of running CalMac Ferries Ltd, I have found that it is a simple but complex business. Do not be afraid to phone and ask us anything. We are happy to share what we do and any information, if it helps to generate a better understanding. Robbie Drummond is more open than I am, but we are a pretty open organisation. Please feel that you have an open invitation.

Thank you both for coming; the committee will engage further with you this session, as we become clearer on things that the Government is doing.

Thank you for the invitation to spend time with you. Some committee members may be worried about the handbrake turns and small clearances that are involved, and we may avoid those particular routes. We would like to engage with you. Thank you for the evidence that you have given us this morning.

I will suspend the meeting to allow the witnesses to change over.

10:30 Meeting suspended.  

10:35 On resuming—