Chapter 8 The Eternal Conundrum of Greek Coastal Shipping

CHAPTER 8

THE ETERNAL CONUNDRUM OF

GREEK COASTAL SHIPPING

Maria B. Lekakou

ABSTRACT

This chapter analyses the reasons that have led to eternal difficulties in

developing an efficient and effective Greek coastal shipping system. Being

crucial for the national cohesion, the effectiveness of coastal shipping

services has been an issue of major importance that has captured the

interest of both the Greek state and its citizens. The analysis focuses on

the interplay of oligopolistic market features and ineffective state policies

that has resulted in an unstable coastal market and has undermined the

quality of the supplied shipping services. In particular, it discusses the role

of an intervening state in shaping the market (i.e. by controlling entry,

fares, safety rules and intervening in routes, manning and duration of

employment). It also examines the main economic features of the coastal

shipping market, which are those of a regulated oligopoly (i.e. a large

number of individual users who express a flexible, heavy seasonal, steadily

increasing demand; asymmetric information, mainly due to managerial,

training and research deficit; the absence of auditing, high institutional

and economic barriers to entry; limited mobility of coastal companies and

indivisibilities). Then the chapter focuses on the essential characteristics

that a passenger transportation network with a strong public interest has

to fulfil (i.e. system accessibility, affordability, safety/security, quality

requirements, etc.) and the limited extent to which these criteria have

Maritime Transport: The Greek Paradigm

Research in Transportation Economics, Volume 21, 257–296

Copyright r 2007 by Elsevier Ltd.

All rights of reproduction in any form reserved

ISSN: 0739-8859/doi:10.1016/S0739-8859(07)21008-X

257

dx.doi.org/10.1016/S0739-8859(07)21008-X.3d

MARIA B. LEKAKOU258

been applied as pre-conditions for developing a modern and efficient

Greek coastal shipping. The emphasis is on the absence of a systemic

approach that would take into account all the constituent parts of the

coastal transport (network, market monitoring, auditing, ships, ports,

infrastructure, stakeholders, etc.) and would act as the driving force

towards the modernization of the coastal shipping services.

8.1. INTRODUCTION

The development of coastal transport services has been an issue of majorimportance for a long time and has captured the interest of both the Greekstate and its citizens. Greek coastal transport has played a crucial role innational cohesion in various respects. From a geographical perspective,coastal transport connects mainland with islands. From an economic andsocial perspective, sea ferry services influence the population levels of theislands, provide opportunities for economic development and enhance theislanders’ quality of life.

This chapter analyses the reasons that have led to eternal, majordifficulties in developing an efficient and effective Greek coastal shippingsystem. The analysis focuses on the interplay of oligopolistic market featuresand ineffective state policies that has resulted in an unstable coastal marketand has undermined the quality of the supplied shipping services. Inparticular, it discusses the role of an intervening state in shaping the market(i.e. by controlling entry, fares and safety rules and intervening in routes,manning, duration of employment) in the absence of the user of the services.

The chapter provides a qualitative assessment of the liberalization of thecoastal market. Greek island cabotage was opened up to Europeancompetition in 2002. Greece speed up its decision to liberalize its coastalservices, as according to the European Regulation 3577/92, its exemptionwas prolonged until 2004.

The assessment is principally based on the level of competition and theusers’ satisfaction. The main conclusion drawn from this analysis, is theexistence of highly concentrated markets and the users’ dissatisfaction fromthe way that liberalization is implemented.

The chapter discusses these research findings, vis-a-vis market structure,competition and (de)regulatory developments, aiming to conclude on thepotential of a framework that would satisfy all the actors of a service withgeneral economic interest. This crucial procedure has already begun but

The Eternal Conundrum of Greek Coastal Shipping 259

serious institutional and structural transformations need to be done since aserious managerial and knowledge deficit still exists, causing significantasymmetry of information among the main players of this ‘‘fragile’’ system.

8.2. HISTORICAL BACKGROUND

For Greece, coastal shipping has always been an essential means oftransportation. In fact, it would not be an exaggeration to say that in thepast, maritime transport was responsible for binding the islands and themainland together as one nation.

In the Greek case, coastal shipping has become a complex network ofmainland-to-island, island-to-island and mainland-to-mainland connec-tions. Greece is characterized by an extensive coastline (14,854 km) and aninsular complex, which includes 3,500 minor and major islands, representing19% of the Greek territory and 14% of the Greek population. Theseparticularities have determined the historical course of coastal shipping,fully diversifying it at the same time from the evolution of the Greek ocean-going shipping. In short, coastal shipping has been of major importance tothe development of Greece, and the issues surrounding it have been closelyfollowed both by governments and the citizenry.

Passenger shipping has undergone many changes since the establishmentof the modern Greek state in the early 19th century (Lekakou & Fafaliou,2003). From the liberation and formation of the Modern Greek state (1821)and on, the market for coastal shipping services has taken various forms.The market was characterized by a state monopoly from the Liberation upuntil 1892, and again right after the Second World War up until 1947. Therewas also a period of ‘‘perfect competition’’ (1892–1932), which ended up indestructive competition, according to the classic Schumpeterian analysis,resembling the problems caused by unregulated railroad transportation inthe turn-of-the-century America. As a result of the uncertainties caused bythis completely liberated coastal shipping market, the state clamped down in1932, regulating primarily the ships’ age and the routes allowed, in order toreduce ‘‘destructive competition’’.

The end result of state monopoly, perfect competition and regulation wasthe formation of a compulsory joint venture, in 1938 the ‘‘Coastal LinesJoint Administration’’, in which all coasters were incorporated. It shouldalso be mentioned that alternatives were put on the table during thistransitional period. Two proposals for a private monopoly were promoted,the first in 1934 on the part of an Anglo-Hellenic Group, and the second in

MARIA B. LEKAKOU260

1946 on the part of the famous Greek shipowner Aristotle Onassis. Bothproposals were finally rejected on the grounds that they were assesseduneconomic and that they did not adequately serve and protect islanders’-welfare.

Since 1947, coastal shipping has been an industry that is highly regulatedby the state. That being said, state intervention has not always had the samequalitative features. The government passed the Public Maritime Law Codein 1973, and in 1976 enacted Presidential Decree N. 684.

These regulatory instruments were of particular importance to the pre-vious regime. Explicit reference was made to entry and exit barriers andprice fixing. State intervention was justified on the grounds of preventingdestructive competition, although such Schumpeterian terminology was notactually used by the legislators.

The state controlled many aspects of coastal services provision throughlicensing, price-setting and the definition of the various elements of thequality of service.1 State intervention had traditionally been promptedby the ‘public service’ character of coastal shipping but had also drawncriticism – and even local protests – due to ineffective service provision. Thiswas blamed in turn on ineffective policy and the preservation of a state-regulated oligopoly; this was characterized by a small number of maritimecompanies with close operational links who served a large number of usersdevoid of any bargaining power and with the aims of producers being inconflict with those of the users.

While profit maximization and market position stand as the goals ofprivate coastal shipping companies, islanders have historically regardedcoastal shipping as an essential service for maintaining all aspects of socialand economic activity. The lack of users’ satisfaction was manifested in avery practical way, which was the mobilization of island populations tocreate their own, locally based and financed, shipping firms. Namely, thecustomer corporation is one whose primary objective is to produce servicesof the quality demanded by its customers at the lowest possible prices. Butsince it will operate in a competitive capital market, it will be obliged toconsider the interests of investors in doing so (Kay, 1996).

In the morning of December 8th, 1966, the ship Iraklion sank sailing fromChania to Piraeus and 250 people were lost (Archontakis & Vavouras,1997). The accident was attributed to manufacturing defects and improperlashing of a vehicle onboard. The heavy climate of sorrow and indignationcaused by the tragedy, was the background on which the idea for a collectiveperspective on the coastal transport issue was developed. All these tragiclocal developments finally resulted in 1967 in the creation of ANEK Lines


(Maritime Company of Crete S.A.), while in September 1970 the shipKydon, the first ship ever owned by a consumer-based company, was putinto service (Archontakis & Vavouras, 1997). The Chanean model wasfollowed by many other islands and towns: Iraklion, Mytilini and Naxos in1972, Thassos in 1974, and then a long list of island and coastal towns wasformed including Samos, Chios, the Dodecanese, Symi, Zante, Rethymnon,Lassithi, a list which constantly expanded (Archontakis & Vavouras, 1997).These customer corporations have aimed at bridging the gap between thelevel of services private companies were eager to provide and the needs oflocal societies (Lekakou, 1994).

Although omnipresent at all levels, state regulation was not considered ingeneral, as an effective mechanism in matching provision with user needs. Inthis context, the emergence of local initiatives was the only possible outcome(Lagoudis, Lekakou, Pallis, & Thanopoulou, 2006).

It is worth mentioning that regulatory intervention of the state in the fieldof transport overall is not a Greek phenomenon but rather an internationalpractice. As regards Greece, the role of the leading carrier is by rightattributed to the coastal shipping transport. This is mainly due to both thegeological nature of the country (many islands, and moreover the mostsignificant urban centres located nearby the coast) and the existing capacityin the sector (maritime tradition of Greeks), as well as the physicalmorphology of the country (naturally sheltered seaports). It should beunderlined though, that despite the more crucial role of the coastal transportas compared to those of the land and air transport in Greece, in the courseof time the latter two have experienced a more stable market structure anda more comprehensive institutional regime than coastal shipping.

To sum up, a key element in the nature of the Greek coastal transport,which at times influenced the type of state provision, is that coastal servicesact as ‘‘arteries’’ through which the whole country is expanded andcompleted, thus constituting a consistency feature for the cohesion of thenational space. However, although the nature coastal services as a ‘‘publicgood’’ has caused the long-standing state’s intervention, at the same timeit has raised social awareness and mobilization due to ineffective policyprovision.

8.3. THE INSTITUTIONAL FRAMEWORK

As previously mentioned, state intervention in transportation markets is nota phenomenon unique to Greece, but has been almost standard practice in

MARIA B. LEKAKOU262

all transportation markets. In the USA, the regulation of transportationbegan in the 19th century. In fact most of the economic theories of regulationhad as their starting point the experience of transportation markets (Kahn,1991) with regulation first being applied to rail transport.

Perhaps it is worth spending a moment on this phenomenon. Why is itthat transportation apparently requires some government regulation if weare to prevent monopolistic outcomes? Firstly, transportation is animportant market which affects the economy as a whole. Secondly, thesemarkets are characterized by high-fixed costs and extremely low marginalcosts (Johnston, 1960). For a ship, an airplane or a train, an extra passengercosts practically nothing. Yet in a perfectly competitive world, marginal costpricing at close to zero would lead to a firm operating at a loss. This isexactly what happened in the market of railroads in the US at the turn of thecentury, and the train companies themselves demanded for regulation as away to prevent extreme price-cutting.

In the last 25 years (1976–2001) the relationship between the Greek stateand the private shipping sector can be characterized as rather unhealthy.Because licenses were assigned by a procedure that was not very transparent,shipping companies vied for power and access to the Ministry of MercantileMarine (MMM), and depending on the particular constellation of politicaland private power, the minister himself (so far only male) had the upperhand, while other times the state appeared to be supporting specific privateinterests. It is in line with the tradition of the literature on regulation, wherethe regulated companies managed to capture the regulators–though not allof the time.

Further distortions occurred because most prices for transportation werecontrolled by the state. Not only prices but also shipping routes and timeslots were the prerogative of the state. In short, the state controlled bothprices and quantities, which is not a positive situation for generating ahealthy market. To make the whole thing work, the MMM had to spendmuch time and energy on ‘‘planning out’’ the complex network of islandtransportation, trying to satisfy both the needs of the islanders, the tourists,as well as being concerned about the shipping companies themselves andtheir rivalries. However, without having sufficient data and an establishedmonitoring scheme, everything was based on the gained experience andeternal negotiations. Yet the market was changing and it was not clear if thestate could incorporate the changes properly.

Over the last decade mainly before the abolishment of cabotage, studentsof the domestic shipping sector have witnessed a lot of rather strangebargaining situations. Shipping firms and shipowners look to the Ministry


for solutions to their problems rather than worry about competition. Energyand resources were spent on searches for bureaucratic ways to blockcompetitors from receiving licenses for specific routes. Rather than competeagainst each other, owners jockeyed for influence with the minister or withdecisive civil servants within the Ministry itself.

Yet, long before the new deregulated framework took effect soon after themillennium, it was apparent that the locally based shipping companies werefacing diverge fates. On the one hand, due to different sizes and patterns ofdemand, the Crete-based companies of this type went public. Via theirlisting in the Athens Stock Exchange, they were successfully transformedfrom stakeholders’ to shareholders’ firms. On the other hand, those firmsserving various other Aegean routes found themselves at best in financialstraits, and at worst with their fleet seized due to the size of their liabilities(Lagoudis et al., 2006).

Changes of the national institutional framework have been the result ofthe implementation of a European Union Regulation 3577/92, aiming atthe abolition of any cabotage restrictions in all EU member states. Greecewas the last EU member state to implement this rule that was adopteddespite the preferences of successive Greek national administrations (seePallis, 2002) and eventually changed competition terms. Coastal passengershipping services in Greece became open to EU-flagged ships which areallowed to compete without licensing in all major routes – though ‘‘publicservice’’ contracts are provided for ‘‘lines of low commercial interest’’ – andwith only minimal state intervention as regards annual engagement andprice setting for economy fares.

Traditionally, the exclusive right of the national shipowners to providecoastal services has dominated legislation on coastal shipping. Following a‘liberalization wave’, the EU agreed in the early 1990s to the removal ofrestrictions in the provision of cabotage services (EU Regulation 3577/92).The new European regime put priorities on the provision of regular,affordable maritime transport all year round to all inhabited islands and theprevention of destructive competition and predatory pricing. Interestingly,the abolishment of cabotage in the EU creates the need to adjust via fleetrenewal and modernization, even though it has increased pressures for theGreek flag (Lekakou & Pallis, 2005). These adjustment pressures aredirected towards both product innovation, which is the improvement of theprovided services, and a process innovation, implicating entrepreneurshipand reorganization of the ways coastal services are provided.

Under the new regime, it is sufficient for a shipping firm to formallyexpress an interest for specific shipping routes, with the provision that the

MARIA B. LEKAKOU264

said party will serve that route all year round (10 months minimum). In theGreek case, this provision ensures the supply of transport service evenduring the off-season period. This might be considered as an economicbarrier, since off-season provision of services often does not cover costs forthe shipping firms. Yet, this guarantees continuation of the service andenhances social cohesion.

Because of the new regulatory regime, however, the state is no longer ableto prevent newcomers from entering the market. The state wishes topromote a sustainable market2 and ensure competitive practices. This ineffect, is part of the implementation of the aforementioned EU regulationpromoting maritime competition at national level. Firms are now asked tobid openly for licenses on an annual basis. Thus, entry barriers are seriouslyreduced. Firms have to act competitively to ensure continuation of theirlicense.

The first part of Law 2932/2001 predicts that from November 1, 2002, theprovision of maritime transport services is free to shipowners of the EUmember states or of the European Economic Space (EES) or of theEuropean Free Trade Association (EFTA) except Switzerland. The newinstitutional framework aims at the development and assurance of a healthycompetition and the public interest protection. Public service obligationscontinue to be imposed and a declaration of intent is predicted on an annualbasis.

Regarding the fares, they are defined and declared by the coastalcompanies. However, the state can have a justified intervention in specificcases in economy fares where public interest is ‘‘threatened’’ through theimposition of fares which make the transport of certain population groupsunaffordable. If healthy competition is distorted and conditions of‘‘agreements’’ and ‘‘concerted actions’’ for the determination of high faresor abuse of dominant position are created among shipowners, the role of theNational Regulatory Authority of Maritime Transport (RATHE accordingto the Greek initials), which was established under this new law, isdeterminant in examining cases of violation.

It is noteworthy that this law according to the fourth report of theCommission (2002) was considered innovative at a European level,especially at the point where it assigns the sector’s monitoring function toan independent Agency. However, the RATHE, was abolished in 2004 whenthe MMM chose the restoration of the coastal service monitoring to thecentral administration and the direct control to political power.

Finally, a procedure is allowed for meeting the transport needs of islands,for which there is no commercial interest, through the imposition of public


service obligations in the context of the proportionality principle and of theunbiased treatment along with the possibility to join exclusive servicecontracts lasting 12 years, according to a very recent change, from theprevious 5 years limit.

However, the main changes in Greek coastal shipping today refer inessence, only to the regulatory framework. While there have been somechanges on the supply side, demand traits remain more or less unaltered.When the institutional barriers to entry were removed, the protests of Greekcoastal shipping users about the level of services provided specifically in theAegean routes – excluding those to Crete – made the headlines. On thesupply side, services are still provided by the same – more or less maritime –companies, pointing eventually to limited firm rivalry in the market.However, in essence only the 1-year provision stabilizes the market andalthough this could be expected to create certain monopolistic practicesalong viable routes, in practice the market is so unstable and violent that nosingle dominant monopoly has arisen. However, the larger shipping firms doseem to operate along the lines of a classic oligopoly due to the capitaloutlay required. The characteristics of the market structure need yet to beconfirmed but taking into account that since the initial move towardsliberalization, there have been practically almost no entrants in the market.On the contrary, mergers and acquisitions of shipping firms have beenobserved as they adjust both to the new regulatory environment and torising costs (Lekakou, Papandreou, & Stergiopoulos, 2004).

In any case, the progress of market deregulation proved ineffectivein taming the idiosyncrasies of passenger services provided in the contextof flagrant traffic seasonality prevailing in one of the most historic seas.This was a surprise for those analysts expecting deregulation to solve allmarket problems. While protests were making headlines in the summer of2005, complaints started afresh and even took more severe forms in thenext year as the local societies affected threatened massive protests. Inmid-2006, when the peak season was beginning in earnest, the ‘‘coastalshipping issue’’ returned to haunt the Greek media and politicians. Thesummer of the islanders’ discontent ended in September 2006 with thedecision of prefecture authorities’ to complain to the European Courtof Justice for the presence of cartels restricting changes on the supplyside and, thus, any improvements of quality of service (Lagoudis et al.,2006).

The truth of the matter is that for Greece, the move towards aliberalized environment coincided with a downturn in the market – lesstourism, a major maritime accident, (Express Samina off the coast of

MARIA B. LEKAKOU266

Paros, September 2001), the decline of the Athens Stock Exchange, theincrease in oil prices and the general ‘‘malaise’’ since the dot com crash.Perhaps liberalization came just in time to absorb the shocks. However,neither the market nor the government were completely prepared for theeconomic shocks, partly due to low quality of management in the shippingsector which was used to functioning under the umbrella of an overly-protective state, and partly due to the state’s inability to adapt to thedemands of the new environment. An environment which the state itselfbrought about.

In order to preserve competition, according to the new regime thegovernment sometimes will have to ‘‘threaten’’ those firms which act aspredators against competitors. In this event, the government has a series of‘‘weapons’’ it can use to dampen anti-competitive practices–such as takingthe firm to the Regulator. Along with the new law on Liberalization, thegovernment also set up a National Regulatory Authority of MaritimeTransport (RATHE, according to the Greek initials). It is in accordancewith the recent European experience, where a major factor of growth in thecreation of National Regulatory Agencies was the process of liberalizationof state monopolies, which was engaged by the Commission in the late 1990sin the area of network industries (Damien & Petit, 2004).

Between 2002 and 2003 RATHE processed over 300 petitions, having todo mainly with pricing, anti-competitive practices and quality of services.A large number of the market’s experts and players believe that the lawneeds to move farther to lift the remaining state-enforced entry barriers. Infact, because the liberalization has so far been half-hearted, since it is beingput into practice by an administration that still thinks along the old modesof thought, many of the problems remain. In practice, newcomers to themarket are already facing difficulties in compiling and supporting viablebusiness plans.

Nevertheless, apart from this development imposed on Greece by the EU,there was also an inherent need for serious structural changes (Vlachos &Lekakou, 2001). These required appropriate policy decisions on the part ofthe government and the responsible ministry. It was recognized that Greekshipping services need to take a wider perspective. A study by the NationalBank of Greece (1998) suggested that what was needed was a focus on thequality of services (such as passenger/user satisfaction). This requiresadopting a systems approach, an approach which takes into account all theconstituent parts of the domestic maritime transport system of Greece(network, ships, port, infrastructure, institutional framework, shipyards,communication services, technological innovation, etc.).


8.4. GREEK COASTAL SHIPPING

Nowadays, Greek coastal shipping has become a complex network ofmainland-to-island, island-to-island and mainland-to-mainland connec-tions. The current system serves about 100 islands and includes 200 ports,which are located both on the mainland and the islands. Fig. 8.1 illustratesthe current Greek coastal passenger shipping system which consists ofpassenger (pax) and freight–passenger (ro–pax) vessels, mainland and islandports, and coastal (multilink) and ferry (single/short-link) lines.

The demand for these coastal services has also followed an almostconstant increase throughout the last two decades (Xideas, 2001). Shippingpassenger traffic in Greece exceeded 27.8 millions in 2000 – being aconsiderable part of the total national, international intra-EU andinternational extra-EU transport of passengers in the EU that has grown

Fig. 8.1. Greek Coastal Passenger Shipping System. Source: Chlomoudis et al. (2007).

MARIA B. LEKAKOU268

constantly since 1997 and passed 328 million persons through EU ports in2001 (Eurostat, 2003). In 2001, 19 million passengers, 1.7 million cars, 8,000buses and 600,000 trucks were transported by the main coastal lines. Inthe same year, 18.5 million passengers, 3.5 million cars, 66,000 buses and700,000 trucks were carried in strait-crossings. At the eve of the 21stcentury, the coastal fleet that served the domestic maritime transportsconsisted of 430 vessels, with a total capacity of 112,000 passengers, 21,000vehicles and 3,600 trucks, operated by 170 coastal shipping companies.

Half of the users of the main lines embarked and disembarked in theport of Piraeus. The demand for coastal services is characterized by anintense seasonality, showing peaks during the summer period, particularly inAugust.

The Greek coastal passenger shipping system consists of passenger (pax)and freight–passenger (ro–pax) vessels, mainland and island ports, andcoastal (multilink) and ferry (single/short-link) lines. Today, the systememploys ships of all types, such as mono-hull conventional open-deckand closed-deck vessels for passenger and passenger–vehicle transport,passenger and passenger–vehicle catamarans, passenger vehicle high-speedmono-hulls (HSVs) and passenger carrying hydrofoils.

It is developed through main and secondary coastal lines distributed innine basic island regions, as well as through straits crossings, which in totalprovide 1,500 connections between almost 40 and 100 mainland and islandports. With the exemption of a limited number of mainland connections,coastal passenger shipping in Greece covers the demand for passengerand ro–ro transport from and to the islands through the provision ofconnections between the mainland and the islands, as well as inter-islandconnections (Fig. 8.1, also Tzannatos, 2005).

Passenger movement in the 13 busiest coastal and 17 busiest ferry linesexceeds 90% of the respective overall movements, whereas the ratio of ferryto coastal passengers is about 3:2. Demand is highly seasonal peaking inJuly and August (ratio of summer to winter is 2:1) and there is a significantspatial non-uniformity in the qualitative and quantitative characteristicsof demand, depending upon the destination (e.g. urban port centres ofCrete versus rural island communities). Seventy per cent of the nationalpassenger transport demand is served through the Aegean network, which isfurther split to the Cyclades by 45%, to Crete by 25%, to the Dodecaneseby 15% and to the north Aegean by 15%. The Aegean network isvirtually of mono-hub structure based upon the Port of Piraeus, fromwhich 10 major coastal lines radiate and 35% of the overall coastalpassenger movement is performed (including the Argosaronic Gulf lines).


The Aegean network employs 70% of the coastal passenger ships operatingin Greece, being of all types and ages, from new buildings to 35 years oldwhere the upper limit of a ship’s operational license lied was in force tillAugust 2006.

Out of the 90 larger ro–pax closed-deck vessels (over 650 grt), about 70%are employed in the Aegean and distributed to the Cyclades by 40%, toCrete by 22%, to the Dodecanese by 13% and to the north Aegean by 17%,in an apparent correspondence to passenger demand. The establishment ofro–pax vessels as a dominant type is concurrent with the general trend ofintermodal transport promotion, whereas the high share of open-deckferries reflects the need to satisfy a high ferry-transport demand throughmany local and frequent short connections within the national network(Rio–Antirio, Piraeus–Aegina, etc. – cf. Tzannatos, 2005).

In the pre-liberalization period, the Greek inland maritime transportsystem was characterized by a number of ‘inefficiencies’ on both the demandand supply sides, which can be summarized as follows (Giannopoulos &Aifandopoulou-Klimis, 2004):

� High-seasonal variation in traffic volumes, with more than 80% of theyear’s demand concentrated in the summer period.

� Uneven geographical concentration of passenger flows with more than50% originating in the Athens/Attica region.

� Fleet of ships is ageing with approximately 70% of the vessels being morethan 25 years old in 2000.

� Low-capacity utilization rates: for long-distance lines, the annual averagecapacity utilization level is 50–60%; for medium to short distances (wherehigh-speed ships are being mainly used), the average capacity utilization isonly 30–35% and for the so-called thin lines to the small islands evenlower.

� Low reliability and disruption of services mainly due to weatherconditions, and frequent mechanical failures of ships which in thesummer months work ‘round-the-clock’ schedules without adequate‘dead’ times for maintenance.

� Suboptimal (from the ship operators’ point of view) operation due tomanning regulations and to the network characteristics – i.e. itinerairieswas ‘defined’ by the Ministry to include a number of smaller ‘non-commercial’ islands, etc.

� Inadequate port infrastructure, which suffers from low-capacity, low-quality installations and operational characteristics on both the sea andland sides.

MARIA B. LEKAKOU270

A positive development in close relation with the liberalization was therenewal of the fleet at the end of the 1990s. Today ‘high-speed’ shipsserve almost 40% of the island connections in the Aegean, and theirentry has decreased trip duration to less than 3 h for over 50% of theroutes, thus also making possible the increase in frequency of the coastalservices.

The quality of infrastructure in the ports is generally of low quality interms of both their sea and land areas. The majority of the problems relateto the following areas:

� Lack of passenger terminals (for ‘check in’ and ‘waiting’).� Insufficient protection against adverse weather conditions.� Limited connectivity to road networks and serious traffic congestionproblems.

� Relatively low use of information technologies, although as of 2000, allreservations and ticketing are made through electronic reservationnetworks.

� Lack of the necessary special mooring facilities for high-speed catamaransand ferries.

There is a need for more ‘rationalization’ of the Greek coastal shippingnetwork in a way that will fit in with the following points:

� Defining some islands or mainland ports as ‘hubs’ for the coastal system.� Securing connections for ‘‘hubs’’ with the ‘‘spokes’’ (regional) throughefficient and reliable feeder routes.

� Providing uniform and consistent levels of service all year round.� Offering reasonable prices for both passengers, vehicles and freight.� Providing a minimum of socially acceptable service to non-commercialdestinations (public service obligations).

In terms of these requirements, it is argued that a number of ‘mixed’ resultsshould be expected from the new liberalized regime.

First, in terms of the distribution of the demand and demand manage-ment, a higher concentration of services offered is to be expected along themain O-D pairs of the most popular islands. As a result of the increasedlevels of service there, such action should attract more ‘generated’ demand.Along the same O-D pairs, tariffs will tend to be reduced (due to increasedcompetition, according to the theory but depending on the market powerof the firms), a fact that will further attract more demand. In contrast(see Giannopoulos & Aifantopoulou-Klimis, 2004), the remaining


destinations should not experience any remarkable differences, on thedemand side, compared with the past.

8.5. THE STRUCTURAL CHARACTERISTICS OF THE

GREEK COASTAL MARKET

The analysis of the coastal shipping structural characteristics allows theprediction of the Greek market prospects. The coastal shipping marketpresents characteristics which lead to oligopoly markets and conditionsfound in other regular transport service markets (airlines) and in the linershipping as well:

A small number of suppliers. There are high concentration levels with smallnumber of usually interdependent enterprises in the main lines (1–4 in eachroute). A number of companies specialize in particular routes, oftenreflecting their historical roots on particular islands. A smaller number offirms, the ‘‘5 big ones’’, dominates the ferry industry (Figs. 8.2, 8.3, 8.4).But, in spite of a growing market in terms of demand, the number of playersis decreasing (Table 8.1).

A large number of users. There is a large number of independent users (50million passengers, transport enterprises, tourist offices) with a changeable,intensely seasonal coastal demand that increases over time (Table 8.2). Inaddition, transport flows are not balanced in the majority of coastal routes.Flows from Piraeus to the islands exceed those in the reverse direction.

Fig. 8.2. Market Shares of the Top Five Firms (Passengers–2005). Source: XRTC

(2006).

Fig. 8.3. Market Shares of the Top Five Firms (Private Cars–2005). Source: XRTC

(2006).

Fig. 8.4. Market Shares of the Top Five Firms (Trucks–2005). Source: XRTC

(2006).

MARIA B. LEKAKOU272

Low level of knowledge and information. There is a knowledge deficit,especially from the consumers’ side and asymmetry of information on behalfof involved actors (producers, users, port authorities, local authorities,central administration) with conflicting aims.

Cross-purposes among key actors. Companies aim at profit maximizationand at maintaining their share in the market. Users seek transport fordifferent reasons (professional, leisure, health, social, administrative, etc.)Finally, the state theoretically aims at the protection of the consumer, thepromotion of the coastal industry and the improvement of the overalltransport system. Asymmetric information has further been held to clarifywhy industries during the regulatory process, may be able to reverse

Table 8.1. Greek Coastal Market Development in Main Lines(1922–2005).

Year No. of Ships No. of Firms

1922 122a n/a

1930 86 32

1939 40 20

1941 3 3

1950 30 17

1960 35 18

1966 41 16

1976 41 18

1995 55 17

2005 70 16

Source: Processed results based upon data obtained from Ministry of Mercantile Marine.aServing ALL the lines.

Table 8.2. Passengers Carried by Coastal Shipping (1996–2002,in thousands).

1996 1997 1998 1999 2000 2001 2002

Transported passengersa 41,638 43,535 46,092 48,396 50,816 54,646 56,285

Passengers/milesb 105,568 110,357 110,481 110,481 116,005 130,269 134,177

Source: National Statistics Service data process.aTransported passengers=all passengers who embarked or disembarked at ports of a scheduled

line.bPassengers/miles=the number which results from multiplying the number of passengers

embarking at every port by the – in a straight line-distance in nautical miles of the destination

port.


regulatory policies to their advantage and capture a regulatory agency(Hagg-Goran, 1997).

Differentiated service. A service differentiated in terms of space andquality with every pair of geographical points defining a different transportservice and a special local market.

Institutional and economical barriers to entry. High institutional andeconomical entry barriers are investment cost, annual operation obligations,long preparation period, extended networking, and fees.

Low mobility. Limited mobility mainly due to pre-existing institutionalframework (license) and service differentiation per sub-market and the

MARIA B. LEKAKOU274

related prerequisites (ship type, port infrastructure, advertisement-agencyexpenses, etc.).

Indivisibility of supply. Ships with a given and ‘‘rigid’’ capacity, indivi-sibility, compared to the seasonal and volatile demand, which leads to highrates of excess capacity during off-peak period.

High-fixed cost, low incremental and almost constant and low marginal

cost (fixed to variable 3:1, and recently 3:2, due to dramatic increases infuel prices or 4:1 for newcomers with newbuildings). There are differencesamong carriers and their cost structures. Differences in the size, types andage of the vessels they own and differences in terms of the administrativeand managerial capabilities are among the many factors that will contributeto differences in costs across different firms as in liner shipping (OECD,2002), i.e. bunkers cost seriously differs between conventional ships andHSV (38% and 52% of the operation cost, respectively) (Union of CoastalShipowners (UCS), 2005). Serious differences in cost patterns existbetween the established companies and the newcomers due to capitalexpenses, networking cost, high-administration cost and the long periodof preparation (for a detailed information on newcomers cost structure,Annex I)

Distance-based fares. Pricing of services are mostly based on distance,and is strongly related with the old state – tariff, using the same method ofthe past: fare based on the distance and mainly on the operational cost ofservice provision and not on the demand or competition per city-pair. Thefirst state pricing formula instituted in 1926 was cost-based, with an almostuniform rate per mile. Cost-based tariff is that which passes the costsof the service to users without discriminating between passengers andthus penalizing the long-distance islands. First class passenger fares werefirst partly deregulated in 1980s. By the 1990s, however, the first class fareswere both cost- and demand-based. Such practice implied the cross-subsidization of third class passengers. It was also a plausible assumptionthat fares were fixed higher than those of the competitive equilibriumbut slightly lower than the monopoly level. This pricing policy did notobviously consider any explicit welfare calculations (Goulielmos &Lekakou, 1992). It yields a high-producer surplus and also renders highercost to the consumer. The consequent lack of incentives to reduce costsresults in economic inefficiencies. Given that competition, even after thebeginning of the liberalization process had not taken place in terms ofprices, other features gain significance, such as the time of departure orarrival for the same destinations, duration of a trip and sometimes qualityof service level.


8.5.1. The Coastal Market Concentration

Liberalization does not intervene in the ‘‘nature’’ of the specific market inorder to change it into a perfect competition market or to smoothenseasonality. This is also the case for liner shipping in the EU and elsewhere,where there has been widespread, but not total, theoretical and practicalagreement that the abolishment of the block exemption for liner conferenceswill not have significant overall impacts on capacity, or market structure.This viewpoint has been shared by both shippers and carriers. There issomewhat more disagreement regarding average tariffs, and especiallyregarding rate volatility. Greater impacts are expected on smaller trades,especially while market adjustments are being made. There is the potentialfor liner shipping of capacity withdrawals that would not be instantly filled(ICF, 2005).

The main purpose of introducing competition practices in Greek coastalservices is to cease state protectionism which the pre-existing systemincluded, aiming at the protection of the user’s interests. state interventionhas been replaced by regulation and this constitutes a clear structuralchange. This practice has a precedent in the liberalization of other industries-networks (energy-telecommunications) as well as in market monitoring ofpublic interest services. The role of the user in relation to the previous regimehas been upgraded through this regulation as well.

The market has all the makings for instability, and in fact recent deve-lopments have led to such an example. Under the old legal system, thegovernment was unable to prevent one of the existing major players toeffectively control (through interlocking directorships) the whole of privateshipping for the islands in the Aegean Seas. By controlling specific ships, themajor player controlled the routes since exclusive licenses were attached toships. It is odd to contemplate that a highly regulated market could end upin the hands of a single company, but research on regulated markets inAmerica points out to just such a possibility (Scherer, 1980). This is whathappened in Greece as well.

The end result of the near-monopoly has not yet been adequately studied,but there is a sense that the results are rather mixed. Monopoly leads tobetter service for some islands but also to serious monopoly practices forothers. In the Argosaronic complex of islands the quality of serviceimproved but in the Cyclades islands a number of islands received reducedquality of service. Yet some claim that this reduced quality was partof a strategy on the part of the monopolist to force the government toprovide the company with new licenses – in order to improve service.

MARIA B. LEKAKOU276

Following a serious exogenous shock (the serious maritime casualty of the‘‘Express Samina’’ in September 2000 with a loss of 80 lives) the systemcould not absorb the consequences. There was public outcry against boththe monopolist and the state itself. This led to a conflict between themonopolist and the regulator (the Ministry), so the previous institutionalframework collapsed and the monopoly reached the brink of bankruptcy.This resulted in new laws and in new companies that emerged from theincumbents and worked as a motivating force to speed up the process ofliberalization and of a new institutional framework. At this point, thecoastal shipping of Greece and in the Aegean in particular faced a greattransition. This presents an exciting opportunity for researchers andeconomists.

However, the data on the tariff rates and traffic provided by the stake-holders are unfortunately insufficient in order to fully address this issue. Toanalyse the competition of the coastal shipping industry, detailed historicalinformation is needed on the cost structure of the coastal companies, salesvolumes in addition to other market data which is somewhat more easilyavailable (e.g. supply, demand). Market shares and the overall level ofconcentration in a market normally give useful first information about thecompetitive situation in a market (Verouden, 2004).

Industry or market concentration (also often referred to as sellerconcentration) measures the relative position of large enterprises in theprovision of specific goods or services such as automobiles or mortgageloans. The rationale underlying the measurement of industry or marketconcentration is the industrial organization economic theory which suggeststhat, other things being equal, high levels of market concentration are moreconducive to firms engaging in monopolistic practices which leads tomisallocation of resources and poor economic performance. Marketconcentration in this context is used as one possible indicator of marketpower (Khemani & Shapiro, 1993).

The appropriate definition of a relevant ‘‘market’’ is crucial, and it is apre-requisite to the estimation of market shares. Studies on the industryconcentration are limited in coastal shipping except Philippines (Austria,2002), but examples can be borrowed from liner shipping or other industriessuch as aviation.

Market definition is the key to any competition assessment, so based onthe European experience gained from the airline industry, the Origin &Destination (O&D) approach (EC, 2003) and the CFI’s 2003 Greek Ferries

judgment (European Court of Justice, 1999), each route is considered as adifferent market. The maritime economic literature supports this choice


(Goulielmos & Gatzoli, 2004). But considering passenger markets, routes,modes of transport and time of travel may be examined. Other factors whichmay need to be considered include the time or season. On the other side,according to a comprehensive cruise market analysis conducted by the USFederal Trade Commission in 2002, a single cruise itinerary does notconstitute a market; rather, competitive conditions should be assessed in thecontext of a market that includes all vacation options or, minimally, allother cruise options. One of the reasons for FTC’s broad market definitionis its finding that cruise passengers are highly sensitive to price changes(GAO, 2004). However, cruise industry does not share the same demandcharacter with coastal scheduled services.

Market concentration is a function of the number of firms in a marketand their respective market shares. Various concentration ratios are used bygovernments and regulatory authorities and the most commonly usedmethod for calculating industry concentration is the Herfindahl–HirschmanIndex (HHI). This index consists of the sum of squared market shares of allfirms in the industry and ranges between 0 (perfect competition) and1 (monopoly). A smaller value indicates a more even distribution of sharesand thus less concentration.

Although HHI is a very accurate and easy heuristic quantifying marketconcentration, its implementation on the Greek coastal shipping market israther problematic because of the lack of public financial data. Apart from asmall number of big companies listed in Athens Stock Exchange, coastalshipping companies are not obliged to publish financial data due to thespecial tax system (tonnage tax) covering the maritime sector, overall thereis also an absence of any monitoring authority. Another way to estimate thecompanies’ market share is by calculating ‘‘transport power’’. As Tzannatos(2005) points, ‘the parameter ‘‘transport power’’ (TP) is introduced, as aperformance index for the ships of coastal passenger shipping as a measureof the fleet’s capability to produce transport work (TW ) in unit time (T ),according to the relationship:

TP ¼TW

T¼

passengers�miles

hour¼ passengers�

miles

hour¼ TC � V

where, TC is the ship’s transport capacity (number of passengers) and V theship’s speed (in knots)’.

Transport power can be considered an alternative market share indicator,especially after deregulation and the consequent absence of any barriers.While institutional barriers to entry have been removed, shipping companies’ability for mobility has been increased. They now have the freedom to place

MARIA B. LEKAKOU278

their units (ships) into selected markets (lines) aiming at profit maximization.If the strategic decision of placing a specific ship in a route proves to bewrong after a period of time (10 months), under the new regime, shipownershave the freedom to withdraw it and place it in a new market (route).According to these, ships transport power is a quite representative index ofmarket shares.

As aforementioned, replacing market shares with ships transport power isan alternative solution under the restrictions that research community facesin Greece. Implementing such a methodology cannot be accurate and underany circumstances has to be very precise and to take into account everyspecial characteristics of the market. In order to raise the reliability of theproposed heuristic, services frequency, one of the structural characteristicsof liner shipping, should not be ignored. As any intervention during thecalculation of the HHI is precarious and may lead to false results, frequencyhas to be incorporated into previous stages. However, its incorporationduring the calculation of the ships ‘‘transport power’’ is made and theentailed ‘‘relevant market shares’’ are estimated.

In every coastal shipping line, an x number of shipping companies mayprovide services on a weekly basis with an N number of ships. Every shiphas its own specific capacity and speed characteristics, variables whichdetermine its unique ‘‘transport power’’. As presented before, multiplyingthe number of passengers that a ship is able to carry by its speed measured inknots, results in ships ‘‘transport power’’.

Shipping companies provide services on a weekly basis. A ships’ transportpower for a specific route, though, has to be calculated on a same periodbasis, which especially for coastal shipping has to be a week. ‘‘Week ShipsTransport Power’’ (WSTP) is measured according to the relationship:

WSTP ¼ STP� A

where STP is a ship’s transport power and A the ships’ port calls on a weekbasis for the specific island port.

For every route, there is a ‘‘route’s week transport power’’ (RWTP), givenby the sum of the ‘‘week ships’ transport power’’ for every ship that providesservices on it, given by the equation:

RWTP ¼Xn

i¼1

TPi

where i is a ship and n the number of ships providing services in the specificroute.


‘‘Relevant ship’s market shares’’ for every ship, is the quota of the ‘‘weekships’ transport power’’, calculated as:

RSMS ¼ðWSTP� 100Þ=RWTP

100

Lastly, in order to estimate suitable variables applicable to the HHI, every‘‘company’s relevant market share’’ (CRMS ) has to be calculated. CRMS isgiven by the equation:

CRMS ¼Xy

i¼1

RMSi

where i is a company’s ship and y the number of different ships that thecompany has assigned to the specific route.

The heuristic of this calculation of the HHI, surpasses any problems facedin the Greek case. As such it is applicable in any coastal shipping route. Forthe purposes of this research, a small but representative sample of routes isselected. The selection was based on the author’s empirical knowledgeaccording to the transport traffic of each line; the common origin is Piraeus,given that Piraeus is the hub of the coastal ‘‘centripetal’’ network. Thecollection of data referred to the frequency of services and ships providingservices on the specific routes, has been done via the MMM.

Demand for coastal services in Greece is characterized by an intenseseasonality, showing peaks during the summer period followed by theaddition of a number of ships which mainly serve the so-called touristicislands as well as a more intense productivity. Competition scheme changesdramatically between the two periods, creating the need for observation andcomparison.

Two different weeks were selected, one referring to the summer period(17/7/2006–23/7/2006) and the other to the winter period (15/1/2007–21/1/2007), in order to implement the proposed heuristic. The findings clearlyshow that market concentration and competition change dramaticallybetween the two periods (Lekakou & Vitsounis, 2007). In Table 8.3, theHHI for summer and winter season is presented.

According to the US Department of Justice, markets in which the HHI isbetween 0.1000 and 0.1800 points are considered to be moderatelyconcentrated, and those in which the HHI is in excess of 0.1800 pointsare considered to be concentrated. By these definitions, the examined coastalmarkets are generally highly concentrated and at the same level as the

Table 8.3. Comparison of HHI during Summer and Winter Periods.

Route HHI

Winter period Summer period

Piraeus – Chios 0.532 0.516

Piraeus – Paros 0.687 0.436

Piraeus – Syros 0.571 0.377

Piraeus – Iraklion 0.593 0.565

Piraeus – Rhodes 0.483 0.420

Piraeus – Thira 0.758 0.297

Piraeus – Samos 0.509 0.534

Piraeus – Chania 1 0.533

MARIA B. LEKAKOU280

North American Cruise Market (HHI over 0.400) (GAO, 2004). Mostroutes also have fewer than four carriers.

A high level of concentration is possible to conclude to anti-competitivebehaviour and changes in market structure that could have a significantimpact on fares. Exercising market power is also possible in highly con-centrated markets, as the airlines paradigm shows. As the coastal industrybecomes more and more concentrated, the pool of potential entrantsshrinks. The ability of the large dominant firms to avoid one another in themarket and engage in conscious parallelism or strategic gaming increases, asin the airline industry (Cooper, 2001).

The findings are also consistent with the trend towards increasedconcentration in liner shipping that becomes more obvious as mergers hadtaken off (Thanopoulou, Ryoo, & Lee, 1999).

The cause that is underlying this process in liners is the increasedproportion of fixed costs among total average costs, which is also typicalfor coastal shipping. Management re-engineering will continue to demandinvestments in human capital, marketing, information technologies andtelecommunications as well as in capital-intensive port facilities and fasterships. All these will imply higher fixed costs versus ever-lower marginalcosts (Hoffmann, 1998). Economies of scope and scale also seem to limitthe degree of pure competition in most liner markets (Brooks & Button,2006).

If this is the process that the coastal industry will follow, given its publicservice character, the state needs to begin monitoring the market notcontrolling it. Citizens’ rights are protected not through price setting andquantity regulation but through effective regulation. A Regulatory Authorityhas to ensure competitive access to all lines, outlaw predatory practices and

Table 8.4. Country-Level Indicators of Regulation and MarketStructure in Coastal Market.

Regulation and Government Control Market Structure

Domestic regulation Number of registered coastal passenger

shipping companies 34

Existence of a domestic coastal

shipping liberalization programme

International regulation Number of major coastal companies

(carrying more than 400,000

passengers per year) 7

European Regulation 3577/92 on

freedom to provide services to

maritime transport within member

states

Market share of the largest carrier in

the domestic market 19.4%

Market share of the 5 larger carriers in

the domestic market 58.8%

Carrier concentration on domestic

market (Herfindahl index) (from

0.420 to 1)

Government control

Public service obligations on coastal

lines (all year service, approved

itineraries, frequency, manning, price

discounts)

Public service contracts on thin lines

Adapted from: Gonenc- and Nicoletti (2000).


provide consumers with direct protection from poor quality service and highprices (Cooper, 2001).

To sum up, Table 8.4 demonstrates all the critical indicators of regulationand market structure of coastal services in Greece that were previouslyexamined.

8.6. TESTING THE WATERS FOR PASSENGER

SATISFACTION

In view of the market characteristics discussed in the previous section, thefocus shifts to the level of satisfaction users get from the actual service

MARIA B. LEKAKOU282

provision. The ultimate measure of the success of a deregulation policy is itseffect on prices, or other welfare impacts, such as those from higher time,cost of travel and greater frequency.

The hypothesis that can be deducted is that the level of service provided issupposed to be tailored to this category of demand and to its characteristicsleaving the largest number of individual users with a ‘‘satisfaction deficit’’.

The non-price competition was the result of the stated preferences of theusers of the system in the pre-liberalization period. What they value most intheir choice of carrier was the time of the departure as well as the tripduration (Giannopoulos & Aifantopoulou-Klimis, 2004).

A survey among users in North-eastern Aegean, held during the summerof 2005 (Masvoulas, 2005; for more details see Polydoropoulou and Litinascontribution in this book) equally revealed a low level of the users’satisfaction from the provided coastal service. Respondents were askedto express their satisfaction in a number of criteria with the assistance ofa 7-point Likert scale, with 1 being unsatisfactory and 7 very satisfied.According to the findings presented in none of the top three ranked factors(frequency, safety, ticket price) obtain a high level of satisfaction by theusers (5.6, 5, and 4.9, respectively).

Notably, one of the main conclusions of yet another survey regarding theusers’ perception towards the level of ticket prices which was conductedamong the island municipalities of the Aegean and the Ionian Sea(Chlomoudis et al., 2007) put forward an interesting finding. Despite thefact that fares paid for coastal services are considered rather high whencompared to the quality of the services provided, the users were not opposedto potential further cost increases insofar as this increase would beaccompanied by an analogous increase of the quality of the servicesupplied. Frequency came up again among the top factors in this survey aswell as it came second only to cost.

This survey was conducted by a questionnaire that was sent to the LocalAuthorities of the island regions. The questionnaire was focused on mattersmostly concerning the price of the fares and the quality of the service. Thereare several matters that this questionnaire dealt with, such as the reliabilityof itineraries, the total duration of the journey, the quality of the ship itself,the quality of certain characteristics of the coastal shipping in Greece, etc.

On the matter of pricing, which is one of the most important for thepassengers, the participants stated that they are currently facing fares from10 to 30 euros in most cases. Surely, they prefer a price decrease but they arenot very optimistic about this, on the contrary, they expect increases on theprices of fares (see Fig. 8.5). Regarding the reliability of itineraries, the

48

31

Fig. 8.5. Expected and Desired Level of Fares According to the Islands Local

Authorities.


participants replied that they are experiencing a delay up to half an hour andthey do not anticipate that this will change. They certainly want moreaccuracy on the timetables, but they are not very troubled with a short delayup to 30min. The duration of the journey is certainly a matter that concernsall the habitants of the islands. The participants do not evaluate thisparticular aspect very positively. Their trip usually lasts from 6 to 10 h andsometimes more than 10 h. As it is expected, they want a significant decreasebut they do not expect any drastic change. All in all, the stance of theparticipants towards the current regime even after liberalization, cannot becharacterized as a positive or an optimistic one. It seems that they areparticularly concerned about the level of prices and the duration of thejourney. They are not pleased with the present situation and they expectstalemate or even deterioration.

MARIA B. LEKAKOU284

Evaluating the fleet and the services, the participants appeared unsatisfied.The main reason for that is the age of the ships. The costal fleet in Greece israther old with an average age over 20 years. The participants also believethat the maintenance is inadequate. These two in combination, affect thecomfort of the passengers and especially their safety feeling. On the otherhand, the participants stated that the rescue means are at a satisfying leveland the training of the crew at a very good level. Overall of course these twopositively evaluated characteristics cannot annul the whole negative image.

Regarding the system of the island transport, the findings of the surveyare revealing a rather puzzling image. Of course there are problemsconcerning the weather conditions and the prohibition of sail, as well as theport infrastructures and the connection with the ports (with cars and publictransportation). Finally, the participants express their discontent with thepassengers’ terminal in ports. However, there are several positive points thatthe participants outlined, such as the system of ticket reservation, thenumber of ships calls and the sources of information that are available eitherin ports or on ships or at the travel agencies.

The lack of competition in the industry costs consumers dearly. Instead,they endure higher prices and poor quality associated with the abuse ofmarket power. The dominant incumbents, according to the theory, can raiseprice, without risking entry and rely on excessive market segmentation torestrict price competition. The strategy involves finding mechanisms to sortcustomers into categories with different price sensitivities and then offeringhigher prices in the less-price sensitive category. Since they do not faceeffective competition, they do not feel compelled to improve quality(Cooper, 2001).

8.7. ASSESSMENT OF THE LIBERALIZATION

PROCESS

The point which can seriously hinder the successful transition to the newregime, is the lack of knowledge and experience in the regulation of confli-cting interests. The regulation of the relationship between public and privateinterest is hindered by the confirmed low-knowledge level of the market’speculiarities and the ‘‘short-sighted’’ approach of the ‘‘coastal issue’’ as aship management problem and not as an operation of an integrated andcoherent insular transport system. The lack is spotted especially in issuesof determination of the necessary universal service of islands (needs, qualityand fares) and on the related market protagonist inertia (inactivity) – mainly


of the state which remains tied to old practices and ‘‘past use’’ solutions,thus undertaking the smallest responsibility.

This is in contrast to the older model around which regulation was based,which was essentially supply-driven and relied on protectionism and heavy-state intervention in the whole spectrum of its operation. In a politicalsystem characterized by a unitary state, weak integrated political leadershipand thus ‘low-reform’ capacity it is unlikely that reform will occur if theformal and factual veto points are opposed (Romanos, 2005). The neweconomic reality, the increased pressure from the EU, the forces ofcompetition, the Greece’s leading role in the region has made clear that theonly way to compete is to move from the supply-driven model to one whichis demand-driven.

A demand-driven model requires taking into account all the actorsconcerned. The most recent development is towards a shipping marketcharacterized by ‘‘sustainable mobility’’. This is defined as to ‘‘meet thepresent needs without compromising the ability of the future generations totheir own needs’’ (definition of sustainability: World Commission onEnvironment and Development, 1987; see also Wormley, 1997).

Transport systems and especially passenger transportation networks mustfulfil certain criteria such as system accessibility which is of crucial impor-tance. In addition, affordability, safety/security and quality requirementssuch as frequency, cleanliness and comfort are preconditions for makingtransport more attractive. Finally, well-qualified and motivated staff arenecessary for meeting the quality criteria (EC, 1995).

The maritime transportation model ought to be in accordance withthese directions and planned as a fully ‘‘users’-oriented approach’’. Theprinciples applied to solving issues like coastal shipping can be boiled downto three:

� Democratic consultation.� International expertise.� Independent research.

The realization of these principles could be related to information andknowledge gained by this analysis also and could conclude with the deve-lopment and establishment of a new Coastal Shipping Policy. This policy,according to our view, should be the outcome of a ‘‘concerted action’’undertaken by various players. This crucial procedure had begun withserious institutional and structural transformations but a serious knowledgedeficit still exists. Over the last years, a large project has taken place. Localauthorities, maritime companies, shipowners, banks, shipyards, state

MARIA B. LEKAKOU286

players (ministries and other authorities) and roughly 30,000 users havebeen consulted or interviewed in order to restructure the coastal market.This was the starting point of citizens’ participation in generating a newmarket but this process discontinued.

The second principle, international consultation has led to the increasedGreek participation in the transportation and regional development fora ofthe EU. This has led to a shift from the policy priorities and requirementstowards a transportation and regional development policy, where enhancedsustainable mobility and regional and national cohesion represent therenewed political objectives.

The reorganization of the coastal sector demands a serious amount ofknowledge and experience. However, all the previous studies pinpointedserious lack of information and missing data (Ministry of the Aegean, 1995;Psaraftis, 2006). Physical morphology, market conditions (e.g. degree ofcompetition) and policy regulations (e.g. fare structures or access condi-tions) in a transport system all feed into the ultimate outcome (Zwier,Nijkamp, Hiemstra, & van Montfront, 1995).

Organized reactions appeared in the form of appeals either to RATHE, orto the European bodies, came either from individual shipowners or fromthe Union of Coastal Shipowners (UCS) and regarded issues related to theimposition of state-determined fares, the binding and rigid character of theNetwork, the denial to accept the declaration of intent to enter to a routeon the part of the Minister of Mercantile Marine and the procedure ofproviding the right to exclusive service.

The appeal on the part of the UCS concerned the required guarantee(bond) and the fine (penalty) regarding the entry to ‘‘free’’ line, the predictedmanning composition, the accommodation regulations, the imposition ofunjustified price ceiling in economic class, and the imposition of compulsoryage limit withdrawal for coasters. The Commission, with letters of warning(2004 and 2005) and later with a justified stand (December 2005), touches onall the crucial issues regarding the conditions of ship line scheduling,determination of highest allowed fares, ship manning, accommodation andfinally the crew’s knowledge of the Greek language and gives a two-monthnotice to the Greek side to comply.

The arguments on the part of the Greek side in the context of the letters ofwarning were based on the positions that the shipowners, who express acommercial interest in providing coastal services, are obliged by the state toprovide public services under specific quality and cost specifications, whichthey declare. The undertaking of such a task is to be indispensably related toguarantees (letters of guarantee, bond) as well as to the settlement of a


representative in the country. The letters of guarantee and the establishmentmay constitute an entry barrier for new enterprises but they are required bythe nature of the service. The same criteria apply to the General CoastalTransport Network which should clearly be indicative but should also coverall the islands without exception aiming at the cohesion of insular regionand the territorial continuity of the country.

On issues regarding manning, compulsory composition surely affects thecost and the quality of the provided services (e.g. issues of accommodation)making crew cost fixed in a high-seasonal activity. However, the sectorconstitutes a ‘‘shelter’’ of employment for European seafarers and of coursesafety reasons and issues of search and rescue impose the necessity ofcommunication with travelling public (knowledge of the Greek language).

On issues regarding accommodation regulation, this was the result ofconsultation as well. It contains public service elements (ensuring theexistence of seats for economically sensitive groups).

Finally, the serious issue of imposition of a ceiling on economy fare isrelated to the state obligation to provide affordable transport to certainvulnerable social groups (given that transport should be economicallyaffordable to all citizens). However, data and evidence about affordableprice should be produced. At this point, the Commission doubts the resultbecause data had not been brought in, in the past. On the contrary, therewas abuse of the right to impose ceiling prices on the part of the statewithout compensation (there are relative resolutions by RATHE).

Apart from these issues, the main confrontation point between the stateand shipowners is the age limit for the compulsory exit of coasters (Psaraftis,2006).

Beyond these juxtapositions there were no important changes at servicelevels, nor price falls as in other industries. From the stakeholders view, astakeholder is defined as ‘any group or individual who can affect or isaffected by Greece’s coastal shipping policy’ (Cavana, 2004), the islanders,experienced a fall on the provided service level in many cases and asignificant rise in fares (see Table 8.5). In parallel, there was a significantincrease in state Aids, as available state resources were tripled (see Table8.6). It is noted that the cost of thin lines was in the period 2004–2005approximately 44 million Euros of which an amount of approximately 25million came from the 3% special tax paid by passengers through the ticket.Consequently, only 20 million Euros are given from the state budget. This isan essentially very small amount, given the number of small Greek islands.

Significant developments are also observed in the existing corporateschemes (bankruptcies, negative financial results, re-negotiations of

Table 8.6. State Aids for Thin Lines (2002–2005).

Period Number of Thin Lines Annual Budget h

2002–2003 67 36,606,552

2003–2004 72 36,759,727

2004–2005 75 43,783,173

Source: Ministry of Mercantile Marine.

Table 8.7. Maritime Employment in Coastal Shipping (2002–2005).

Year Employment in Coastal Shipping

Greeks-EU citizens Non-EU

1996 7,662 62

1998 7,879 138

2000 7,672 57

2002 7,539 146

2004 7,388 54

Source: National Stastical Service of Greece.

Table 8.5. Coastal Fares’ Increases (2001–2005).

Year Rate of Increase (%) Average Annual Change in Bunkers Price

2001 7.0 –

2002 9.9 �12.66

2003 2.4 0.096

2004 3.5 1.266

2005 6.8 35.25

Source: Ministry of Mercantile Marine.

MARIA B. LEKAKOU288

bank loans, ‘‘compulsory sales’’ of very young ships, cease of any proce-dure of fleet renewal). Ports observe these developments without parti-cipating.

On the other hand, the seafarers’ trade union, the Panhellenic Seamen’sFederation (PNO) continued to oppose the deregulation of the coastalmarket. The main reason cited was that half of its membership wasemployed in the coastal industry (Table 8.7; for a detailed analysis seechapter by Tsamourgelis in this book). It was anticipated that increasedcompetition would oblige shipowners to minimize crew costs. Even further,the trade unionists were concerned that MMM would lose its discretion in


designating manning composition. With the influx of foreign competitorsand flags of convenience, crews from developing countries would beemployed, dislocating the Greek crews with their larger wages, pension andhealth care expenses (Romanos, 2005).

In the scenery of the first liberalization period there are no winners. Thereare of course ‘‘successful stories’’ and speculators who took advantage of thesystem’s weaknesses mainly on issues regarding public interest lines.

In these conditions, what is required is a change in the operationconditions of the insular transport system so that it responds to thefundamental principle of the European competition policy, that is, theimprovement of the end-user’s position.

What is needed is a central action which will comprise the institu-tionalization of special insular policies and procedures of consolidatingthe meanings of competition and of public interest, having as recipients –participants in all the system parts. The requirement for this is organizedconsultation, independent research and the utilization of internationalexperience in order to assimilate the rules of the competitive marketsbecause in the previous period there were significant gaps and errors in thepractices which developed.

Independent evaluation could be based on principles, institutions andmethods:

� A coastal shipping observatory, consisting of experts at national andEuropean level.

� Guaranteed independence from government, and which should beaccountable to the National Parliament.

� An annual report, a website and ad hoc reports.� Open to all stakeholders and citizens – including public authorities,operators, consumers/users/citizens, trade union organisations, profes-sional groupings, civil society, research.

� Centres, who should be encouraged to provide inputs to and takefeedback from the meetings and consultations.

� Technical assistance to groups representing vulnerable users of coastalservices.

The evaluation should include at least four objectives (European Federationof Public Service Unions, 2005):

� Assess the expected impact of liberalization at National level objectives –e.g. efficiency, productivity, price levels, etc. – against evidence of theactual developments under liberalization.

MARIA B. LEKAKOU290

� Assess the impact of the liberalization directives, internal market rules,state aid rules and other EU level frameworks on the ability of the state toorganize Coastal Services according to policies and structures determinedlocally and reflecting national and local conditions and histories.

Coastal companies should advance to re-structure, transposing the centre ofgravity from the ship to its operation, to the ‘‘product’’ promotion, to thepassenger and to the increase of the work cycle. Special gravity should beplaced on small island-based corporate schemes which are involved incoastal shipping, constitute employment shelters but are unready to act inthe new environment. These transformations need support in order to meetthe challenges.

Local authority on islands can, utilizing international experience (e.g.Scotland, the Canary Islands) depict the specifications of the transportservice which is indispensable for the development of their islands, given theEuropean policy on the rights of users to general interest services like coastaltransports for insular regions.

Transparency and information are composing elements of a healthycompetition. The explicit improvement and the universal dissemination ofknowledge level are requirements for coordinated action. In the specificphase, the permanent constant monitoring of demand data is required,as well as the establishment and operation of a monitoring system onquality and fares which will provide the data necessary for policy investi-gation.

The central problem with the design of regulatory mechanisms is the factthat the regulated firm has private information about available technologiesand corresponding cost functions, the operating characteristics of its net-work, the effort it expends to reduce costs, the quality of its services and theresponsiveness of its customers to various quality and price signals. Even ifthis asymmetry of information can be substantially reduced in principle, thepotential efficiency gains to be had from such a reduction have to bemeasured against the monitoring and control costs of the regulator (OECD,2004).

8.8. CONCLUSIONS

It is generally accepted that islands and insular regions in general, face aseries of problems which undermine their equal entry to the internationalfinancial world. It is a reality recognized in the Amsterdam Treaty (Article


158) where it is proposed that the state ought to develop national transportpolicies which take into consideration the particular character of its regionsand any interventions should take into account the structural difficulties of

accessibility from/to the islands.

Services of general economic interest comprise activities of commercialcharacter while they fulfil a public utility mission. As a result member statesgrant them special public service rights (article 86 in the EU convention).This is in force especially regarding services in the sectors of transport,energy and telecommunication networks.

All of these predictions in the maritime cabotage sector however, have notbeen explicitly implemented and the liberalization process, even though theRegulation explicitly referred to the essential elements of the public service,did not define their content and did not predict monitoring and assurancemechanisms. The liberalization process of other sectors was very mature, forexample in telecommunications or postal services. For these services, thebodies of the Union developed the meaning of universal service whichdefines a total of public utility demands to which the whole Communityshould be subject. The obligations resulting from this meaning, aim atensuring everywhere the access of all to specific essential services of qualityand at an accessible price.

The lack of a clear definition of the content of ‘‘universal service’’ formaritime cabotage and especially for insular transports, prolonged thevagueness around the limits of public service. Criticism and proposals onbehalf of insular regions focus exactly on this point, that is, the process andterms of public service obligation assignment or the entering into a contractof public service provision. The basic points of this criticism are found in therule of choosing the lowest bidder in order to cover insular lines for whichthere is no commercial interest. This practice many times causes problemsrelated to the quality of provided services and the risk for the maintenanceof employment levels of insular seafarers. The division of the network andthe call per line also create problems in the inter-communication andcontribute to further ‘‘incontinuity’’ and division of insular space. The shortduration of contracts is a term which was received with criticism by the usersand the shipowners as well since it creates instability conditions and doesnot create conditions for the declaration of entrepreneurial interest with theintention to upgrade services (Eurisles, 2003).

The basic conclusion arising from the evaluation of the policy realizationfor maritime cabotage liberalization is that a deeper study on issues ofinsular transports is required, with a clear depiction and definition ofessential public service elements. It is about a change of perception in the

MARIA B. LEKAKOU292

maritime transport management (OECD, 2001). All the policies until nowhave have focused on the ship. This must be replaced by the systemic andnetwork approach (network – port – company – supporting services –monitoring of traffic and economic data – evaluation – assurance of serviceprovision) in parallel with the enactment of clear criteria of Public Interestassurance.

For the realization of such a service model of insular transports ashort-term, mid-term planning is required, so that the smooth transitioncan be ensured in parallel with the institutionalization of monitoringmechanisms at national and at European level. The peculiarity andcomplication of the insular space do not allow the possibility for othermarkets to ‘‘copy’’ a ready solution. They require a special solution whichwill necessarily rely on the specifications mentioned, in parallel with thenecessary democratic consultation so that the islanders’ opinions andmoods, along with restrictions can be depicted and the new perception canbe consolidated. Special gravity should be placed as well on the very largenumber of small corporate schemes which are involved in this sector, areisland-based and constitute shelters of employment but which are unreadyto act in the new environment and need to be supported in order to meetthe challenges.

In the EU, markets are liberalized gradually, with rules, control, havingas priority the assurance of public interest and the reinforcement of compe-tition, aiming at the improvement of provided services and mainly at theupgrading of the position and the role of the services’ user.

The liberalization of maritime transports in a multi-insular country likeGreece eventually leads to the creation of two and three island ‘‘categories’’.The large or more commercial ones are in the first category from the aspectof service but even these only during the peak season. Beyond small islandswhich have always had unfair treatment, a very large volume is formedby middle, large and faraway islands – like the Dodecanese or the islandsof the Eastern Aegean – which most months of the year simply watch shipspassing by.

NOTES

1. For further discussion on regulated markets and industries, cf. Scherer (1980)and Stigler (1971).2. Sustainable here is used in the sense of sustainable market equilibria and not in

the sense of more recent usage concerning ‘‘sustainable development’’.


REFERENCES

Archontakis, K., & Vavouras, I. (1997). Modern multistakeholders coastal company; its

performance in coastal shipping (in Greek). Athens: Papazisis.

Austria, M. S. (2002). Philippine domestic shipping industry: state of competition and market

structure. PASCN Discussion Paper No. 2002–04, Makatti City.

Brooks, M. R., & Button, K. J. (2006). Market structure and shipping security. Maritime

Economics & Logistics, 8, 100–120.

Cavana, R. Y. (2004). A qualitative analysis of reintroducing cabotage onto New Zealand.

Maritime Policy and Management, 31(3), 179–198.

Chlomoudis, C. I., Lekakou, M. B., Panou, C., Papadimitriou, E., Syriopoulos, T., &

Tzannatos, E. S. (2007). Transport: Lifelines for the islands (in Greek). Athens: Papazissis

Editions.

Cooper, M. N. (2001). Mergers between major airlines: The anti-competitive and anti-consumer

effects of the creation of a private cartel. Washington, DC: Consumer Federation of

America.

Damien, G., & Petit, N. (2004). The development of agencies at EU and national levels:

Conceptual analysis and proposals for reform. Jean Monnet working paper, New York.

Available at www.papers.ssrn.com

Eurisles. (2003). Island Transport and the EU. Situation in 2003, Study realised under the

initiative of CPMR Islands Commission. www.eurisles.org. Assessed on December 2006.

European Commission. (1995). Green book: The citizens’ network. COM(95) 60 final, Brussels,

29 November.

European Commission. (2003). Industry dialogue on air transport competition policy.

Exploratory questionnaire on selected airline alliances & merger competition assessment

issues. Brussels: European Commission.

European Court of Justice. (1999). Case IV/D-2/34.466, Greek Ferries. Official Journal L

109/24 of 27 April 1999.

European Federation of Public Service Unions. (2005). Evaluating the impact of liberalisation on

public services. London: University of Greenwich.

Eurostat. (2003). Maritime transport of goods and passengers (1997–2001). Statistics in Focus

THEME 7, 4/2003. Brussels: Eurostat.

General Accounting Office. (2004). Maritime law exemption: Exemption provides limited

competitive advantage, but barriers to further entry under U.S. flag remain. Washington,

DC: U.S. General Accounting Office.

Giannopoulos, G. A., & Aifandopoulou-Klimis, G. (2004). Inland maritime transport in Greece

after the lifting of cabotage and full liberalization. Transport Reviews, 24(4), 465–483.

Gonenc- , R., & Nicoletti, G. (2000). Regulation, market structure and performance in air

passenger transportation. OECD Economics Department Working Papers, No. 254,

OECD: Paris.

Goulielmos, A. M., & Gatzoli, A. (2004). An analysis of the pricing system in the Greek–Italian

coastal routes. Maritime Policy and Management, 31(4), 269–285.

Goulielmos, A. M., & Lekakou, M. (1992). The economic structure of Greek passenger coastal

shipping. European research roundtable conference on short sea shipping (pp. 301–315).

London: Lloyds of London Press.

Hagg-Goran, P. T. (1997). Theories on the economics of regulation: A survey of the literature

from a European perspective. European Journal of Law and Economics, 4, 337–370.

MARIA B. LEKAKOU294

Hoffmann, J. (1998). Concentration in liner shipping: Its causes and impacts for ports and

shipping services in developing regions. LC/G.2027, ECLAC.

ICF Consulting. (2005). Economic assistance study on liner shipping, Revised Final Review.

Report Prepared for: Directorate General for Energy and Transport, European

Commission.

Johnston, J. (1960). Statistical cost analysis. New York: McGraw-Hill.

Kahn, A. E. (1991). Economics of regulation. Reprinted. MA: MIT Press.

Kay, J. (1996). The business of economics. Oxford: Oxford University Press.

Khemani, R. S., & Shapiro, D. M. (1993). Glossary of industrial organisation economics and

competition law. Paris: OECD.

Lagoudis, I. N., Lekakou, M. B., Pallis, A. A., & Thanopoulou, H. A. (2006). Coastal shipping

services in the Aegean Sea: Can passengers get satisfaction? Proceedings of the 2nd

international conference on EU—EAST and South Asia trade, investment, logistics and

E-business (Cd-Rom format), Chios, Greece.

Lekakou, M. (1994). Economic aspects of the coastal shipping issue: Pricing policy (in Greek).

Unpublished PhD Thesis, Registered at the University of Piraeus, Greece.

Lekakou, M., & Fafaliou, I. (2003). The historical course of the Greek coastal transport services

in the twentieth century and associated policy responses. Archives of Economic History,

XV(1), 127–153.

Lekakou, M., Papandreou, N., & Stergiopoulos, G. (2004). Setting the rules for the develop-

ment of a national Maritime Transport System. Proceedings of the international logistics

congress, Izmir, Turkey (pp. 1061–1073).

Lekakou, M. B., & Pallis, A. A. (2005). Cruising the Mediterranean Sea: Market structures and

EU policy initiatives. Aegean Working Papers, 2(1), 45–61.

Lekakou, M. B., & Vitsounis, T. (2007). Measuring market concentration in Greek coastal lines.

Mimeo, Chios: University of the Aegean.

Masvoulas, G. (2005). Demand and supply time series passenger analysis in the North Aegean.

Unpublished MSc thesis. University of the Aegean, Greece.

Ministry of the Aegean. (1995). Study of the existing situation of maritime transport in the

Aegean islands (in Greek, unpublished), Mytilini: MoA.

National Bank of Greece. (1998). ARIADNI: Project for the development of maritime transport

(in Greek). Athens: NBG.

OECD. (2001). Regulatory reform in electricity, domestic ferries and trucking. OECD reviews of

regulatory reform–regulatory reform in Greece. Paris: OECD.

OECD. (2002). Competition policy in liner shipping–final report. Division of Transport. Paris:

OECD.

OECD. (2004). Conclusions of round table 129: the limits of (de-)regulation of transport

infrastructure services. Paris: OECD.

Pallis, A. A. (2002). The common EU maritime transport policy: Policy Europeanisation in the

1990s. Aldershot: Ashgate.

Psaraftis, H. N. (2006). Coastal shipping and cabotage (in Greek). Athens: Evgenideion

Foundation.

Romanos, M. J. (2005). Shipping, the state and the market: The evolving role of the European

Union in international & Greek shipping politics. Case study on coastal shipping in the

1990s. 2nd Hellenic Observatory PhD symposium on modern Greece. LSE, London, June.

Scherer, F. M. (1980). Industrial market structure and economic performance (2nd ed.). Chicago:

Rand McNally.


Stigler, G. S. (1971). The theory of economic regulation. Bell Journal of Economics, The RAND

Corporation, 2(1), 3–21.

Thanopoulou, H. A., Ryoo, D. K., & Lee, T. W. (1999). Korean liner shipping in the era of

global alliances. Maritime Policy and Management, 26(3), 209–229.

Tzannatos, E. S. (2005). Technical reliability of the Greek coastal passenger fleet. Marine

Policy, 29(1), 85–92.

Union of Coastal Shipowners. (2005). Study on the determination of the percentage of operation

cost elements, in the total cost of Greek coastal ships. Piraeus: UCS.

Verouden, V. (2004). The role of market shares and market concentration indices in the

European Commission’s Guidelines on the assessment of horizontal mergers under

the EC Merger Regulation. FTC and U.S. DOJ Merger enforcement workshop.

Washington, DC, February.

Vlachos, G., & Lekakou, M. (2001). The reform of the institutional framework of the coastal

shipping, according the new European Regulation 3577/92. Case study: Concepts

concerning the Greek coastal shipping policy. In: G. M. Korres & G. Bitros (Eds),

Economic integration: Limits and prospects (pp. 217–229). London: Palgrave.

World Commission on Environment and Development. (1987). Our common future (The

Bruntland report). Oxford: Oxford University Press.

Wormley, D. (1997). Critical issues in transportation. TR news. Washington, DC: Transport

Research Board.

Xideas, E. (2001). Passenger shipping transportation vs air transportation in the Aegean

Archipelago. Proceedings of the 9th World Conference on Transport Research (CD Rom),

Seoul.

XRTC. (2006). Greek coastal shipping 2005 (in Greek). Piraeus: XRTC.

Zwier, R., Nijkamp, P., Hiemstra, A., & van Montfront, (1995). Connectivity and isolation

in transport networks: A policy scenario experiment for the Greek island economy. In:

H. Coccosis & P. Nijkamp (Eds), Overcoming isolation (pp. 204–235). New York:

Springer.

ANNEX I

Coastal Service Features

Ferries
4 Miles 480 Speed (in Knots) 23 Working days per year 1,274 Port calls in the islands 9,250

MARIA B. LEKAKOU296

No.
Total Cost–Components Ratio in%
(Ferries–Network–Management–Transport)

1 B
unkers and Lubricants (a) 14.56
(I)
Fuel–HFO/380 (II) Marine diesel (III) Lub-oils 2 M anning Cost/(5 crews for 4 ferries) (b) 6.31
(c) F
erries Operational Cost 1.72
3
Ferries–Port disbursement 4 Ferries–Marine insurance cost, P & I Club included 5 Other commercial risks–insurance cost 6 Ship maintenance–class survey–repairs–spares 7 Ships–deck–engine–cabin stores 8 Flag and class registration fees, etc. expenses (d) T otal Ferries Operational Cost (a+b+c) 22.59
9
Network’s ‘‘transport services’’ 10 Network’s ‘‘infrastructure–shore supporting facilities’’ 11 Network’s ‘‘company’s management’’–administration 12 Network’s ‘‘company’s management’’–trade operation–
infrastructure services
(e/1) L and-based services operation cost 3.56
(e/2) F
ees/Taxes/Commission & Unforeseen 34.70
13
Travel agents commission (on-sales booking) 5.00 14 Public contribution cost (on-sales 21%) 21.00 15 Provision funds for overheads and unforeseen 8.70 (e) A dministrative Cost+ Fees/Taxes–provision funds included
(e/1+e/2)

38.26

(f ) G
rand Total Ferry Services Network Operational Cost
(d+e)

60.85

(g) F
inancial Cost (Capital return+Interest) 19.05
(h) G
rand Total Network’s Trade Cost (Ferries+Land
Services+Financial Cost)

79.90

(i) R
eserve Fund (after Capital+Interest Paid) 20.10
Note: Bold signifies total costs per cost-category.

Source: Confidential commercial data.

Date post:	05-Jan-2017
Category:	Documents
Upload:	maria-b
View:	224 times
Download:	3 times

Chapter 8 The Eternal Conundrum of Greek Coastal Shipping

Documents