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Natives of Britain’s Scilly Isles are a tough bunch. After all, the tiny archipelago 28 miles off Cornwall’s coast quietly held off the Netherlands during their 335 year war. Scillonians have a new fight on their hands. Its locally owned ferry service and airline from the mainland has attracted a bid from Aim-listed shipbuilder Harland and Wolff. On Friday, the shipbuilder said the Isles of Scilly Steamship Group had “unequivocally rejected” its proposal.
This is not ISSG’s first rebuff to H&W. Having decided to upgrade its half-century-old ferry Scillonian III, three months ago ISSG chose French shipbuilder Piriou over H&W. One reason given was Piriou’s scale, with more than €300mn of sales. Despite the offer of UK government’s levelling up funding, using a French company meant ISSG had to finance this privately with £34mn of debt.
The Belfast-based company which built the Titanic presumably took offence. H&W said in October that it would create a rival service to the Scilly Isles, claiming that the sea and air routes were “underserved”.
Indeed, only one ferry service operates to the archipelago, though a rival helicopter service exists. ISSG will increase its fares about 15 per cent (before inflation) in 2024-26 to defray the costs of the new ferry plus one freight ship. Passengers will soon have to put up with one-way fares approaching £100.
But if H&W sound like passenger-friendly trustbusters, think again. The shipbuilder has no obvious experience actually running a ferry or airline. It admits it cannot afford to take on this service without getting hold of that UK government funding, worth about £48mn. Heavily indebted H&W has posted operating losses annually for the past decade, according to S&P Capital IQ, and was bought out of receivership in 2019.
ISSG earned profits through the pandemic lockdowns. Why it would reject the chance to climb onboard H&W is abundantly clear.
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