More reliable than the Federal Reserve’s Beige Book, news that Steamship Authority traffic last year beat the line’s 2011 numbers is solid evidence that this lingering national, low-growth, post-Great Recession sort-of recovery persists. Traffic growth has been sub-par for almost a decade.
The Authority’s 2012 annual report shows that the boatline carried more than 2.2 million passengers between Martha’s Vineyard and the mainland in 2012, an increase of about 2.5 percent. Auto traffic increased similarly. Freight traffic has strengthened but not so much.
The Steamship Authority has moved steadily to attack its cost structure, which is largely driven by personnel costs. The line has trimmed the vessel schedules and reduced manning costs, though upward pressure on costs across the board, including wages, benefits, and vessel and terminal maintenance persists.
In general though, the Steamship Authority’s ability to raise rates is what keeps it in business. A $1.5 million rate increase became effective at the beginning of this year. SSA members approved the hike to offset the expected increases in operating expenses, primarily vessel fuel oil expense, wages, benefits and maintenance. It’s a familiar story. In bad years, sometimes in the middle of bad years, the Steamship Authority needs rate increases. In good years, it also needs rate increases. And rate increases are in the boatline’s future — and consequently, in ours — year-in and year-out, on and on, without end?
Businesses, especially in difficult economic times, reorganize, shed old blood and find new, fresh leaders, cut costs, cut staff, hold the line on prices, look for money-saving technologies, and target efficiencies in everything they do. They streamline operations to become more productive. Customers benefit when they need it most, and they remain customers.
Businesses are often driven to do better by their shareholders. The Steamship Authority does not have shareholders — more’s the pity. It has bondholders and state legislators to whom the line is indebted. In public arenas, the discipline enforced on private, competitive enterprises is missing, but it happens, and politicians sometimes get the message from their constituents that they need a break from tax increases.
But, it doesn’t happen for the Steamship Authority, because the islands’ lifeline always has pricing power. In the world that is not legislatively protected, demand and price generally move inversely. Raise the price, demand falls. The Steamship Authority has been immune to this commonplace.
But Islanders and their visitors have not been immune to the effects of the Steamship Authority’s privileged economic life. Islanders must contend with rising costs for mere travel, even as they struggle with rising prices in the non-lifeline aspects of daily existence. The Steamship Authority addresses this imposition on the welfare of its constituents politically, by shifting costs to harm visitors and non-residents and discount its services deeply to year-round Islanders, who get champagne travel for beer prices. It’s a business hoax, but it’s worked so far, and its success has allowed the boatline to ignore the need for a ruthlessly objective review of its financial, oversight, management, and operating structures, which is sorely needed and has been for more than a decade.
The Steamship Authority does what it does, the way it does, because it can. Is there a better way, a more economical way? If there is, the Steamship Authority is not looking for it.