Ferry route between Saaremaa island, Latvia would be socioeconomically profitable

Ferry route between Saaremaa island, Latvia would be socioeconomically profitable

BC, Tallinn/Riga, 20.03.2018.

http://www.baltic-course.com/eng/transport/?doc=138624

According to a study about the viability of a boat service between Estonia's largest island and Latvia, commissioned by the NGO Saarte Koostookogu from the company OU Arenguruum, opening a ferry service would be socioeconomically profitable but would rather be unprofitable when carried out only on a commercial basis, informs LETA/BNS.

The study included analyzing the possibilities of opening the Montu-Ventspils and Kuressaare-Riga ferry routes, while AS Kihnu Veeteed with the vessel Reet is interested in the Montu-Ventspils route and Sea Wolf Express OU with the vessel A-902 is interested in the Roomassaare-Riga route.

According to the study, the Montu-Ventspils route based on an optimistic scenario would need an annual support of more than 100,000 euros in the first years, but would become self-sufficient within eight years. Based on a pessimistic scenario, the necessary sum of support would be approximately 300,000 euros per year.

The study said that based on an optimistic scenario, opening the Montu-Ventspils route would encompass a socioeconimic income received by Saaremaa through the travelling tourists in the amount of 2-3 million euros per year and on the basis of a conservative scenario would total 1-2 million euros per year. In a positive case, the ferry route would bring 10,000-20,000 more tourists per year to Saaremaa, while the number of additional tourists in a pessimistic case would be 7,000-11,000.

Sea Wolf Express OU, which showed interest in operating on the Roomassaare-Riga route, has agreed to start testing on the route this summer and in the case of positive results is prepared to start operating fully in summer 2019.

In their presentation, heads of Sea Wolf Express OU foresee the functioning of the route purely on a commercial basis and will not ask for the financial support of the local government or state.

Considering the situation, in which there is an operator interested in offering the service without the financial support of the public sector, it would be reasonable to wait for the results. Should the 2018 season be successful in terms of the volume and quality of the service on offer, then the launch of a competing ferry service with the help of support is not justified, it is said in the study.

According to the study, granting state aid would be possible if the support is given for up to three years and the route becomes self-sufficient as a result. As a second option, the study highlights the possibility of organizing a public tender, which would not count as state aid if it is carried out on a market basis.

According to the study, tourism in the Baltic Sea region is increasing. Saaremaa and Ventspils are important tourist destinations in their countries and interested in being a part of the development that accompanies tourism growth. This is why the local governments of Saaremaa and Ventspils and entrepreneurs involved in tourism, including port operators, are strongly interested in restarting the erstwhile Montu-Ventspils ferry route. In addition, Saaremaa is interested in opening ferry service in the direction of Riga as the largest city of the Baltics.

The limitations of the volume of the maritime transport between Saaremaa and Latvia, the concentration of ferry traffic to a short period and the lack of operating history to prove the self-sufficiency of the route however do not generate business interest in the largest ferry operators of foreign countries or Estonia. Interest in operating the routes are showing those Estonian companies that have the suitable vessels with low implementation and who are hoping to earn profit in the volume interesting to them by partly relying on fulfilling the order of the public sector. The exception here is Sea Wolf Express OU, which as a starting business is ready to test the Roomassaare-Riga route on a commercial basis.

According to the study, operating the route on a commercial basis is preferable and this is why compilers of the study are to file different proposals for the Roomassaare-Riga and Montu-Ventspils route.

On the Roomassaare-Riga route, the potential operator must be helped along, which at present is Sea Wolf Express OU. It is expedient for the rural municipality of Saaremaa and other interested parties to continue closely communication with the potential operator so that when needed, be able to contribute in providing assistance when solving problems linked with launching the route both in Saaremaa and Riga.

In the event that the route is not launched under market conditions in the summer period of 2019, the study suggests to organize a public auction in cooperation with Riga concerning the transport of 2020 and the next couple of years. Supposedly, the possibility of managing the route under market conditions and thus also the feasibility of continuing the public tender will be determined during that time.

On the Montu-Ventspils route, the rural municipality of Saaremaa in cooperation with the city of Ventspils must as quickly as possible decide over the feasibility of organizing a public tender on the route. If the decision is made to organize a public tender, then it is necessary to reach an agreement on organizing the joint public tender, the conditions to be presented to the bidders and the maximum acceptable price of the tender. The tender must be announced in fall 2018 at the latest.