What happens when rates can’t rise?


It’s not easy being the Steamship Authority. During a squally, high summer week like this one, the uncomfortable truth of that statement is inescapable.

The president is here, along with all the visitors, summer property owners, and relatives we can cram in. It’s the perfect moment to show off ferry efficiency and the quasi-public company’s graceful attention to the needs of travelers. But the weather is dirty, the Oak Bluffs terminal is too exposed to the gale to be used, and the expected late August pressure of guests returning to their winter quarters has been abetted by many of our guests who figure, hey, I didn’t bargain for wall-to-wall rain and a cold wind that threatens to blow me across the street. Let me on that ferry.

Marc Hanover, the Vineyard member of the boat line, told us Tuesday that the line is adding the big, capable freighter Katama to Vineyard Haven-Woods Hole service to help speed the departing flow of people and automobiles. He said proudly that the boat line was “stepping up” to solve the jammed up gridlock in Vineyard Haven. He’s right, and thank you.

Indeed, Mr. Hanover’s news reflects well on the boat line, as do a great many initiatives, including scheduling changes, improved web access, transfer bridge ticket printing, computer aided tracking of available space, and much more. The line has worked hard to make itself more traveler-friendly, and the effort has paid off. Indeed, it’s saved the SSA and us money.

The boat line has also worked hard to negotiate contracts with its several bargaining units to restrain the growth of payroll and benefit costs, which have at times in the past absorbed more than 60 cents of every expense side dollar the line spent. In 2009, wages, benefits, and payroll taxes were 55.3 percent of operating expenses, according to the boat line’s annual report for calendar 2009. That is remarkable progress.

In fact, total operating expenses last year declined $4.3 million, to $74.8 million, compared with 2008. As much as $3.8 million of the reduction resulted from a sharp decline in 2009 of vessel fuel costs. Payroll expense declined by just $61,000. For these savings in fuel and payroll, give the credit to management, the leadership of the members, and a woeful global economy. Credit also a sharp reduction in the number of trips operated by the boat line, allowed by clever scheduling, the increased capacity contributed by Island Home, and flat demand.

It’s on the growth side that there is cause to worry. Since 2005, there’s been none. Consider 2.6 million passengers in 2005, 2.7 million in 2009; 456,000 autos in 2005, 456,000 in 2009; 142,000 trucks in 2005, 133,000 in 2009; 22,397 trips made in 2005, 21,445 made in 2009. In 2007, the boat line’s total operating revenue was $80.6 million. Last year, it had declined to $79.8 million.

How has the boat line been able to pay its bills, as fuel costs, payroll costs, insurance costs, repair costs, etc. have risen, but revenue and the volume of traffic have not?

The answer is rate hikes — making the cost of living, summering, property-owning, ice cream eating, going to BJs, getting radiation or chemotherapy treatment, tee-shirt buying, daytripping and everything else a little bit more expensive.

What the boat line has learned and implemented over the last few years is that better use of technology, increased capacity per trip, hedging volatile expenses such as fuel, all contribute to leaner operations. And, when they can’t be made lean enough fast enough, the members can raise rates. What the members need to learn is “What should the Steamship Authority look like 10 years from now?” — so that slow or no growth in customers and revenue doesn’t price the boat line’s constituents out of the travel market or out of their Vineyard homes or summer places.