ECONOMY

Greek passenger shipping enters a new era with the end of competitive restrictions

Greek coastal shipping entered a new institutional framework yesterday, having already made substantial steps toward its qualitative upgrading. However, all is not rosy and there have been delays in several aspects of deregulation. For its part, the State seems to have launched the new framework with insufficient preparation. Ferry operators complain that the law introducing the deregulation of the sector is inadequate, despite last-minute improvements which did not alter the overall picture. Most importantly, the law will only be in force until December 31, 2003, and then it will have to be fully harmonized with European Union legislation; it beats many why this harmonization could not have happened straightaway. While the new framework contains many positive elements, its successful implementation presupposes the functioning of certain factors. These were pointed out by representatives of the industry and banks at the First Shipping Symposium held in Athens in June by XRTC (business and shipping consultancy firm of Credit Lyonnais). One is a stable framework of rules and its harmonization with EU legislation. Another is the abolition of controls on fares, and help from the government in various ways, on the grounds that shipping companies contribute to social welfare by investing private capital and do not enjoy equal treatment with other sectors of Greek industry. Industry representatives also argued that government also needs treat the new high-speed vessels differently from conventional ferries as regards rules about duration of deployment and crew structure. Banks, for their part, have realized the necessity of rescheduling the loans of ferry operators but also ask for corresponding sacrifices from the companies and the State: modernization, transparency in management and disentanglement of ferry companies from an undue emphasis on regional ties; port installations have to be improved at a fast pace with a view to upgrading the safety of sea transport and reducing operating costs. The growth of the coastal shipping industry must not depend on the state of the Athens Stock Exchange (ASE); possibilities for the government to provide financial incentives need to be explored; the Merchant Marine Ministry has a role to play in this, possibly by preparing a study after discussions with the ferry companies and presenting it to the Economy Ministry. Another requirement is the creation of a route network, with main transfer points for secondary routes. Such measures can contribute to a better operation of the new framework, although it may still not be harmonized with EU rules. High-speed ferries In view of the new framework for coastal shipping, XRTC expresses the view in a report that the new high-speed vessels will dominate the most profitable routes in the Aegean, while the old conventional vessels will be restricted to secondary segments of the market. It also considers it likely that concentration trends will intensify in the industry, where the following operators are now active: Attica Enterprises (EPAT). The group, which controls Strintzis Lines, possesses the following advantages: a modern fleet, sound management, expansion in foreign routes, strong liquidity. Disadvantages are the strong competition which the firm met on the Baltic Sea routes and excess capacity on the Adriatic routes. Revenues reached 124.8 million euros in the first half, EBITDA stood at 38.3 million euros, while net profit was 2.5 million; long-term debt stands at 851.6 million euros. Strintzis Lines. Advantages are seen as membership of the EPAT group, the value of its new vessels, liquidity and the recent rescheduling of its debts. Its entry into new Aegean routes and the new higher fares strengthen its position. A negative element is the cancellation of the order for two new ships with Hellenic Shipyards. Lesvos Shipping Company (NEL). Its position in the Aegean market seems to have been consolidated with the new vessels, it has rescheduled its debts and is the main operator on the Chios-Lesvos route. XRTC estimates that NEL can become a target of a hostile takeover bid or part of a merger. Its negative points include the technical problems displayed by its modern vessels and the age of many of its conventional ones. ANEK. The company has a relatively low debt, the value of its vessels is high. It is the sole operator on the Hania route and is active on almost all other Aegean routes. XRTC believes that ANEK can benefit from the current concentration trends and the recent change in management. Disadvantages are the age of part of its fleet, delays in debt rescheduling (banks have agreed to consider a new rescheduling plan by the end of the year) and its low liquidity. Moreover, ANEK has to face strong competition and excess capacity in the Adriatic and the expected deployment of Strintzis’s Blue Star Ferries on the Hania route. Minoan Lines. The company dominates the Iraklion route, has a modern fleet, its revenue base is broadly dispersed, it participates in most segments of the market – especially through its subsidiary Hellas Flying Dolphins (HFD) – and has a partnership with Grimaldi. Its ownership of many newly built vessels gives it the possibility of entering new markets and improving its results. XRTC sees as negative elements its high debt, its non-aggressive policy on the routes outside Greece and its interest in HFD, which also has a high debt burden. First-half revenue reached 71.8 million euros, EBITDA was 10.3 million euros; the company posted a net loss of 19.7 million euros, while long-term debt stands at 447.4 million euros. Third quarter Banking circles consider that the third quarter, when business is at a peak, will show improved results for the industry as a whole, for three main reasons: Fuel prices were on the whole stable, passenger traffic was higher this year – due to the new, high-speed vessels which have reduced traveling time – and several companies rescheduled their debts. During this quarter, the industry got a foretaste of the conditions of a deregulated market on the Dodecanese routes. The fleet of operating ferries carried 162,800 passengers in August – 45.8 percent higher than in the same month last year, mainly due to the entry of one Blue Star ferry and one NEL vessel.