Monitoring Report No. 1
Anthony Carlson
Sea, Air and Safety Branch
27 April 1998
Introduction
In August 1996, the then Commonwealth Minister for Transport and Regional Development announced the introduction of the Bass Strait Passenger Vehicle Equalisation Scheme (the Scheme), effective from 1 September 1996. The Scheme provides a rebate against the fare charged by a ferry operator to transport a driver plus passenger vehicle by sea across Bass Strait, and gives effect to the Government's election commitment to provide a rebate of up to $300 for a return trip.
The Scheme operates under a set of Ministerial Directions and is administered by the Commonwealth's Tasmanian Assistance Team in Hobart. Although the Scheme was originally overseen by the Department of Transport and Regional Development's (DoTRD) Maritime Division, new administrative arrangements in October 1997 resulted in the maritime functions of DoTRD being taken over by the Department of Workplace Relations and Small Business. Since then a new set of Directions have been approved by the Minister for Workplace Relations and Small Business. This report reflects the administrative arrangements in place during the monitoring period (1 September 1996 to 30 June 1997).
Clause 16 of the Directions (attachment I) provides for the annual monitoring of the effectiveness of the Scheme by the Bureau of Transport and Communications Economics. In considering the Scheme's effectiveness, it is appropriate to take into account the aim of the Scheme, which is simply stated as "to reduce the cost of seagoing travel for an eligible passenger" (clause 2.1). However, comments made by the then Minister at the time of the announcement of the Scheme suggest an additional aim of helping the Tasmanian tourism industry in particular, and the Tasmanian economy as a whole (Sharp 1996). Therefore, the effectiveness of the Scheme would depend on:
- the extent eligible passengers benefited from lower net fares;
- changes in eligible passenger demand, and in the demand of those accompanying eligible passengers, as a result of lower net fares;
- changes in unit operating costs to the service operator and the degree any savings are passed onto all passengers through lower gross fares; and
- the resulting change in total demand for passengers travelling across Bass Strait, including travel by air, and the origin of this traffic.
This is the first monitoring report and only covers the first 10 months of the Scheme's operation (1 September 1996 to 30 June 1997). Consequently, this report provides only an initial indication of the overall effectiveness of the Scheme. At this stage it is too early to provide a conclusive analysis of the effectiveness of the Scheme.
Overview of the Scheme
Calculation of the rebate
The rebate is calculated on the basis of charging a net fare for an eligible passenger vehicle plus driver, travelling in standard share cabin accommodation, that is comparable to the notional cost of driving an equivalent distance on a highway.
The equivalent highway cost is based upon the sea distance of 427 kilometres between the ports of Devonport and Melbourne multiplied by an estimated running cost for an average family saloon (39.87 cents per kilometre). This provides an equivalent highway cost of $170 for a one-way trip.
For the purposes of the rebate calculation, the fare for an "inside cabin" on the Spirit of Tasmania is used as the passenger fare benchmark. This accommodation represents approximately 50 per cent of the berths available on the Spirit of Tasmania. The benchmark passenger vehicle fare has been based upon the fare for a passenger vehicle of no more than five metres in length.
Due to the seasonal nature of demand, both the passenger and vehicle fares vary according to three seasons (high, shoulder and off peak seasons). Consequently, the rebate varies with the largest rebate being applied during the high season and smallest rebate being applied during the off season, to provide an approximation of the equivalent highway cost across all seasons. The rebates applied for the monitoring period are provided in table 1.
Table 1 Round trip rebate for a driver travelling with a motor car, bus, or motor cycle, 1 september 1996 to 30 june 1997
| Eligible vehicle | Off Peak Season(1 Sep 96 - 27 Sep 96)(13 Apr 97 - 30 Jun 97) | Shoulder Season(28 Sep 96 - 13 Dec 96)(26 Jan 97 - 12 Apr 97) | High Season(14 Dec 96 - 25 Jan 97) |
|---|---|---|---|
| Motor car or bus | $200 | $240 | $300 |
| Motor cycle | $100 | $120 | $150 |
Note: The rebate for a one way trip is 50 per cent of the rebate for a round trip. Where a round trip consists of northbound and southbound legs in different seasons, the booking is, for the purposes of determining a rebate, considered as consisting of two one way trips. (Source DoTRD 1996)
The rebate for a one-way trip is 50 per cent of the rebate for a round trip. The value of the rebate is reviewed each year by the Minister.
Method of payment
The rebate is an 'up front' subsidy. That is, the rebate is provided to the driver of an eligible passenger vehicle as a reduction in the fare charged by the relevant service operator. The onus is on the service operator to determine the eligibility of the passenger for the rebate, apply the rebate to the passenger's gross fare, and claim reimbursement of the rebate from the Commonwealth. Clause 9.3 of the Directions limits the service operator to no more than one claim a month, while clause 9.4 allows the service operator to claim reimbursement:
- for an eligible passenger who has travelled within the previous 12 months; and
- subject to clause 10, where an eligible passenger has not yet travelled, but has booked and paid for travel to be undertaken during the period for which the claim is made, for that passenger.
The Directions made provisions (clause 8) for passengers who had booked and paid for their travel prior to the introduction of the Scheme, for travel after 1 September 1996, to be forwarded a cheque for the appropriate rebate.
Funding for the scheme is demand-driven and changes to match the actual level of eligible passenger vehicle travel undertaken. Funding for 1996-97 was originally estimated at $7.5m based upon the carriage of an estimated 68,000 passenger vehicles during the first 10 months of the Scheme's operation. A total of nearly $8.5m in rebates was paid during 1996-97 in respect of the carriage of 73,360 passenger vehicles.
New operators
The Scheme does not discriminate between service operators. Should a new operator enter the Bass Strait passenger trade, the Scheme applies to its passengers on the same basis as those of existing service operators. That is, the rebate applicable to each season, and the dates of the seasons, remain unchanged for any new operator. This arrangement is intended to provide certainty in the market place as to how the Scheme will apply.
Payments Made Under The Scheme
Service operators
During the monitoring period, there were two operators carrying passengers and their vehicles between Tasmania and the mainland: TT Line with the Spirit of Tasmania; and Southern Shipping with the much smaller ferry Matthew Flinders. The Spirit of Tasmania operates between Devonport and Melbourne, while the Matthew Flinders operates services between Bridport (Tasmania) and Welshpool (Victoria) via Flinders and Deal Islands. Since eligible passengers using Southern Shipping received rebates totalling only $1080 over the monitoring period, this report focuses on the operations of TT Line.
Payments made to TT Line
For the period September 1996 to June 1997, $8.47 million was paid by the Commonwealth to TT Line, for 73360 eligible vehicles. Of these vehicles, the vast majority (95 per cent) were motor cars, 4.5 per cent were motor cycles and less than one per cent were buses (see table 2).
Figure 1 shows the number of eligible motor cars by direction and indicates the seasonal nature of the demand for ferry passage across Bass Strait. In most instances, the split between north and south bound flows is roughly even. However, there was greater demand for southbound voyages in September 1996 (60:40), and for northbound voyages in May to June 1997 (between 60:40 and 55:45).
Table 2 Payments made under the scheme to TT Line, September 1996 to june 1997
| Motor Cars | Buses | Motor Cycles | |||||
|---|---|---|---|---|---|---|---|
| Month | Number | Rebate paid ($) | Number | Rebate paid ($) | Number | Rebate paid ($) | Total rebate paid ($) |
| September | 5558 | 566060 | 9 | 900 | 89 | 4530 | 571490 |
| October | 6451 | 774120 | 27 | 3240 | 281 | 16860 | 794220 |
| November | 6771 | 812520 | 26 | 3120 | 271 | 16260 | 831900 |
| December | 7459 | 1026960 | 12 | 1620 | 249 | 17250 | 1045830 |
| January | 8144 | 1177950 | 15 | 2160 | 323 | 23115 | 1203225 |
| February | 6842 | 821040 | 37 | 4440 | 501 | 30060 | 855540 |
| March | 7436 | 892320 | 41 | 4920 | 810 | 48600 | 945840 |
| April | 7411 | 801500 | 43 | 4680 | 584 | 33640 | 839820 |
| May | 6874 | 687400 | 25 | 2500 | 116 | 5800 | 695700 |
| June | 6865 | 686500 | 7 | 700 | 83 | 4150 | 691350 |
| Total | 69811 | 8246370 | 242 | 28280 | 3307 | 200265 | 8474915 |
Note An additional $1080 in rebates to Southern Shipping were made in the same period. (Source Tasmanian Assistance Team)
Figure 1 Directional Flow of Eligible Motor Cars, September 1996 to June 1997
Source Tasmanian Assistance Team
The seasonal nature of demand, combined with the higher rebates being provided for peak season travel, results in significant variation in total payments made under the Scheme on a monthly basis (figure 2).
Figure 2 Payments made to TT Line, September 1996 to June 1997
Source Tasmanian Assistance Team
Effectiveness of the scheme
To determine the effectiveness of the Scheme this analysis considered the following:
- changes in gross fares;
- changes in the number of eligible passenger vehicles and number of passengers accompanying those vehicles;
- TT Line's operating performance; and
- changes in the total demand for passenger travel across Bass Strait, including by air.
Changes in Gross Fares
Effective from 26 January 1997, TT Line increased fares by an average of 5.3 per cent, representing the first general price increase since 1994 (TT Line 1997). Table 3 indicates that for an adult inside cabin fare (on which the rebate is partly based), the fare increase was slightly above average for the shoulder season, and slightly below average for the off peak and peak season.
Table 3 also indicates that for the standard car fare (on which the rebate is partly based), there were no price increases for any season. The most significant changes in the TT Line fare schedule were for a standard car towing a trailer or caravan where total length is greater than 5 metres and height is under 2.25 metres (table 3). TT Line management informed the BTCE that these changes reflect the company's attempt to receive a more appropriate level of revenue for the additional space that such vehicles occupy. For example, the fare increases are limited in the main to the shoulder and peak seasons, times when space is at a premium.
While there has been an increase in gross fares, eligible passengers still derive a significant fare saving as a result of the rebate.
table 3 Selected tt line fares, one way, as at 26 Junuary 1997
| Shoulder season | Off peak season | Peak season | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| New | increase | New | increase | New | increase | |||||
| Fare | Length | fare ($) | $ | % | fare ($) | $ | % | fare $ | $ | % |
| Adult, inside cabin | na | 153 | 8 | 5.5 | 147 | 7 | 5.0 | 168 | 8 | 5.0 |
| Standard car under 2.25m in height | ||||||||||
| 5m or less | 145 | 0 | 0 | 125 | 0 | 0 | 185 | 0 | 0 | |
| Standard car towing a trailer or caravan, both vehicles under 2.25m in height | ||||||||||
| 8m or less | 362 | 30 | 9.0 | 257 | 0 | 0 | 422 | 60 | 16.6 | |
| 9m or less | 411 | 40 | 10.8 | 301 | 0 | 0 | 486 | 80 | 19.7 | |
| 10m or less | 400 | 50 | 14.3 | 345 | 0 | 0 | 555 | 100 | 22.0 | |
| 11m or less | 509 | 60 | 13.4 | 389 | 44 | 12.8 | 614 | 120 | 24.3 | |
*na=not applicable (Source TT Line fare schedule, effective 26 January 1997.)
Effect on Vehicle Numbers
During the 1996/97 financial year, TT Line carried 80642 vehicles of all types, representing an increase of 28 per cent on the previous 12 months. The change in the number of motor cars in the same period was 31 per cent. This increase in traffic was partly due to an increase in the number of voyages made by the Spirit of Tasmania in the 1996/97 financial year (313 compared with 295 in 1995/96). Nevertheless, on a per voyage basis, there was an increase of 20.7 per cent and 23.9 per cent in the number of vehicles (freight excluded) and passenger motor cars, respectively, carried by TT Line.
On a monthly basis, there was a substantial increase in the number of motor cars carried in May and June 1997 compared with the same time in the previous year (table 4). While this is significant, it is too early to tell whether this represents an ongoing trend.
Table 4 Vehicles1 carried by TT Line, 1995/96 - 1996/97
| All vehicles | Motor cars | |||||
|---|---|---|---|---|---|---|
| Month | 1995/96 | 1996/97 | Change (%) | 1995/96 | 1996/97 | Change (%) |
| July | 3512 | 3868 | 10.1 | 3441 | 3797 | 10.3 |
| August | 2786 | 3773 | 35.4 | 2721 | 3655 | 34.3 |
| September | 4865 | 5657 | 16.3 | 4748 | 5559 | 17.1 |
| October | 5503 | 6759 | 22.8 | 5234 | 6451 | 23.3 |
| November | 5277 | 7066 | 33.9 | 4983 | 6769 | 35.8 |
| December | 5781 | 7717 | 33.5 | 5494 | 7456 | 35.7 |
| January | 7466 | 8484 | 13.6 | 7052 | 8146 | 15.5 |
| February | 6449 | 7377 | 14.4 | 5737 | 6839 | 19.2 |
| March | 7349 | 8286 | 12.8 | 5579 | 7435 | 33.3 |
| April | 6126 | 7907 | 29.1 | 5922 | 7280 | 22.9 |
| May | 4209 | 6872 | 63.3 | 4055 | 6731 | 66.0 |
| June | 3631 | 6871 | 89.2 | 3544 | 6781 | 91.3 |
| Total | 62954 | 80637 | 28.1 | 58510 | 76899 | 31.4 |
| per voyage | 213 | 258 | 20.7 | 198 | 246 | 23.9 |
1. Vehicles all types, freight excluded.
2. In addition to the 76899 motor cars carried by TT Line in 1996/97, 353 motor cars were carried by Coastal Express on behalf of TT Line. TT Line received a rebate under the Scheme for these vehicles.
3. Comparing tables 2 and 4 indicates that TT Line received a rebate for 11 motor cars which it appears it did not carry. The reason for this discrepancy is that table 4 is based on TT Line's yield management database which will vary on a month to month basis with the actual number of motor vehicles carried and claimed against as shown in table 2.
Source TT Line yield management database
Two other points should be made:
- the relatively smaller increase in traffic in January is partly to do with that month already representing the peak period of demand, with capacity constraints limiting potential increases in demand; and
- although August had a large relative increase in traffic (before the Scheme came into effect), it was from the smallest base of all months.
Effect on Passenger Movements
During the 1996/97 financial year, 259169 passengers were carried on the Spirit of Tasmania. This was a 20 per cent increase on the previous year. Table 5, provides a break down of passenger numbers based on TT Line's yield management database.
Of all passengers carried by TT Line in 1996/97, 35 per cent were berth only passengers, while 63 per cent were drivers or passengers of a motor car being carried by TT Line. The remaining passengers were those drivers or passengers of vehicles other than motor cars. This compares to a 39:58 split in the previous year.
Table 5 Passengers carried by TT Line, 1995/96 - 1996/97
| Total passengers | Berth only passengers | Motor car passengers | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Month | 1995/96 | 1996/97 | Change (%) | 1995/96 | 1996/97 | Change (%) | 1995/96 | 1996/97 | Change (%) |
| July | 13544 | 15766 | 16.4 | 6252 | 8239 | 31.8 | 7199 | 7440 | 3.3 |
| August | 8260 | 16150 | 95.5 | 2943 | 9135 | 210.4 | 5245 | 6864 | 30.9 |
| September | 18288 | 19239 | 5.2 | 7713 | 7109 | -7.8 | 10411 | 12012 | 15.4 |
| October | 20969 | 20299 | -3.2 | 9544 | 6978 | -26.9 | 11038 | 12901 | 16.9 |
| November | 19748 | 21530 | 9.0 | 9608 | 7991 | -16.8 | 9739 | 13166 | 35.2 |
| December | 21214 | 24262 | 14.4 | 8039 | 7100 | -11.7 | 12833 | 16835 | 31.2 |
| January | 26235 | 28504 | 8.6 | 7296 | 7341 | 0.6 | 18392 | 20688 | 12.5 |
| February | 20702 | 21876 | 5.7 | 8222 | 7279 | -11.5 | 11498 | 13912 | 21.0 |
| March | 22553 | 25575 | 13.4 | 8580 | 9065 | 5.7 | 11419 | 15333 | 34.3 |
| April | 20000 | 24591 | 23.0 | 6732 | 7866 | 16.8 | 12997 | 15833 | 21.8 |
| May | 12235 | 21478 | 75.5 | 4377 | 7626 | 74.2 | 7670 | 13663 | 78.1 |
| June | 11970 | 20253 | 69.2 | 4957 | 6006 | 21.2 | 6889 | 14143 | 105.3 |
| Total | 215718 | 259523 | 20.3 | 84263 | 91735 | 8.9 | 125330 | 162790 | 29.9 |
| per voyage | 731 | 829 | 13.4 | 286 | 293 | 2.6 | 425 | 520 | 22.4 |
Source TT Line yield management database
On a per voyage basis, TT Line carried 13.4 per cent more passengers in 1996/97. However, there was only a 2.6 per cent increase in berth only passengers compared with an increase of 22.4 per cent in motor car passengers. Indeed, much of the growth in berth only passenger traffic was due to an extraordinary increase in traffic during August. Figure 3 indicates that much of the increase in motor car passenger traffic from September (when the Scheme was introduced) to February may represent a transfer of demand from berth only passengers.
It should be noted that, during 1996/97, the Tasmanian Government provided $350,000 for a $30 discount in the off-peak APEX fare for both Tasmanian and mainland passengers. All 11,666 tickets were sold, which may help explain some of the growth in passenger numbers in the May to June 1997 period.
Figure 3 Percentage Change in Passenger Movements, 1995/96 - 1996/97
Source TT Line yield management database
Using the vehicle numbers in table 4, table 6 indicates that, although there has been substantial variation in the simple average number of motor car passengers per motor car on a month to month basis, the annual average (based on the average for each voyage) has not changed significantly.
Table 6 number of car passengers per car, 1995/96 - 1996/97
| Car passenger per car | |||
|---|---|---|---|
| Month | 1995/96 | 1996/97 | Percentage change |
| July | 2.1 | 2.0 | -6.3 |
| August | 1.9 | 1.9 | -2.6 |
| September | 2.2 | 2.2 | -1.5 |
| October | 2.1 | 2.0 | -5.2 |
| November | 2.0 | 1.9 | -0.5 |
| December | 2.3 | 2.3 | -3.3 |
| January | 2.6 | 2.5 | -2.6 |
| February | 2.0 | 2.0 | 1.5 |
| March | 2.0 | 2.1 | 0.8 |
| April | 2.2 | 2.2 | -0.9 |
| May | 1.9 | 2.0 | 7.3 |
| June | 1.9 | 2.1 | 7.3 |
| Annual average1 | 2.10 | 2.09 | -0.5 |
1. Average of car passengers per motor car for each voyage. Calculated t-statistic (0.74) indicates no significant difference in the average for the two years. (Source TT Line yield management database)
It is too early to determine the full impact of the Scheme on the demand for sea travel across Bass Strait. However, in the first ten months of the Scheme, there have been significant increases in both the number of vehicles, particularly motor cars, and passengers accompanying motor cars, carried by TT Line. At the same time, the number of berth only passengers carried by TT Line increased by approximately 2.6 per cent. It is reasonable to assume that this increase in demand should be reflected in higher vessel utilisation rates, resulting in lower per unit operating costs for TT Line.
TT Line's Operating Performance
Operating Costs
TT Line's operating costs in 1996/97 amounted to $51.2 million. This was a 6 per cent increase on the previous financial year (table 7). However, there were 18 more voyages by the Spirit of Tasmania in 1996/97 (313 compared with 295 in 1995/96). Consequently, on a per voyage basis, operating costs remained steady. This was due to reductions in hotel and freight services, sales and holiday packages, and head office costs being offset by increases in human resources and reservations costs, and commissions and fees.
Table 7 TT Line operating expenditure, 1995-1997
| Expenditure ($'000s) | Change | Expenditure | Change | |||
|---|---|---|---|---|---|---|
| 1995/96 | 1996/97 | (%) | 1995/96 | 1996/97 | (%) | |
| Expenditure by department | ||||||
| Operations | 21198 | 22357 | 5 | 71858 | 71428 | -1 |
| Hotel services | 14565 | 15296 | 5 | 49373 | 48869 | -1 |
| Customer services | 4693 | 4893 | 4 | 15908 | 15633 | -2 |
| Administration | 5697 | 6098 | 7 | 19312 | 19482 | 1 |
| Other expenditure | ||||||
| Commissions and fees | ||||||
| Passenger | 1579 | 1904 | 21 | 5353 | 6083 | 14 |
| Vehicle | 521 | 631 | 21 | 1766 | 2016 | 14 |
| Total | 48253 | 51179 | 6 | 163569 | 163511 | 0 |
Note Operating expenditures are shown by profit centre. In some cases, expenditure on one particular item may be distributed among a number of profit centres. (Source TT Line financial reports)
Operating Revenue
Table 8 indicates that TT Line earned $64.1 million in revenue in 1996/97. This was a 16 per cent increase on the previous financial year. On a per voyage basis, operating revenue increased 9 per cent, reflecting an increase in fares in January 1997, and higher passenger and vehicle occupancy rates. However, some of the increase in vehicle numbers was offset by a reduction in freight capacity and this is reflected in reduced freight revenues.
Table 9 considers TT Line's operating costs and revenues in terms of the output of its three core services: passengers, vehicles and freight. The table shows that TT Line was able to increase its per unit return in all three services, principally from reduced passenger and freight unit costs, and increased vehicle unit revenues. The latter reflects a change in company pricing policy towards vehicles towing trailers or caravans, and oversized vehicles.
Table 8 tt Line operating revenue
| Revenue ($000) | Change | Revenue per voyage ($) | Change | |||
|---|---|---|---|---|---|---|
| Revenue source | 1995/96 | 1996/97 | (%) | 1995/96 | 1996/97 | (%) |
| Passenger | 19934 | 29398 | 47 | 67571 | 93925 | 39 |
| Vehicle | 9126 | 12356 | 35 | 30936 | 39476 | 28 |
| Freight | 17796 | 17050 | -4 | 60324 | 54473 | -10 |
| On board food & beverage | 6847 | 2891 | -58 | 23210 | 9238 | -60 |
| Franchise | 409 | 497 | 22 | 1387 | 1589 | 15 |
| Cruise | 423 | 674 | 60 | 1432 | 2154 | 50 |
| Other | 159 | 660 | 315 | 539 | 2109 | 291 |
| Holiday packages | 552 | 581 | 5 | 1872 | 1856 | -1 |
| Gain (loss) sale fixed assets | -9 | -18 | 106 | -30 | -58 | 94 |
| Total operating revenue | 55237 | 64091 | 16 | 187242 | 204762 | 9 |
Figures may not add due to rounding. (Source TT Line financial reports)
This pricing change (as discussed earlier, see table 3) coincided with an average 5.3 per cent increase in passenger fares. However, table 9 indicates there was only a slight (less than 1 per cent) increase in actual passenger revenues. This discrepancy can be explained by figure 4 which indicates that there was a substantial increase in the proportion of various discounted fares compared with all fares, for the off peak season. Although information on the size of each discount per ticket is not available, it does appear that any increases in revenue obtained from higher published fares have been offset by greater discounting in the off peak season. Whether or not the increased discounting is an indirect result of the Scheme is too difficult to determine at this early stage.
It should also be noted that the apparent 'increase' in passenger fares shown in table 9 is partly the result of an earlier change in pricing policy by TT Line. From 26 August 1996, passengers received a buffet meal and continental breakfast as part of the standard fare. This resulted in an increase in fare revenue but was offset by a reduction in revenue from on-board food and beverage consumption.
Table 9 TT line operating costs and revenues by service type
| Passengers | 1995/96 | 1996/97 | Vehicles | 1995/96 | 1996/97 | |
|---|---|---|---|---|---|---|
| Passengers carried | 215974 | 259169 | Vehicles carried | 62933 | 80642 | |
| Revenue ($000) | Revenue ($000) | 9126 | 12356 | |||
| Fares | 19934 | 29398 | ||||
| On board food & beverage | 6847 | 2891 | ||||
| Total passenger revenue | 26780 | 32290 | ||||
| Revenue per passenger ($) | 124 | 125 | Revenue per vehicle ($) | 145 | 153 | |
| Costs ($000) | Costs ($000) | |||||
| Hotel services | 14565 | 15296 | Commissions and fees | 521 | 631 | |
| Commissions and fees | 1579 | 1904 | Other | 4587 | 5758 | |
| Other | 10018 | 13699 | ||||
| Total passenger costs | 26162 | 30899 | Total vehicle costs | 5108 | 6388 | |
| Costs per passenger ($) | 121 | 119 | Costs per vehicle ($) | 81 | 79 | |
| Return per passenger ($) | 3 | 5 | Return per vehicle ($) | 64 | 74 | |
| Freight | ||||||
| Number of TEUs | 23200 | 22112 | ||||
| Revenue ($000) | 17796 | 17050 | ||||
| Revenue per TEU ($) | 767 | 771 | ||||
| Costs ($000) | ||||||
| Freight services | 7160 | 7201 | ||||
| Other | 8944 | 7945 | ||||
| Total freight costs | 16103 | 15146 | ||||
| Freight costs per TEU ($) | 694 | 685 | ||||
| Return per TEU ($) | 73 | 86 |
Note The "other" costs category was determined by apportioning total costs, less those costs already noted, by the contribution each service makes to total revenue. (Source TT Line Financial Report)
Since the introduction of the Scheme, TT Line has improved its financial position and TT Line management has acknowledged that the Scheme has made a substantial contribution to the company's positive financial performance (TT Line 1997). It also appears that the increase in demand as a result of the Scheme has lead to lower unit operating costs for TT Line, and it is possible that some of the benefits of these lower costs have been passed on to some passengers through discounted fares.
Figure 4 Percentage Change in the Proportion of Discount Fares to Full Fares, 1995/96 - 1996/97
Source TT Line yield management database
Changes in Air Passenger Movements Across the Bass Strait
The reduction in the cost to travel across Bass Strait by sea may have resulted in some consumers switching from air to sea travel. But, at first glance, there has been little effect on total passenger numbers using air services between the mainland and Tasmania, since the Scheme came into effect (AVSTATS, see figure 5). Although much of the May 1996 to April 1997 data (the most recent data available) are provisional or estimates, it seems that traffic flows during this period are roughly in line with passenger movements in the preceding 12 months.
However, this general picture hides changes in passenger movements into and out of Devonport and Burnie for the same period. For example, figure 6 shows how the number of passengers travelling by air between Devonport and Melbourne/Moorabbin for the August to November 1996 period was substantially down on that period in the preceding year. This decline in passenger numbers is particularly so for the period corresponding with the introduction of the Scheme. Although Tourism Tasmania was able to confirm that one airline had commented on a downturn in business since the Scheme's introduction, Tourism Tasmania was unable to provide any additional information to confirm the type of passengers who may have switched from air transport to the ferry.
Figure 5 Number of Domestic and Regional Air Service Passenger Between Tasmania and the Mainland, Various Years1
1. Data for 1996-97 are provisional. (Source AVSTATS)
Figure 6 Number of Domestic and Regional Air Service Passenger Between Melbourne/Moorabbin and Devonport, Various Years1
1. Data for 1996-97 are provisional. (Source AVSTATS)
The slight decline in the June to August period (the period immediately preceding the introduction of the Scheme) may have been due to some consumers delaying their travel in anticipation of the introduction of the Scheme, and switching to the Spirit of Tasmania when they did travel.
Although some regional airlines may believe they lost passengers to TT-Line, it is possible that little shift in modal demand occurred since total passenger numbers, rather than motor car passenger numbers, on the Spirit of Tasmania increased only slightly over the September to November period (see table 5). Additional information about changes in the demand for 'fly-drive' packages would be required if this matter were to be further investigated.
If the introduction of the Scheme did not result in consumers switching modes to cross the Bass Strait, then the matter of what caused the decline in regional air passenger demand would still need to be resolved. This is because it is possible that the factors impacting on the demand for air travel may also have been expected to impact on the demand for sea travel. If this is true, then it is possible that the effectiveness of the Scheme may be understated since sea passenger traffic actually increased.
Conclusions
Due to the limited period over which the Scheme has operated, this monitoring report finds that it is too early to draw any firm conclusions about the effectiveness of the Scheme. However, the following points are worth mentioning:
- there has been an increase in total traffic on the Spirit of Tasmania since the commencement of the Scheme;
- load factors (per voyage) have increased resulting in lower unit costs for TT Line; and
- unit passenger revenues have remained roughly unchanged while unit vehicle revenues have increased by 5.5 per cent.
There is little doubt that the introduction of the Scheme has contributed to the improved financial performance of TT Line. However, it is possible that TT Line has passed on some of the indirect benefits it has derived from the Scheme through increased discounting during the off peak season.
Postscript
It does seem that the increase in demand has been sustained beyond the 1996/97 monitoring period. During the scheduled dry docking of the Spirit of Tasmania, the ferry Incat 045 operated between 13 July and 27 July 1997 (inclusive). This service enabled TT Line to trial the potential use of a high speed catamaran, resulting in TT Line's decision to use such a vessel (The Devil Cat) over the peak 1997-98 period.
References
AVSTATS, Air Transport Statistics, Department of Transport and Regional Development, Canberra.
DoTRD 1996, Directions by the Minister for Transport and Regional Development for the Operation of the Bass Strait Passenger Vehicle Equalisation Scheme, Department of Transport and Regional Development, August, Canberra.
Sharp 1996, Bass Strait Passenger Vehicle Equalisation Scheme, media statement by the Hon. John Sharp MP, Minister for Transport and Regional Development, 23 August.
NRMA 1995, What it Costs to Run Your Car, Sydney.
TT Line 1997, Annual Report for the Year Ended 30 June 1997.
Attachment 1
Clause 16 of the Minister's Directions for the OPERATION of
the Bass Strait Passenger Vehicle EQUALISATION Scheme
16.1 A Service Operator who claims reimbursement under the Scheme shall be subject to monitoring by the Bureau.
16.2 The Bureau shall, on an annual basis, monitor the effectiveness of the Scheme, with specific regard to:
(a) movement in a Service Operator's annual operating costs;
(b) movement in an Operator's revenue; and
(c) the number of eligible passengers and eligible passenger vehicles carried per annum by the Operator.
16.3 A Service Operator shall comply with all reasonable requests by the Bureau for information or access to documentation, in relation to the Bureau's monitoring function.