Fixing the ferries: Why there is light on Auckland harbour’s horizon

Ferry fury has boiled over as Auckland commuters complain about cancelled sailings and high prices. But there is light on the horizon with a promised multimillion- dollar investment in electric ferries and closed-door negotiations to break Fullers’ exclusive hold on the troublesome Waiheke Island run. Jane Phare reports.

Noisy ferries leaving behind a trail of diesel fumes and wakes that pound Auckland’s beaches and fragile sandstone cliffs. It’s an era that Auckland Transport (AT) wants to see the back of.

And ferry breakdowns, cancelled sailings, reduced schedules and passengers left behind on wharves is an era commuters want to see an end to as well. It’s been a long time coming but AT wants to champion change, starting with a $30 million injection to pay for two $12m electric ferries and charging stations by 2023.

And it’s putting pressure on Auckland ferry company Fullers360 to give way on its monopolistic exemption hold on the Waiheke and Devonport runs. Although Fullers isn’t quite so enthusiastic about letting go of the Waiheke run in particular, it is matching AT’senthusiasm for green ferries.

According to Fullers’ CEO Mike Horne the company plans to add at least five electric or electric/hybrid ferries to its fleet over the next five years. Horne wants to see the first electric ferry on the water within two years,propelled by jets rather than propellers which will reduce wash.

The company is also considering hybrid ferries for longer, more exposed runs, electric vessels that will run on a battery but will have a diesel boost for safety reasons, Horne says.

“But 99 per cent of the time, it’s going to be running on full battery electric.”

Hybrids will be converted later to an electric/hydrogen vessel once hydrogen is better understood so they will be “100 per cent green,” Horne says. Fullers is also looking at full hydrogen-powered vessels in the future for longer-distance island trips. The company plans to gradually replace its ageing diesel fleet over the next decade.

“There’ll be three or four different sorts of technologies over the next 10 years that allows us to get us fully decarbonised in ferries,” Horne says.

Already Fullers has spent more than $1m on electric, hybrid and hydrogen ferry research and development with New Zealand companies, including “key partner” Hamilton jet in Christchurch.

AT, too, has a vision for the next decade: a decarbonised fleet – likely to be a mixture of electric and hydrogen-powered – operating within a fully integrated travel system. Ferry services manager Gareth Willis talks of “a 21st century ferry” with better accessibility (wider doorways), more bike storage, upgraded technology for operating in fog and improved manoeuvrability to speed up docking times.

The ferries will be quieter, with zero emissions and low wash (wake). AT is currently working with Michael Eaglen’s EV Maritime company to provide the first electric ferries.

Of course, in the long term the vision depends on budget. AT is about to put a ferry procurement business case to Waka Kotahi NZ Transport Agency for approval, setting out its strategy for the next 10 to 12 years.

Green dream on hold

But Waiheke is unlikely to become part of the green dream any time soon. Although Fullers has spent more than $5m on eight electric buses for the island, diesel ferries will be tying up at Matiatia wharf for some years to come. For a start, Fullers has invested around $60m in the past five years to provide purpose-built ferries for the Waiheke service, although Horne says the company won’t be buying any more diesel ferries.

And then there’s the issue of power on the island. While there’s enough to charge electric buses there’s not enough to charge a large commuter ferry. That, says Horne, would require massive infrastructure in the form of a new cable to the island to feed grunty two to three megawatt charging stations (1 MW equals 1000 kilowatts).

AT and Fullers are talking to Vector about the installation of charging stations on Auckland’s wharves to enable ferries to “sip” power while passengers are unloading and loading, keeping the vessels topped up all day. But “sipping” won’t work on the longer runs like Waiheke, Gulf Harbour and Rotoroa Island. Fullers is looking at hydrogen-powered ferries as an alternative but those plans are still in an early development stage.

Waiheke woes

Waiheke residents have their own specific case of ferry fury to contend with: hundreds of people left behind at Matiatia during peak times, and cancelled or reduced schedules resulting in kids missing their sports games and people unable to get to work on time.

And then there’s the cost of the ferry tickets. A family of four will pay $113 to visit grandparents on the island for the day. An adult return ticket costs $42 ($35 off-peak), monthly passes are $372, and a 40-trip ticket is $530.

The Waiheke issue goes back more than a decade when the then Minister of Transport Steven Joyce granted Fullers an exemption from the Public Transport Operating Model (PTOM) for the Waiheke, Devonport and Stanley Pt runs on the basis that they were tourist destinations.

That means Devonport and Waiheke (the Stanley Pt service has since been withdrawn) are not fully integrated into the public transport system and can’t be regulated under PTOM. Fullers can charge a commercial rate, reduce services in winter and change or drop services with just 15 days’ notice, potentially leaving AT scrambling to plug the gap.

AT wants to see this notice period increased to 180 days to give it time to engage another transport contractor, part of ongoing negotiations with Fullers. AT has so far taken a softly softly approach, preferring to negotiate rather than call in the big guns – Waka Kotahi and the Minister of Transport – to force the removal of the exemption by Order in Council which would allow AT to take over.

Both Fullers and AT say negotiations have “progressed well” in the past year with concessions so far conceded for the Devonport run. Horne says Fullers is not against PTOM but good outcomes for customers also need to be considered, not just the cheapest price within a budget.

Waiheke locals argue the exemption puts them at a serious disadvantage compared to other Auckland commuters. Waiheke local board chair Cath Handley says island commuters travelling to and from the city are forced to pay fares considerably higher than relative ferry fares paid elsewhere.

“Our commuters, and that includes students, do not receive a cent of subsidy for their daily travel and the fare difference is extraordinary. We’re a suburb of Auckland but we don’t receive any of the ratepayer benefits of public transport.”

The median income on the island is $25,000 less than the average Auckland household income, so islanders are already financially disadvantaged.

Labour shortages mean the cost of ferry fares has become critical, she says. Business owners are faced with either subsidising ferry fares or putting people up in accommodation on the island, which is scarce and expensive. Sudden changes to the ferry schedule have major ramifications for shift workers on the island, she says.

“The regulated ferry services haven’t had cuts to the winter timetable the way that our service has been cut.”

Chris Darby, chair of Auckland Council’s planning committee, has been vocal for years on the issue, concerned that AT has very limited ability to regulate the quality of the exempt services.

“When something goes wrong with Devonport or Waiheke they (commuters) point the finger back at Auckland Transport and Auckland Council because they don’t know about these exemptions and contracts.”

Apart from the Waiheke run, Fullers receives around $18m a year to run subsidised ferry services around Auckland, paid by AT and Waka Kotahi NZ Transport Agency. The company received another $1.766m from Waiheke SuperGold subsidies, which enables passengers aged 65 and over to travel for free during off-peak hours, in the 2020/21 financial year. The company received a $362,000 GoldCard subsidy for the Devonport run. Sealink received $245,200 for its exempt service over the same period.

Both Handley and Darby want the Government to intervene to break the impasse. In a statement to the Herald this week Transport Minister Michael Wood said consultation on the PTOM review was complete and he was now waiting for “advice on the next steps”.

“I am aware of the concerns of many people on Waiheke about this issue and I am keen to see these concerns addressed. My understanding is negotiations between AT and Fullers are proceeding and I’m hopeful there will be an outcome before the end of the year.”

On the positive side, regular Fullers commuters say when things are going well, the service is efficient, the staff are friendly and the onboard flat whites aren’t bad. Darby says that in more recent times the Fullers management team have listened and are being proactive to deal with complaints.

But the Waiheke exemption remains a sticking point, a service that one islander described as a “licence to print money by a monopoly owned by a foreign company” and “a cash cow”.

Fullers360 is owned by Souter Holdings Fullers Ltd, in turn owned by Scottish bus baron Sir Brian Souter. Pre-Covid, Sir Brian was a regular visitor to Auckland and remains very hands-on with the company, Horne says. He dismisses suggestions that Fullers is a “cash cow” and that profits are siphoned offshore.

“It’s quite the opposite. In fact it’s come back onshore for exactly that reason (to invest in ferry stock). He (Sir Brian) is incredibly supportive to the local Fuller’s team over here in terms of helping us achieve our goals,” Horne says.

He describes the Waiheke route as “a big, expensive beast” to run.

“It’s such an asset-heavy business and those assets sitting in salt water are incredibly time-consuming and suck up a lot of money.”

Scrutiny of Fullers’ 2019 and 2020 accounts on the Companies Office website support Horne’s view that the company operates not far above break even. Souter Holdings has gradually offloaded the bus companies it owned in New Zealand, selling its loss-making Manabus in July 2019.

Instead, Horne says Fullers is concentrating on growing its ferry business, includingnegotiating to launch an electric and hydrogen-powered ferry service in Tauranga. The company is also focused on the tourist market, at this stage domestic, on the back of a 30 per cent lift in tourist cruises to destinations like Tiritiri Matangi, Rangitoto, Rotoroa Island and Coromandel in the past six months.

When is a monopoly not a monopoly?

Critics accuse Fullers, and vehicle-and-passenger company Sealink New Zealand (also exempt) of being monopolies, of leaving consumers little choice except to pay up and get on board.

But the Commerce Act sets a high bar to prove monopolistic behaviour and so far both Fullers and Sealink have sailed away from those accusations. The Commerce Commission has received 30 complaints against Fullers360 in the past three years (July 2018 to June 2021), including 11 that refer to monopolistic/anti-competitive behaviour.

It received eight complaints about Sealink over the same period, three that mention monopolistic/anti-competitive behaviour but found insufficient evidence with respect to both companies.

In 2018 the commission investigated allegations of anti-competitive conduct in relation to the carriage of freight on ferry services to Waiheke Island. Again, no action was subsequently taken due to lack of evidence.

Anti-competitive behaviour is illegal under section 36 of the act if it restricts the entry of other businesses or deters them from operating efficiently. However, it does not protect individual businesses from facing vigorous, or even aggressive, competition.

Neither is it illegal for a business to have substantial market power, unless it is using that power for an anti-competitive purpose. Businessman and Auckland yachtie William Goodfellow discovered just how hard it is to go up against a well-established company like Fullers when he launched a competing passenger ferry service.

Back in October 2014 the Herald announced Explore’s arrival with this promising headline: “Bright yellow dawn of new Auckland ferry era.” But it was to be a “Yeah, right” moment. Within a year it was all over.

Despite Explore’s modern boats, comfier seats and USB ports, Goodfellow was unable to compete. Explore customers had to stand in the rain on an uncovered pier while nearby Fullers’ passengers waited in relative comfort. And Fullers owned the bus fleet that met passengers at the Waiheke end. Now two of Explore’s natty ferries, stilI painted in the original yellow-and-black colour scheme, zoom around the harbour under the Fullers brand.

AT says that the completion of the new $170m Downtown Ferry Terminal with its six new piers will help remove barriers for new competitors. Newcomers will have equal access to those piers, Willis says.

The next round of ferry contracts are due for renewal in two years’ time but AT will start the tender process before that. AT is looking at either owning the vessels outright or funding a contractor. Either way the plan is for AT to own the vessels at the end of the contract.

The advantage of that is new competitors will be encouraged to bid because they will not need to fork out millions of dollars upfront to go up against Fullers on some routes.

Horne says Fullers is in for the long haul and has no issue with competition. The company has been talking to AT about how to get more operators into the market and increase services.

“In 10 years time a really joined-up network of ferries would be fantastic for Auckland. And that’s not a Fullers thing, that’s a ferry thing.”

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