en.econostrum
           

Public Services Outsourcing in Corsica: a small budget with major obligations


shippax CFI
Limited to only one basic service between Marseille and corsican ports, Maritime Public Services Outsourcing, currently under negotiation, regulates transport prices for passengers and freight. It also organises “skeleton services” in the event of a strike. Overview of the main changes announced for the assignees...



The agreement must be signed in May to allow reservations to open next June.  The initial duration of the contract for twelve years has been reduced to ten years (January 2014 – May 2023) (Photo N.B.C)
The agreement must be signed in May to allow reservations to open next June. The initial duration of the contract for twelve years has been reduced to ten years (January 2014 – May 2023) (Photo N.B.C)
Strict, minimal, or even vague - when it comes to re-evaluating fuel prices, the specifications defining the new arrangements for Public Services Outsourcing for shipping between Marseille and six corsican ports, reflect the financial difficulties facing the Transport Office of Corsica.

After lengthy disputes at the Corsican Assembly, politicians agreed in October 2012 to remove additional services (peak periods and school holidays) and passenger subsidies, a saving of nearly €34 million and €16 million respectively. 

Public Services Outsourcing is therefore restricted to the basic service, which will be from Marseille only.

Capacity identical to the basic service under the current agreement

Public Services Outsourcing will be on the basis of 23 trips per week. (Photo N.B.C)
Public Services Outsourcing will be on the basis of 23 trips per week. (Photo N.B.C)
The Transport Office of Corsica (OTC), which is responsible for the implementation of Public Services Outsourcing has set a minimum transport capacity of 410,000 passengers per year or 34,000 per month and 1.6 million linear metres per year or 133,333 linear metres per month.
This volume of traffic is almost identical to the previous agreement (2007-2013). Public Services Outsourcing will work on the basis of 23 trips per week between Bastia (7 days a week), Ajaccio (7/7), and La Balagne and Porto-Vecchio with three weekly trips.

Future Public Services Outsourcing sounds the death-knell for car-ferries as the specifications stipulate that companies must operate mixed ro-ro vessels under 25 years of age on signing the agreement, and less than 30 years while the contract is in force.

For the current incumbents, this involves renewing part of the fleet, four new buildings for SNCM and a new mixed cargo ship to replace La Méridionale’s Kalliste.

the PSO puzzle without passenger subsidies

A round-trip for a trailer will now cost €1000 instead of €1300 at present. (Photo N.B.C)
A round-trip for a trailer will now cost €1000 instead of €1300 at present. (Photo N.B.C)
Departing from Nice and Toulon, any company wishing to operate routes to Corsica will have to abide by Public Services Obligations (PSOs) without financial compensation and with set service frequency and tariffs! With these PSOs, Corsica is trying to hedge against the risk of unfair competition towards assignees and put an end to selling at a loss.

With rock-bottom prices and maximum prices (from -50% to +50% of the base price), the Transport Office strictly regulates passenger fares with different prices for Corsican residents and non-residents. 

This is a blow to companies who consider that this scale is too low, as it is itself indexed to a resident discount that is also revised downwards. All this without financial compensation.

The OTC has also decided to revise prices for trailers downwards. In future, a return trip for a trailer will cost €1000 compared to €1300 at the moment.

Public Services Outsourcing and OSP are in the same boat

The SNCM will create a company with a scope dedicated to Public Services Outsourcing, as will Corsica Ferries. (Photo N.B.C)
The SNCM will create a company with a scope dedicated to Public Services Outsourcing, as will Corsica Ferries. (Photo N.B.C)
The Collectivity of Corsica also imposes these same freight rates on companies operating within the framework of Public Services Obligations. In simple terms, this means that the price for the trailer will be the same from Marseille and Toulon whereas now, carriers pay less for a trailer on Corsica Ferries’ Mega Express.

New constraints are emerging for the first time in this future agreement. From now on, if the assignees are part of a consortium, they will have to form a company dedicated to operating Public Services Outsourcing lines. The Collectivity of Corsica indeed wants more transparency in the use of public money. It is no longer a case of using Corsica’s “territorial continuity” budget to fund unprofitable activities outside Public Services Outsourcing (ports in North Africa, Italy, Toulon and Nice).

So, SNCM will create a company with a scope dedicated to Public Services Outsourcing, as will Corsica Ferries. La Méridionale says it is ready to end its relationship with Propriano and Porto Torres in Sardinia rather than creating a new company.

Skeleton service in case of a strike

Another novelty, assignees must provide a skeleton service in the event of a dispute. Negotiations are underway with social partners in order to define the practical terms and avoid the island being blockaded.

The agreement must be signed in May 2013 to allow reservations to open next June. The initial duration of the contract for twelve years has been reduced to ten years (January 2014 – May 2023).

Corsica Ferries versus SNCM…with Brussels sitting in judgement

The opening of maritime cabotage services to competition in Europe in 1992, followed by the arrival of Corsica Ferries in 1996 in Nice then Toulon in 2001, undermined the monopoly of the Société Nationale maritime Corse-Méditerranée. 
Service to Corsica has never ceased to inflame the passions of the operators involved, giving rise to many lawsuits in French and European courts. The Law has had to consider issues as diverse as tenders, social plans, agreements, subsidies of all kinds, including the last recapitalisation of SNCM in 2005 just before privatisation. This has led to a boomerang effect as this recapitalisation is now being questioned seven years later and is causing SNCM and its two main shareholders, the State and Veolia Transdev a lot of headaches.
In a decision given on 11th September 2012, the Luxembourg Court, consulted at the request of Corsica Ferries, cancelled the 2008 decision of the European Commission.  At that time, Brussels had approved measures taken by France during the privatisation of SNCM two years earlier. How could it be otherwise? SNCM was then threatened with liquidation, striking seamen and office staff were demonstrating. Pressure from the street, political pressure? Something had to be done quickly to find a buyer, at all costs.  

The European Commission’s “obvious mistake”  

According to the court, Brussels made an “obvious mistake” in finding that the last recapitalisation did not constitute State aid. A small reminder of the facts: it was particularly the matter of a direct contribution by the State to SNCM in the amount of €158 million, and a capital contribution by CGMF (State holding company owning 80% of SNCM in 2002) to the tune of €8.75 million with an overdraft of €38.5 million to finance an employee redundancy scheme.
The SNCM could be ordered to pay back these sums. The case looks complex. Veolia Transdev has since become the majority shareholder and does not see things that way. A real sword of Damocles hangs over Veolia which, let us not forget, suggested in 2012 that the company should be disposed of for the modest sum of one euro!
On 22 November 2012, the SNCM filed an appeal before the Court of Justice of the European Union against the court judgement. Four days later, the French Republic presented a second appeal before this same court.
In June 2012, the Commission opened an in-depth investigation into monies received by SNCM and CMN for the Marseille-Corsica sea link. This time, it was to analyse if public money, which benefitted both companies for the period 2007-2013, breached EU rules. Once again Brussels has French State aid in its sights.
A few years earlier, on 30th October 2001, the European Commission considered that the “aid paid by France to the SNCM as part of the five-year agreements with the Transport Office of Corsica in 1991 and 1996, as compensation for public service obligations”, was “compatible with the common market”. Same old, same old...

NBC



Nathalie Bureau du Colombier, MARSEILLE


Thursday, March 21st 2013



Article read 647 times


Articles which should interest to you
< >

Thursday, March 21st 2013 - 12:15 Corsica – Mainland France – the great upheaval