Business Irish

Saturday 25 May 2019

Irish Ferries will stay buoyant despite ship delay disappointment for holidaymakers

Sailings cancelled and holidaymakers disappointed, but analysts are confident the customers will flock back again

Irish Ferries’ unfinished WB Yeats ferry in a shipyard in Germany
Irish Ferries’ unfinished WB Yeats ferry in a shipyard in Germany

Ailish O'Hora

The word on the seas is that when the delayed Irish Ferries ship, the WB Yeats, finally arrives on the market for next year's summer season, the bar on it will be bigger than ones in previous ferries.

EU intra-duty free officially ended in 1999 and there is no actual sign that it will return post-Brexit.

But the planners at ICG, the Irish Ferries parent, are said to be accounting for all possibilities following Britain's exit from the EU.

One thing it didn't see coming, though, was the delay of the delivery of the WB Yeats by German shipbuilder Flensburger Schiffbau-Gesellschaft (FSG) until next September, forcing the Irish ferry company to cancel numerous sailings this summer and disrupting the travel plans of thousands of disappointed holidaymakers in the process.

FSG said there had been delays in the delivery of interior components for public areas as well as on the electrical system installation in the hull and deckhouse of the ship.

The past week, at least at face value, looked like the stuff of nighmares for both Irish Ferries and its affected customers, not to mention lost revenue for our tourism industry and a bombshell for shareholders.

And the timing of the delay couldn't have been worse, heading into the peak summer travel season.

To add insult to injury, the delay was the second for the ship in as many months by FSG.

Irish Ferries again blamed "extraordinary circumstances beyond its control", and attributed the delay to FSG.

But as the plight of travellers took up columns of newspaper inches and dominated the airwaves, is the delay really such a big deal for ICG and its Irish Ferries brand?

Those who watch the industry closely believe that this is a glitch that ICG and Irish Ferries will recover from and will do so quite quickly - but at some cost?

Analysts pointed out that the ship was purchased at a good time, when steel prices were relatively low.

The latest figures for ICG show that for 2017 it reported a strong set of results despite the effects of lower sterling and higher fuel costs.

Operating profits came in at €89m, up from €62.6m the previous year.

Revenues for year ended December increased 3pc to €335.1m from €325.4m the previous year.

And while market watchers said ICG, which operates on the Irish sea and French markets, will take a hit on the delay of the ship in this year's figures, they don't see much more collateral damage further down the line.

"Let's face it, when the ship is ready to work in September, who will actually remember what happened the previous summer," said Stephen Furlong, analyst at Davy stockbrokers.

"Customers have short memories. Big companies often have problems and customers flock back to them," he added.

"We know now that the delays in the delivery of the ferry will have a €7m hit on the top line for 2018, but can't see it having an effect on the company's 2019 bottom line at all."

It's important to remember that there's a lot more to the ferries business than carrying passengers.

The ferry business is broadly divided 50-50 between passenger and freight, and the latter is an all-year business, not just a seasonal one.

Apart from passenger and freight, ICG also operates a container and terminal division.

In fact, many of these large ferries were built predominantly with freight in mind, with the passenger business coming second.

And freight is a massive contributor to the Irish economy given its role in the import/export market, especially for a small, open island economy like Ireland.

According to the Central Statistics Office, the latest figures show that €79bn in imports came to Ireland in 2017 while the export figure was €122bn.

The latest annual port tonnage figures from the CSO are for 2016. In that year, Irish ports handled 50.7 million tonnes of goods including freight and containers.

And as Brexit fears continue to grow, analysts said these figures could grow.

Given the structure of the ferries business, it could allow hundreds of thousands of extra tonnes of freight to travel to and from Ireland and the Continent and bypass Britain and the border controls and paperwork that might go with that if a hard Brexit hits.

ICG has already placed an order with FSG for another ship and will pay €165m to build a replacement for the Ulysses, which "will be the largest cruise ferry in the world in terms of vehicle capacity," according to the company.

And in the past week, Stena Line - although a smaller operator than ICG - has confirmed that the first of its new ferries, which is currently being built in China, is planned to enter services on its Dublin-Holyhead route in early 2020.

At the launch, Ian Davies, Stena Line trade director Irish Sea South said: "Freight volumes have surpassed the Celtic Tiger peaks of 2007 and we are confident that this upward trend will continue.

"2017 was a record year for Stena Line in the Irish Sea, where we carried over 800,000 freight units on our routes to and from the island of Ireland," he said.

And don't forget the enormous fanfare in April when Taoiseach Leo Varakar launched the MV Celine in Dublin, the world's biggest ro-ro ship that will transport freight between Dublin and the continent.

Dubbed the "Brexit buster", it is 235m long and has a capacity of 8km of car deck and would not have been able to dock in Dublin had it not been for the completion of recent expansion works there.

It will be interesting to see if the WB Yeats' 54,985 gross tonnes cruise ferry that can accommodate 1,885 passengers and crew and has nearly 3km of car deck space gets as much attention when it launches.

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