EDITORIAL | Tasmania's ferry debacle: why governments should never own ships

Proving yet again that governments should never own ships, the government of Australia’s tiny, mendicant island state of Tasmania has done it again. The process of purchasing two replacement Ro-Pax ferries for the vital 240-nautical-mile Bass Strait service operated by the government’s TT-Line Company has inevitably degenerated into expensive chaos and catastrophe.

Yesterday, the board of TT-Line Company fell out completely with its ministerial “owners”. TT Line chairman Mike Grainger, a hitherto successful international maritime businessman, was effectively fired. That was simply the culmination of a lengthy process that commenced in 2017 and has sadly but completely predictably been a commercial debacle ever since.

Since it was established in 1985, TT-Line has always suffered from a strangely confused bureaucratic culture whereby, thanks to its government ownership, it has never been able to be operated in a normal commercial manner despite its owner describing it as a “government business enterprise.”

"Despite their many perks, no one in their right mind would want to serve as a director of such an organisation."

While it has supposedly operated as a public service with a substantial subsidy, it was also meant to be treated as a business, albeit with rather too much union influence. It was, like Scotland’s similarly government-owned and equally disastrous Calmac Ferries, and New Zealand’s KiwiRail, neither fish nor fowl. That made its effective governance nigh on impossible.

By its nature as a political football, the company was always subject to the often hopelessly impractical whims of pork barrelling politicians. Despite the many perks, no one in their right mind, as Mr Grainger has now discovered, would want to serve as a director of such an organisation.

The company’s ship acquisition and infrastructure decision making processes have reflected this reality. As I wrote on these pages on July 23, 2020, its ship acquisition decisions were completely wrong.

Obviously, no effective due diligence was conducted on the two shipyards (Germany’s Flensburger Schiffbau and Rauma Marine Constructions of Finland) that were originally and sequentially commissioned to build the ships. Both yards were effectively bankrupted and had to be bailed out (including partially by the Government of Tasmania to the tune of AU$80 million in the case of RMC) during the construction process.

While I strongly believe that much more economical, safer, and more appropriate ferries could have been built for much less money by either Tasmania’s own world leading Incat or Austal shipyards in Western Australia, the government’s cultural cringe prevailed. It had to go foreign, presumably with all the frequent flyer points that implies.

Amusingly, though, Finnish ferry owners purchased similar new ferries, at considerably lower prices and with much shorter building times, from Chinese yards at the same time that Tasmania was buying ships from Finland. Amazing!!! No private owners would survive for very long if they indulged in the kinds of acquisition processes indulged in by the TT-Line Company.

"The absence of logical planning by the company is simply astonishing."

As I sat through and endured similarly slick presentations about their ferry purchases by the CEOs of TT-Line and KiwiRail at the Interferry conference in, co-incidentally, Hobart in November last year, I was amused by their claims that appeared completely unrealistic. As it turned out, not much later, my thoughts were correct – in both cases.

Finally, the straw that apparently broke the camel’s back with respect to the relationship between TT-Line and its government owner was the debacle of the AU$350 million development of the company’s new terminal at Devonport in northern Tasmania. That will not, theoretically, be completed until 12 months after the ships, again theoretically, will have commenced to operate. That, it seems, will restrict their capacity by 40 per cent. The absence of logical planning by the company is simply astonishing.

Of course, as it is too early yet, we do not know how another seemingly strange decision of TT-Line will pan out. That involves its moving its Australian mainland terminal from almost the centre of Melbourne to the very shallow Port of Geelong, nearly 60 kilometres away. That involves considerable inconvenience to most of the company's passengers. It will be interesting to see the long-term effects of that incomprehensible move.

So, the company’s terminal decisions seem just as unrealistic as its ship acquisitions. It is a very strange way to run any business, even a government-owned one.