The company, whose only other route is across the Clyde to points near Gourock and Dunoon, is planning to take the publicly owned Caledonian MacBrayne head on, running in direct competition between Ardrossan and Brodick.
It will be the first commercial challenge to be launched on a lifeline service in CalMac’s Clyde and Hebrides network for more than 40 years, although there was short-lived competition from another company over freight between Lewis and Ullapool nine years ago.
In an exclusive interview with the Herald, Gordon Ross, managing director of Western Ferries, said the company is convinced the European Commission report into the Scottish ferry industry will prevent CalMac using its subsidy to fight off a commercial challenge on the Arran route. In particular he said it won’t be able to use its public support to reduce prices in the face of a challenge from Western, or seek more money to increase the frequency of its sailings.
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Mr Ross also believed the report, which points to the public subsidy for CalMac’s Gourock/Dunoon service being incompatible with European regulations, made it more likely that Western will tender for the service with a passenger only vessel. But it is the plan for Arran which will attract most attention.
Mr Ross revealed that moves have already been made to design a new vessel for the route that would mean a new service could be introduced in early 2012. But it could be earlier if a suitable vessel can be found on the charter market. Despite the five, 55-minute each way, return sailings a day that CalMac provides, he is convinced there is constrained demand and island businessmen agree. Higher frequency and lower fares will be Western’s strategy for the route.
He said: “We are taking positive steps in designing a new vessel to better determine the operational costs of providing a commercial service to Arran. We are absolutely committed to the idea.
“Western Ferries has a very sound business model. We have been providing commercial ferry services on the Clyde for about 36 years. Now we are looking to take to Arran those elements of that model which have allowed Western Ferries to run a commercially successful service against a heavily subsidised service provided by CalMac.”
It has long been known that Western Ferries wanted to expand beyond its operation between Hunters Quay and McInroy’s Point, a couple of miles from Dunoon and Gourock respectively.
The company’s roots are in the late-1960s when a group of businessmen challenged David MacBrayne’s (later Caledonian MacBrayne) Hebridean hegemony by introducing a service to Islay that pioneered roll-on roll-off ferry services. It ended in 1981 but, ever since, it has looked to westwards from its highly successful Gourock/Dunoon operation.
Mr Ross said: “From talking to the people on Arran and from our own researches, I am convinced there is a significant level of unmet demand. Visitors and locals are simply unable to travel because they can’t get their cars on the ferry. That is particularly frustrating for the locals and for the local entrepreneurs who want to grow their businesses, notably in the tourist sector.
“It is clear that the demand in Arran is for a crossing between Ardrossan and Brodick, so we are looking to go head to head in direct competition to the CalMac service. Our approach to the Gourock-Dunoon route is based on high-frequency (32,000 sailings a year, a long working day and cheaper fares.
“Taking that same approach to Arran, I am hopeful we can undercut CalMac, who will be charging £41 a car single at the top end and £5.60 a passenger this summer.
“We might also think about copying the fully integrated bus service we operate with McGill’s Coaches, which allows people to board a bus in Dunoon town centre and get off in Glasgow and vice versa on the way back. It now represents 20% of the passenger market between Gourock and Dunoon.”
The EC report states that CalMac would “infringe the provisions of the public service contract if it were to unilaterally and unjustifiably reduce prices to drive existing competitors out of the market or to foreclose the entry of potential competitors.
“Moreover, no additional compensation can be claimed by CalMac for any reduction in revenue arising from discounts or reductions in the prices established in the published tariff schedule. This also prevents possible anti-competitive price behaviour”.
It adds it would be another distortion of the market if CalMac was automatically eligible for increased subsidy to add new routes or significantly increasing frequencies.
Mr Ross added: “This means that for the first time there is a level of protection with regards to any new competition.
“CalMac are restrained from using additional subsidy to reduce their prices to undermine commercial competition, nor could it increase its frequency if it was to deny Western Ferries access to publicly owned assets.
“Moreover, I am certain that the Arran community would not be happy if a new service providing additional capacity and cheaper fares was to be undermined by anti-competitive practices funded by great amounts of public subsidy, especially at a time when the public purse is under so much pressure.
“I have evidence that Western Ferries’ service to Islay was undermined back in the 1980s by CalMac’s ability to offer substantial discounts to hauliers.
“If Western Ferries had this level of protection back then, I am certain that the current framework of Scottish ferry services would look vastly different.”
Alistair Dobson, owner of Arran Dairies, a director of Visit Arran and who is involved in the Taste of Arran Group said: “We have five return sailings to the island a day but it is nowhere near as many as Rothesay. Arran needs two vessels.”
A CalMac spokesman said: “It would not be appropriate for us to comment on Mr Ross’s plans.”