CalMac and CMAL may be scrapped to form one company to try and end ferry fiasco

The Project Neptune probe issued scathing criticisms of the existing governance structure for the lifeline island ferry services.

It criticised an “absence of long-term planning”, with a “sub-optimal” approach to the maintenance and replacement of vessels, potentially causing “higher than necessary or unforeseen maintenance costs”.

But the Herald on Sunday can reveal the analysis also supported a move to turn the ferry owners and operators into one integrated publicly-owned company responsible for the operation and the supply of vessels on the west coast of Scotland.

The investigation carried out by global consultants Ernst and Young said it had "potential for improved passenger experience in the longer term, once initial challenges of integration were overcome".

A scoring process over the potential for best value of a series of suggestions for structural reforms, including privatisation and giving local authorities responsibility for procuring ferry services and vessels found that integration of CMAL and CalMac was by far the most positive option The scoring also into account passenger experience, support for local communities, deliverability, accountability and transparency.

The study said that there would be "opportunities to achieve efficiencies in their operations", for instance over vessel maintenance."

It said: "The new body may also benefit from greater alignment of objectives and be more easily understood by users. There would be clearer accountability to customers and stakeholders and the potential to improve VfM (value for money) by removing duplication and interfaces."

Further details of Project Neptune seen by the Herald on Sunday say that that the new merged enterprise "could improve service delivery". The new company has even been given a name - CHFS Ferries Co.

It said: "Process for vessel management/renewal should be easier to manage from within a single organisation, which should have positive repurcussions for vessel quality."

The analysis said there were international benchmarks pointing to Canadian firm BC Ferries, which carries in the region of 22m passengers per annum across 25 routes.

It owns the majority of its 35 vessels, which have an average age of 33 years, and is also responsible for operations, maintenance as well as procurement.

It comes as it emerged Scottish Government-owned Calmac has been hit with record performance penalty fines over the running of ferries.

It has amassed over twice as much in performance fines in the last year than in its first nine years in charge.

The ferry operator has amassed nearly £10m in fines since 2007 and nearly £8m in penalties has come since it kept the contract just over five years ago.

Some £4.454m in penalties has been incurred in the 20 months to June this year.

Before CalMac Ferries Ltd, a subsidiary of David MacBrayne Ltd, took the £1bn eight-year contract under competition from the services company Secro, the penalties over nine years to September, 2016 amounted to just £1.36m.

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CalMac, which employs 1,700 staff, is to get a record amount of fines for the latest full year - having incurred £2.310m in penalties in the eight months to June, 2022 alone.

The Competition and Markets Authority has previously expressed concern about the "potential risks" of state control over the way ferries are operated, run and paid for.

There has been concern that the service is "cocooned" inside four levels of Scottish Government control with the Transport Scotland agency as funders, the procuring and vessel owning company CMAL, the ferry operators Calmac and the nationalised shipbuilders Ferguson Marine (Port Glasgow).

Part of Project Neptune's remit was to look at whether the structure is "fit for purpose", against a background of years of failing, ageing ferries.

Transport minister Jenny Gilruth has said there will be sweeping changes to the way ferries are owned and operated and said there were plans to consult on changes after years of disruptions caused by an ageing ferry fleet.

It is understood that the merger will form part of the further discussions.

One ferry user group official feared that a merger might be "messy" but that a restructure of how ferry service were run had to happen.

"What we have in place now is not fit for purpose," he said. "The needs of those who rely on ferries has to be number one, but I would question whether that is the case when it is so easy for decision to be made base on a political standpoint rather than sound business sense.

"Effectively getting rid of two companies to form one cannot be without its complications, although as a concept it might work."

Seventeen of CalMac's 35 working ferries deployed across Scotland are now over 25 years old.

The oldest in the CalMac fleet is is the Isle of Cumbrae which is 46-years old.

And the cost of repairs to ferries run by CalMac has more than tripled in a decade as age has taken its toll.

The state-controlled ferry operator spent more than £28.5m on repairs to their vessels last year, compared with just £9.5m in 2011.

Since the SNP came to power in 2007, the average age of Scotland's lifeline vessels has soared from 17 years to 24 years. Back in 1974 the typical ferry was just 13 years old.

An analysis from Ernst and Young says that further legal advice should be sought on the implications for merging the two organisations.

But it said that the integration of CMAL and CalMac was "the most attractive option" of those it looked at, including privatisation.

But it said the merger "could improve clarity around responsibilities" with the ferry operator and the owners objectives aligned.

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It said: "The simplified model should be better understood by island communities. Communication with key stakeholders should also be clearer as ferry services on the west coast of Scotland would have ‘one voice’."

It warned that if during integration, key personnel leave, the Scottish Government agency Transport Scotland may lose access to expertise, "which could impact vessel and service quality over the long term."

Robbie Drummond, managing director of CalMac, said: “One wish often raised by communities about any future structure is that it must be clearer and simpler for communities to understand and engage with. This goes hand in hand with a desire for better levels of accountability to the communities on the network. We agree with communities that simplicity and accountability are critical in designing the best structure to meet future community needs.

“CalMac is an integral part of life on the west coast of Scotland and we will continue to be fully committed to, and focussed on, delivering a reliable and high-quality service for our local communities.”