On Wednesday, October 25, Ferry Shipping News had the opportunity to visit the DFDS headquarters in Copenhagen. Mike Louagie (left) and Bo-Lennart Thorbjörnsson (right) had a discussion with Mathieu Girardin, the Head of the Ferry Division.
Let’s talk about the integration of FRS into DFDS. Given FRS’ focus on passenger services and DFDS’ reputation as a freight company, could you outline the strategic plans for this collaboration?
We find ourselves currently in a transitional phase, awaiting the necessary clearance from competition authorities. Our progress lies between the signing of agreements and the eventual closure of the deal, which we anticipate will occur by the year’s end or early next year. It’s important to note that this process is not within DFDS’s control, but we hold a degree of confidence in our prospects.. The ultimate decision rests with the authorities in Spain and Morocco.
While operations in the Strait of Gibraltar predominantly cater to passenger services, it’s crucial to acknowledge the substantial presence of freight in this corridor. The market size here encompasses around 440,000 trucks annually, a figure that indeed holds significance.
The passenger business in this region is heavily reliant on seasonal traffic, particularly tourists and Moroccans returning to their homeland during the summer season. Our aspiration at DFDS extends beyond being perceived solely as a freight company. We maintain a strong commitment to passenger transportation. Although our turnover may be predominantly influenced by freight activities, we still transported 3.7 million passengers in 2022, exemplified by our routes between Oslo-Copenhagen, Dover-Calais, Dunkerque-Dover and our Baltic routes. They all play pivotal roles in our business model and. We believe that we can leverage the insights and experiences gained from these routes, particularly from our operations in the Channel (Calais-Dover and Dunkerque-Dover), for the Strait of Gibraltar.
In summary, FRS Iberia operates three distinct routes.
HSC LEVANTE JET (Photo: FRS)
The strategic rationale behind our investment in FRS Iberia is to tap into a burgeoning freight market. The anticipated growth in the years ahead is driven by Morocco’s increased exports into Europe, facilitated by the near-shoring trend. This approach involves relocating manufacturing from distant regions, like Southeast Asia and China, to nearby countries, thereby securing a more robust and resilient supply chain.
We are observing a noticeable shift towards regionalization in global trade, a trend further amplified by the ongoing global crises. The imperative to secure resilient supply chains has become paramount for both importers and manufacturers seeking access to the European market. DFDS is strategically positioning itself to align with this evolving trend and ensure our ability to harness future growth opportunities.
Stepping back, our approach to investing in FRS Iberia resonates with our strategy in Turkey from a few years back. In 2019, UN RoRo was a prime example of our proactive approach to this trend. We initiated this journey five years ago with just ten vessels, and today, we have expanded our fleet to include 19 vessels in the Mediterranean. Notably, we’ve also increased the vessel sizes, underlining our commitment to this strategy.
We are committed to thoroughly exploring these near-shoring countries, ensuring that we are strategically positioned to harness the future growth in freight over the coming years and decades. While there is undoubtedly a substantial passenger business at play, we are confident in our ability to leverage our extensive experience, to manage and adapt effectively.
Mathieu Girardin (Photo: Mike Louagie)
Could you elaborate on the dynamic between the business units and the Copenhagen headquarters?
Certainly. The relationship is straightforward. All the business units that report to the Copenhagen headquarters are responsible for the Profit and Loss (P&L) aspects, specifically overseeing the commercial aspects of local operations. Their mandate includes delivering specific results, and P&L falls under their purview.
This local ownership structure is a characteristic of DFDS, and it is also evident within our logistics division. For instance, if we take the case of Business Unit Med, their responsibilities encompass the management of both operational and commercial activities in their designated region.
If an issue arises, who bears the responsibility?
The business units hold responsibility for addressing such matters. In the case of Business Unit Med, there are specific roles in place, including a Commercial Director and an Operations Director, both reporting to the Head of Business Unit Med.
However, when it comes to fleet strategy or ship-related incidents, things become a bit more intricate. Since last April, we’ve adopted a matrix organization structure. Within this framework, while the business units play a crucial role, we also have specialized functional roles. Catja Hjorth recently joined us and leads the Operations team, overseeing fleet technical aspects, fleet chartering, intermodal operations, sustainability projects, and terminal management.
In addition, we maintain a centralized commercial team, led by our colleague Anders Refsgaard. He oversees marketing, pricing, customer service, and global account sales, particularly to large clients working with DFDS across our network. This centralized commercial function serves as a pivotal point connecting with the various business units.
It’s important to note that while these specialized roles exist, the P&L responsibility remains primarily local. For instance, in the event of an operational issue, the Head of Operations in Business Unit Med would liaise with the fleet chartering team in Copenhagen to secure the necessary support.
Is there an internal charter rate that business units use to cover the operational costs of the ships?
Yes, it’s a standard process. The business units internally pay the charter market rate. The key objective here is to assess the profitability of a specific route by comparing it to the market cost of chartering the vessel.
What are your insights on the consolidation of transport companies? Is it safe to say that small companies are becoming obsolete, and does DFDS not inadvertently compete with its own customers through its logistics company? Additionally, how do you handle large industrial customers who might prefer to bypass intermediaries and deal directly with end customers?
The majority of our ferry division customers consist of transport companies, rather than end customers. Notably, there remains a substantial number of small and medium-sized transport companies across Europe. Although there is potential for consolidation in the industry, we have yet to witness significant changes in this direction. We continue to cater to smaller companies through our offices in locations such as Göteborg and Vlaardingen.
Addressing industrial customers is part of our strategic approach at DFDS. We’ve established what we term “strategic sales,” a team of experts in sales and marketing dedicated to global accounts. This team reports to both the Logistics Division and the Ferry Division. They are equipped to engage with larger customers and offer not only ferry services but, when necessary, logistics solutions as well.
While I focus primarily on the Ferry Division within the divisions, our overarching goal as a provider for transport companies is to maintain a clear distinction and collaboration between our ferry and logistics services. The logistics arm of DFDS is a customer of DFDS Ferry Division.
(Photo: Mike Louagie)
Next year, the EU Emissions Trading System (ETS) will come into effect. What’s the plan?
We embrace the ETS and other regulations and are prepared to adapt. To ensure transparency for our customers, we will implement an ETS surcharge, calculated on a route-by-route basis, taking into account expected CO2 emissions and associated costs.
This surcharge will apply to both passenger and freight services. For our freight customers we aim to avoid unexpected surcharges by updating our calculations monthly, as we have a good understanding of our vessels’ CO2 emissions, which are publicly available data. For passengers the surcharge is fixed and will be updated on an annual basis.
The ETS will indeed influence port operations, emphasizing the importance of efficient turnaround times. We are already focused on optimizing terminal operations to reduce bunker consumption costs, as delays in terminals result in extended sailing times. As part of our commitment to reduce emissions, we plan to retrofit our vessels, upgrading components like propellers, bulbs, and exploring technologies such as special antifouling and air lubrication. Additionally, optimizing schedules and implementing shore power are part of our strategy.
Our ambition is to reduce CO2 emissions by 45% by 2030 and ultimately achieve climate neutrality by 2050.
Regarding greener fuels, the technology for retrofitting engines for methanol is available today, but securing a reliable and cost-effective supply remains a significant challenge. Ammonia is being considered, primarily for newbuild vessels, but here too there are challenges with safety and logistics.
Lastly, we are exploring electricity as part of our multifuel strategy.
You recently welcomed a visit from the French Foreign Minister, Olivier Becht, to your company’s HQ in Copenhagen?
Yes, during his visit, Minister Becht engaged in discussions with DFDS CEO Torben Carlsen regarding the French government’s objectives for decarbonizing passenger crossings in the Channel.
The core concept behind the announcement we made, is our commitment to introducing an battery electric fleet in the Channel by 2030. However, we acknowledge that such an endeavour cannot be undertaken alone. To make this vision a reality, we require active support from the ports involved, who must electrify their facilities. This transition is relatively straightforward for Calais and Dunkerque, thanks to the proximity of the Gravelines nuclear power plant. Yet, electrifying the Dover port presents more substantial challenges.
The French Minister for Foreign Trade, Attractiveness and French Nationals Abroad, Olivier Becht and CEO of DFDS, Torben Carlsen, met to discuss decarbonisation of the shipping sector and the electrification of maritime traffic across the English Channel. (Photo: DFDS)
Do you see a possibility of having unmanned vessels for the Channel?
The Eastern Channel experiences exceptionally high shipping traffic, and in my personal view, the implementation of unmanned vessels in this area is not imminent. Our crews are exceptionally skilled, and it is imperative to ensure they work under optimal conditions with appropriate levels of rest to prevent fatigue. Our commitment to the well-being of our seafarers is paramount.
What we require in the Eastern Channel is a level playing field. We believe that the most effective model involves employing French and British seafarers who reside near the ports, in local French and British communities. This perspective revolves more around safety considerations than cost-related ones. We are concerned about extended periods at sea without the crew being able to return home, as it is not a sustainable approach. To address this, we have collaborated with French and British authorities to develop regulations aimed at protecting seafarers’ rights.
While unmanned vessels may not be a near-future reality, we do acknowledge the potential of digitization to significantly enhance productivity, bolster safety measures, optimize turnaround times, and streamline routing, among other advantages. Hence, digitization remains a top priority for us.
CÔTE D’OPALE (Photo: Mike Louagie)
Could you provide insights into the prevailing trends on the Channel concerning accompanied and unaccompanied freight?
We are observing a gradual, long-term transition from accompanied to unaccompanied freight, although this shift is taking place at a measured pace.
Are you currently considering the acquisition of new ships?
We continuously explore newbuilding opportunities with a focus on green vessels. DFDS has shifted its approach and no longer seeks to order conventional “black” vessels. Instead, our future orders will prioritize eco-friendly options.
Our commitment to green operations is unwavering, and we are actively monitoring emerging technologies. When the time is right, we will place orders for new vessels to ensure sustainable, environmentally responsible operations.
Recent additions to our fleet include two Ro-Pax ferries for the Baltic, the E-Flexer vessel for the Channel, and five Jinling Ro-Ro ships, reflecting our proactive approach to fleet management. We are mindful of ship lifecycles and have a dedicated team prepared to seize the opportune moment for newbuildings.
What is the progress report on the service between Scotland and the European Continent, potentially connecting Rosyth to Zeebrugge or Dunkerque?
We are currently in the process of exploring this service opportunity. A decision regarding this route is anticipated next year. While we already operate the IJmuiden-Newcastle route, it caters to a distinct market. For this Scotland-European Continent service, our main requirement is to secure a significant commitment in terms of volumes. We are actively engaged in discussions with the French, Belgian, and notably, Scottish authorities to evaluate the feasibility and potential of this endeavour.