P&O is scheduled to take delivery of two state-of-the-art “superferries” this year, months after firing its crews in an effort to cut costs. The company valued two vessels at £220 million (€260 million) when it ordered them from Guangzhou Shipyard International Limited in 2019. The first of the ferries, named 'P&O Pioneer', was launched on the water in January at a yard in China where it was built.
It is due to go into service on P&O’s Dover to Calais route in September, replacing the Pride of Kent, which is currently being detained by the Maritime and Coastguard Agency after failing a safety inspection.
Pioneer's sister-ship, which P&O has named “Liberte”, is under construction and will be delivered early next year. It will replace Pride of Canterbury on the Dover - Calais route. The details of P&O’s deal are confidential. Typically, ships are purchased in a similar way to residential property.
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A deposit - usually 10% - is paid by the shipping operator (in this case P&O). The balance is paid by banks and other lenders (private equity companies, investment funds) in stages until the ship is built.
When the ship goes into service, the shipping operator pays a “mortgage” to the lenders for a period of up to 15 years, after which they own the vessel. Convention suggests it is unlikely that P&O will start paying in any significant way for Pioneer or Liberte until they are operational.
It’s easy to see why P&O ordered Pioneer and the Liberte. The 'superferries' - as P&O calls them - are diesel-battery hybrids and will consume 40% less fuel than P&O’s existing fleet.
The new ships are beautifully designed and are bigger and more manoeuvrable than traditional Channel ferries. They’re also double-headed, meaning they need not turnaround in port - saving time loading and unloading vehicles.
What’s interesting though is that P&O felt able to afford these ships when it ordered them in late 2019. The company claims to have been in a desperate financial positon for some time.
P&O's CEO was grilled in the Scottish Parliament on Tuesday
P&O’s chief executive, Peter Hebblethwaite, told the Scottish Parliament yesterday that P&O has “not been viable or competitive for a number of years” and that crew had to be fired, without warning, in an attempt to cut costs and rescue the business from certain bankruptcy.
The accounts of P&O Ferries Division Holdings Limited show that the company made a modest profit of £1m in the year ending December 31, 2019. During the pandemic, ferry passenger traffic (but not freight) collapsed. It is in the process of recovering.
The new ships are very expensive and, given that P&O is about to start paying for them in earnest, we can legitimately ask if they were a factor in the company’s decision to cut its wage bill by firing crew. Neither P&O Ferries nor DP World was prepared to comment.
A source close to P&O told me: “There is absolutely no connection with the incredibly difficult decision the business had to take two weeks ago to survive, without which it would no longer exist to welcome the new ships into service in 12 months time." In the press release P&O Ferries issued in 2019, announcing it had signed a €260 million contract for the two ships, the company’s then chair, Robert Woods, said: “This major investment in a new generation of super-ferries is a powerful testament to the commitment of DP World, our owner, to enable trade flows between Britain and Europe by providing first class shipping capacity for many years to come."