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Battle lines drawn over Tirrenia subsidy extension
The battle lines are being drawn around Italian state-owned carrier Tirrenia, with efforts to extend the ferry company's subsidy regime past the 2008 deadline set by the European Commission now the subject of animated discussion from parliament to company boardrooms to docks around the country.
The debate ahead is unlikely to be civil. Already, maritime unions associated with the company have called a one-day strike for Friday in protest at the government's failure immediately to back an extension of subsidies for four more years, until 2012.
Meanwhile, transport officials from the Sardinia region, a major market for Tirrenia as for its private competitors, called last week for an end to subsidies and the opening up to competition of the island's routings.
Shipowners' association Confitarma is keeping its powder dry, unsure as yet whether the measure to extend the subsidies has sufficient support within the government or in Parliament to pose a threat. But its members are less reserved.
Industry patriarch Aldo Grimaldi is pressing his attack on Tirrenia on four separate fronts, accusing it of violating EC rulings and distorting competition to the detriment of his own Grandi Navi Veloci.
Mr Grimaldi insists the subsidy regime is not his target, that he is interested only in stopping Tirrenia using public funds to compete illegally, specifically on the over-tonnaged Genoa-Porto Torres route. But his assault on the public company cannot but have an impact on the debate, as the EC is asked once again to consider the legitimacy of state aid to Tirrenia.
Mr Grimaldi is an old foe of the company - he led the initial fight against its subsidies more than a decade ago - and with GNV under pressure in an increasingly competitive market, he has an additional incentive to keep up the chase. He is doing so with vigour.
In Genoa, he has sued Tirrenia in civil court, alleging anti-competitive conduct and claiming damages; Tirrenia is trying to get the forum changed to Naples as a prelude to having the case thrown out.
In Rome, Mr Grimaldi is pressing his case with the ministry of transport, reasoning that if Tirrenia is acting illegally, it can only do so with, at the very least, the passive acceptance of the government.
Mr Grimaldi's lawyers will shortly write to the ministry to ask why no new pricing schedule has been approved for the company since 2004.
Later this month, they will also file a complaint with Italy's competition authorities. And they have already complained to the EC, which in turn has sought clarification from the Italian government.
Mr Grimaldi's case includes several claims, among which are: that far from stabilising its service between Genoa and Porto Torres at 1994 levels as instructed by the EC, Tirrenia has put larger, faster ships into service on the route; that it has not increased prices in line with costs, relying on public subsidies to fill the gap; and that it has indulged in predatory pricing and granted large discounts and extravagant payment terms to key customers, increasing the risk of bad debt.
Tirrenia's filing in Genoa civil court last week reiterates the defence it has long made to such charges. It stresses the restraints and demands placed on it by its public service mission, as well the government's role in setting tariffs, routings and deployments.
More specifically, it also claims to have reduced capacity on the Genoa-Porto Torres route from 802,060 passengers to 482,044, a much bigger cut than required. The type of ship is irrelevant, it adds, since the EC decision requires only capacity reductions and makes no stipulations on the size, speed or quality of the ships deployed.
As for its pricing and payments policies, it concedes to discounting, extending payments terms and not applying interest to payments due, but argues that it is within its rights in doing so. It also claims that 2004 tariffs are still in effect despite the significant impact of inflation on costs over the last two years, not because the company did not file new tariff schedules but because "the government saw no reason to change them."
The face-off between Tirrenia and GNV comes at a time of particular ferment in Italy's ferry market.
MSC-owned SNAV, for instance is gradually expanding its fleet and extending its network of services up the Italian peninsula.
Corsica Sardinia Ferries is bulking up. Vincenzo Onorato's Moby Lines is also on the rise, adding new ships and routings, and turning its sights on GNV as well as its old foe Tirrenia. Indeed, its arrival on the Genoa-Porto Torres route is bad news for both. And Grimaldi Naples is expanding both at home and abroad.
The arrival on the scene of the private equity funds, both Italian and international, is only likely to accelerate a looming market shakeout, and in this regard all eyes are on Tirrenia.
Flush with cash and eager to put it to work, the funds have already made an impact.
In the last few months, Clessidra has snapped up 30% of Moby Lines - more funds for expansion, notes Mr Onorato, insisting that he will retain his majority stake - for an undisclosed price.
And a trio of funds are expected to close on December 14 on a deal to take control of GNV, for a king's ransom.
The standard modus operandi of the funds is to buy in, beef up their chosen investment and sell out fast at a substantial profit, just as Permira managed to impressive effect with GNV. The market may be a very different place by the time they are done.
The debate ahead is unlikely to be civil. Already, maritime unions associated with the company have called a one-day strike for Friday in protest at the government's failure immediately to back an extension of subsidies for four more years, until 2012.
Meanwhile, transport officials from the Sardinia region, a major market for Tirrenia as for its private competitors, called last week for an end to subsidies and the opening up to competition of the island's routings.
Shipowners' association Confitarma is keeping its powder dry, unsure as yet whether the measure to extend the subsidies has sufficient support within the government or in Parliament to pose a threat. But its members are less reserved.
Industry patriarch Aldo Grimaldi is pressing his attack on Tirrenia on four separate fronts, accusing it of violating EC rulings and distorting competition to the detriment of his own Grandi Navi Veloci.
Mr Grimaldi insists the subsidy regime is not his target, that he is interested only in stopping Tirrenia using public funds to compete illegally, specifically on the over-tonnaged Genoa-Porto Torres route. But his assault on the public company cannot but have an impact on the debate, as the EC is asked once again to consider the legitimacy of state aid to Tirrenia.
Mr Grimaldi is an old foe of the company - he led the initial fight against its subsidies more than a decade ago - and with GNV under pressure in an increasingly competitive market, he has an additional incentive to keep up the chase. He is doing so with vigour.
In Genoa, he has sued Tirrenia in civil court, alleging anti-competitive conduct and claiming damages; Tirrenia is trying to get the forum changed to Naples as a prelude to having the case thrown out.
In Rome, Mr Grimaldi is pressing his case with the ministry of transport, reasoning that if Tirrenia is acting illegally, it can only do so with, at the very least, the passive acceptance of the government.
Mr Grimaldi's lawyers will shortly write to the ministry to ask why no new pricing schedule has been approved for the company since 2004.
Later this month, they will also file a complaint with Italy's competition authorities. And they have already complained to the EC, which in turn has sought clarification from the Italian government.
Mr Grimaldi's case includes several claims, among which are: that far from stabilising its service between Genoa and Porto Torres at 1994 levels as instructed by the EC, Tirrenia has put larger, faster ships into service on the route; that it has not increased prices in line with costs, relying on public subsidies to fill the gap; and that it has indulged in predatory pricing and granted large discounts and extravagant payment terms to key customers, increasing the risk of bad debt.
Tirrenia's filing in Genoa civil court last week reiterates the defence it has long made to such charges. It stresses the restraints and demands placed on it by its public service mission, as well the government's role in setting tariffs, routings and deployments.
More specifically, it also claims to have reduced capacity on the Genoa-Porto Torres route from 802,060 passengers to 482,044, a much bigger cut than required. The type of ship is irrelevant, it adds, since the EC decision requires only capacity reductions and makes no stipulations on the size, speed or quality of the ships deployed.
As for its pricing and payments policies, it concedes to discounting, extending payments terms and not applying interest to payments due, but argues that it is within its rights in doing so. It also claims that 2004 tariffs are still in effect despite the significant impact of inflation on costs over the last two years, not because the company did not file new tariff schedules but because "the government saw no reason to change them."
The face-off between Tirrenia and GNV comes at a time of particular ferment in Italy's ferry market.
MSC-owned SNAV, for instance is gradually expanding its fleet and extending its network of services up the Italian peninsula.
Corsica Sardinia Ferries is bulking up. Vincenzo Onorato's Moby Lines is also on the rise, adding new ships and routings, and turning its sights on GNV as well as its old foe Tirrenia. Indeed, its arrival on the Genoa-Porto Torres route is bad news for both. And Grimaldi Naples is expanding both at home and abroad.
The arrival on the scene of the private equity funds, both Italian and international, is only likely to accelerate a looming market shakeout, and in this regard all eyes are on Tirrenia.
Flush with cash and eager to put it to work, the funds have already made an impact.
In the last few months, Clessidra has snapped up 30% of Moby Lines - more funds for expansion, notes Mr Onorato, insisting that he will retain his majority stake - for an undisclosed price.
And a trio of funds are expected to close on December 14 on a deal to take control of GNV, for a king's ransom.
The standard modus operandi of the funds is to buy in, beef up their chosen investment and sell out fast at a substantial profit, just as Permira managed to impressive effect with GNV. The market may be a very different place by the time they are done.
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