Ferry route axe to cost 300 jobs

May 28 2008 by Karen Dent, The Journal

MORE than 300 jobs are being axed by cruise giant DFDS after the firm blamed “skyrocketing” oil prices for its decision to scrap its North East route to Norway.

The Danish company, which took over the loss-making service from the region to the western Norwegian ports of Stavanger, Haugesund and Bergen in 2006, will close the route on September 1. Around 270 staff on the MS Queen of Scandinavia – 72 of whom are UK-based and some of whom are on time limited contracts – plus 70 land-based jobs spread across the UK, Norway and Denmark will go.

Most of the affected staff are from the UK and Denmark but DFDS UK managing director John Crummie yesterday said he could not comment on how many were from the North East while a consultation with staff was going on.

The Danish-owned company had tried to turn around loss-making route which it took over from Norwegian company Fjordline, by changing the tonnage, on board crewing and service.

But Mr Crummie said: “Over the last couple of years there have been a couple of business trend: skyrocketing oil prices have doubled year-on-year.

“There is general overcapacity in the market, with a combination of air and sea, and particularly competition in Norway, which has meant a downward pressure on volumes and average prices.

“We are clearly into a downward part of the economic cycle and we didn’t see the basis of a viable route.”

Mr Crummie said a study by the Port of Tyne had suggested that passenger shipping brought around £45m into the region annually.

“Inevitably and unfortunately, the closure of this route will have an effect on retail and tourist business,” he added.

Sarah Green, the regional director of the Confederation of British Industry, said the news was a blow to North East tourist businesses.

“Retailers and the local tourism industry have benefited from Norwegian visitors who came on regular shopping trips to benefit from the lower prices in the UK,” she said.

“DFDS state high oil prices are a cause of their decision and whilst high oil prices are impacting many manufacturers, they are increasing demand for businesses linked to the offshore sector, many of whom have Norwegian commercial connections.

“Therefore we would still expect the connections between the North East and Norway to flourish.”

Andrew Dixon, the chief executive at destination marketing agency, the NewcastleGateshead Initiative, said the closure of the route was “a huge disappointment”. But he added: “There has of course been a growth in air routes to Newcastle International, however, with Eastern Airways only recently announcing its first direct, daily weekday service from Stavanger. This new service started earlier in May and is expected to not only appeal to business travellers but also visitors taking short breaks.”

Mike Parker, from the North East Chamber of Commerce, said although the end of route would hit tourism and shopping, Scandinavian tourists were not the main overseas visitors to the region.

“We are attracting a wider tourism base from elsewhere in the globe and businesses in the North East benefit directly and indirectly. These positives in other areas are mitigating.”

Earlier this year, DFDS said the number of passengers travelling through the Port of Tyne increased by 17%, with the number of vehicles going up by 5%.

At the time, Mr Crummie said “fewer than expected” Norwegian and Dutch tourists had come to the North East and warned of rising operational costs.

DFDS also operates a service to Amsterdam from Newcastle and sails between Harwich in Essex and Denmark.

Mr Crummie refused to discuss the future viability of these other routes.

But he said: “Within DFDS, our focus is on improving the financial performance and building the profitability of the business unit. “The expectation is that it will be profitable this year.”

Fact file

The Queen of Scandinavia ferry, which serves the Newcastle to Norway route, was built in 1981 and refurbished in 2006. DFDS said it will be chartered out or sold after the route ends on September 1.The ship’s vital statistics are:

:: 166m long

:: 28.5m wide

:: 21 knots cruising speed

:: 606 cabins

:: Space for 305 cars

:: Space for 1,760 passengers

:: Four restaurants

:: Three bars

:: Cinema

:: Casino