Tórshavn court backs Smyril Line in battle to quit Lerwick

Hopes of keeping the Smyril Line ferry Norröna sailing to Shetland for at least one more year took a knock on Tuesday when the commercial court in Tórshavn turned down an application for an injunction from Shetland Development Trust.

If it had been granted the injunction would have forced Smyril Line to include Lerwick in its sailing schedule for next summer.

The development trust immediately lodged an appeal to the Danish High Court and a decision is expected soon.

Smyril Line announced last week that it wanted to cut Lerwick out of the Norröna's sailing schedule from the end of October.

The loss-making Faroese company claims that calling into Shetland is not economically viable and that it costs the company more than £10,000 in harbour dues and extra fuel every time the Norröna visits Lerwick which is three times a week in the summer and either once or twice a week in the spring and autumn.

Smyril Line managing director Thomas Magnussen also revealed that less than five per cent of passengers get on or off the ferry in Lerwick.

Ever since the launch of the new 36,000-tonne Norröna in 2003, the company claims it has made a loss each time the ship calls into Shetland.

But the Shetland Development Trust - which has a 19 per cent stake in Smyril Line - claims that Smyril Line is contractually bound to keep calling into Lerwick until the beginning of 2008.

The trust invested £4.2m in Smyril Line in 2001 in return for a 32 per cent shareholding and a five-year agreement to have Lerwick as a regular port of call.

According to the development trust the five-year agreement came into force when the new £62m super ferry Norröna came into service in April 2003.

On Wednesday development trust chairman Josie Simpson said that until the High Court in Copenhagen makes a decision it would be unhelpful to speculate on what else could be done to reverse the decision.

However, he dismissed Smyril Line's claim that it was having to spend thousands of pounds on fuel by including Lerwick in its sailing schedule.

Calling into Shetland adds very little to the company's fuel bill, Mr Simpson claimed as the Norröna calls into Lerwick en route between the Faroe Islands and Norway and therefore had to sail past Sumburgh Head.

"Diverting to Lerwick is absolutely negligeable," he said.

One idea that has been suggested in the past could involve bringing the Norröna into the SIC owned port of Scalloway rather than Lerwick, which is operated by Lerwick Port Authority.

Using a harbour under the direct control of the local authority would allow harbour dues for the Norröna to be either heavily discounted or even scrapped entirely.

However Mr Simpson said that the amount of work needed to bring a ferry the size of the Norröna into Scalloway would be enormous and would involve building a ferry terminal with a sufficiently large linkspan to accommodate the ferry.

In the short to medium term at least the idea was unlikely to be viable.

It was also clear, Mr Simpson added, that Smyril Line's strategy to turn itself into a profitable company is based on the Norröna calling into a port on mainland Scotland instead of Shetland.

Even if the losses Smyril Line incurs calling into Lerwick could be stemmed Mr Magnussen seemed intent on diverting the Norröna to a Scottish port.

If that happens there would not be enough time in the ship's weekly schedule to call into both Shetland and Scotland as well as Denmark, Norway, Faroe and Iceland.

Last week Smyril Line revealed that the lack of berths on the NorthLink ferries on the Aberdeen to Shetland route had put a severe dent in the company's original business plan.

The company had planned to lure passengers from the UK mainland to travel to Shetland and then on to Scandinavian destinations on board the Norröna.

But only a year before the launch of the new Norröna, NorthLink introduced new ferries on the Aberdeen to Shetland route which had fewer berths than the old P&O boats.

And unlike previous operators P&O, NorthLink has consistently refused to allow Smyril Line to take out block bookings for passengers wanting to buy through tickets from Aberdeen to Scandinavian countries.

The result has been a bottleneck with hundreds of potential passengers from the UK mainland having to be turned away during the peak summer months.

Last year Smryil Line made losses of £4.7m, up from £2m in the previous two years.

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