Editorial
A year of challenges
Posted June 22, 2006
The Steamship Authority operates in what are certainly challenging times. Costs are greater, customers fewer. It's a labor- and fuel-intensive business in a climate of intense bargaining between employees and management and gyrating, but mostly rising, oil prices. The boatline's floating assets are expensive to acquire, uniquely designed or adapted for the particular service the SSA provides, rapidly depreciating from the moment of acquisition, expensive to maintain, and often in service in bad weather. Who would choose to be in such a business?
A review of the boatline's annual report for 2005 highlights some of these challenges. For instance, the line as a whole carried 2.4-percent fewer passengers last year than it had in 2004. Despite rate increases, ticket revenue from passengers carried declined one tenth of a percent, year over year. The line carried 455,657 automobiles, about 1.4 percent fewer than in 2004. Auto revenue was off three tenths of a percent. Freight was up 11.7 percent for 2005, and that meant a 10.5 percent increase in truck revenue, or about $1.5 million. Freight contributes less operating revenue, 24.7 percent, than autos, 33.1 percent, and passengers, 29.1 percent do. But, the increase in freight traffic, together with small rate hikes, yielded sufficient income to meet the boatline's obligations.
How did the SSA pay its bills? Among the interesting details revealed in the 2005 report, the boatline operated 1,009 fewer trips in 2005 than in 2004, a 4.3-percent reduction, thus saving the operating costs associated with those trips, but also missing the revenue. The end of the slow ferry service between the Vineyard and New Bedford helped a lot. Plus, 531 of these discontinued trips had been made in 2004 by the Flying Cloud, the line's hopeless first attempt at a fast ferry. Despite the economies realized by the reduction of total trips, the total operating expense in 2005 rose slightly more than $2 million, or about 3.2 percent. The contributors were increases in maintenance costs, depreciation, fuel, insurance and employee health-care benefits. Fuel alone rose 24.2 percent, year over year. Labor costs are a bright spot. In 2004, wages, benefits, and payroll accounted for 63.2 percent of operating expenses. Labor costs declined in 2005 as a share of total operating costs, to 61.5 percent.
This is business that requires resourceful, cautious, and nimble leadership, and happily the combination of members, led last year by Marc Hanover of Oak Bluffs, managed the difficult balancing act. Of course, the members would give a great deal of the credit to Wayne Lamson, the former treasurer and now general manager, and his management team, as well as to the line's employees, but the good outcomes - modest rate increases, spending restraint, judicious capital investment, and a determination to build customer loyalty by improved service - must be credited first to the leadership of the five members. Compared with the foolishness and hostility that marked member relations for a decade before the current member-team was put in place, this is a leadership that works smoothly together, with a clear understanding of the important mission of the SSA and acceptance of the members' responsibility to see that that mission is accomplished. They demand performance from management without day-to-day meddling - a commonplace practice in years past - and they have a businesslike respect for the business cross-currents, as exemplified by the numbers reviewed above, that make their job such a challenge.
