Joe Cordina was appointed executive chairman of Gozo Channel in April 2013 and was faced with financial meltdown and shocking governance issues. He told Vanessa Macdonald that things were turning around but that big decisions needed to be taken on the future of the ferry service.

The National Audit Office was commissioned in December 2013 to investigate various aspects of Gozo Channel governance between 2010 and 2012. There were a number of shortcomings. Why has no one been held accountable?

That is the way the country works… Many of the people involved are politically appointed and when they and the government change, everything ends.

You are also politically appointed. What is the difference?

I can only speak for myself. I have done, am doing keep doing my best, wherever I am.

I think that those who were responsible could have done some things in a better way.

Perhaps some of the blame could be laid at the minister’s door as it seems that a number of shortcomings were reported by employees but were not followed through.

One example of this is the theft from the cafeteria. The manager there said she had reported it to the chairman at the time, Paul Curmi, who in turn passed it on to the minister. But the pilfering kept going until I took over…

The annual accounts for 2014 filed last week show that Gozo Channel made a loss of €1.3 million in 2013 and a token profit of €42,633 last year from revenue of €14 million.

However, there are still some red flags. Gozo Ferries owes Gozo Channel just over €8 million, almost two-thirds of which is for the hoistable deck on MV Ta’ Pinu. It seems unlikely that Gozo Ferries will ever be able to repay it. The NAO said that Gozo Channel might not be considered a “going concern” if this debt could not be settled. What is happening?

The first thing is to ensure that Gozo Channel does not continue to make losses.

Apart from breaking even in 2014, based on the results of the first nine months of the year, we anticipate making a profit in 2015 of €500,000.

As at end 2014, you owed €7 million, almost all of which is due to six creditors: Transport Malta (€3,937,488), Drydocks Malta (€854,290), Cassar Fuel (€573,669), Malta Shipyards (€502,631), Enemed (€264,222) and Malta Shipbuilding (€248,125). Is anything being done to settle these amounts?

We have not paid bills that we are still contesting. But we are trying to settle bills with other creditors within 60 days. Unfortunately, we are a government company and there is a tendency to take advantage of this...

Employee costs for Gozo Channel amount to around 50 per cent of total expenditure, but a 2010 Washington State report indicated that US, European and other ferry operators spent an average of 42.8 per cent on labour. Is Gozo Channel yet another government entity used to create jobs?

Maybe it was before but in the past three years, we have not taken anyone on, with the exception of two engineers that we needed. In fact, we are not replacing people who leave.

The current headcount is around 200. A 2014 report said it would be possible to operate with 11-man crew for passenger trips and a seven-man crew for cargo journeys – without any need for overtime for seaborne staff. What is your ideal headcount?

I have to say I think that we are at the ideal now.

If this were the private sector, we would be able to take on part-timers just for the summer – but the government sector does not work that way

Our minimum manning requirement is 15 when there are more than 500 passengers and 11 when there are fewer than that. Some sections might be trimmed or restructured but not others.

And I would like to boost internal controls, which requires more staff.

It is always about the quality of service that you want to offer: I could have just one person on ticketing but then customers would have to wait longer. That is the constant dilemma, balancing the need to make a profit against the need to offer a service.

Overtime for 2010-2012 cost GCCL over €1.8 million. There were some ridiculous examples in the NAO report: an ICT clerk worked 1,319 hours of overtime, equivalent to 33 40-hour weeks of overtime; a workshop fitter 1,101 hours; a driver 1,104 hours; and a chief engineer 1,148 hours. What has been done to curb this?

Clearly it was exaggerated and I do not exclude that there was abuse. I think we have done all possible to cut abuse as there is now a process requiring two approvals.

Overtime is a big issue for us as you have to adjust to operational needs, which cannot always be anticipated in advance. And when we need to work extra trips – say on Sundays – then the whole crew needs to stay on, not just one person.

There is also the issue of seasonality. If this were the private sector, we would be able to take on part-timers just for the summer – but the government sector does not work that way. We do not have that flexibility.

The Public Service Obligation bid contemplated that Gozo Channel would hedge its exposure to fuel costs – almost €6 million a year – but it never did. Hedging gives you certainty but not necessarily savings. Did this lose money or save money for Gozo Channel?

We saved because the cost of oil fell. Had we hedged, we would have been tied to the higher price. But in any case we are too small for hedging companies. So we are still not hedging and at the moment, we do not think it would be in our interest to do so.

There was a time in 2010-2011 when the Malita’s fuel meters were not working and the Falzon Fuel’s barge meter readings were not noted. Is that just a coincidence? How can you be sure there was no pilfering?

I cannot say what was going on but now there are many controls on fuel. Our engineers oversee it and take soundings, etc. And the tender is being issued regularly – as it is supposed to be.

In August 2014, there was a lot of controversy about the fact that Go Fuels did not win a tender…

This was sorted out. Go Fuels was a supplier for some years and was obviously unhappy at losing. The tender had been issued and since there were a number of objections, we had to issue a short-term tender to cover the three months till these were concluded. There was also a misunderstanding in the media about the price quoted: it was the commission of the other bidder that was twice as high, not the price of the actual fuel.

We now have a year-long tender with Falzon Fuels and are already working on the next one.

There were discrepancies in ticketing from two aspects, at Mġarr itself, and between Ċirkewwa and Mġarr, which could have cost as much as €1.45 million between 2010-2012 and 2014. A number of theories were put forward, ranging from software discrepancies to fraud by officials stationed in the marshalling area. What has been done to control this?

I am not convinced about the numbers. At Ċirkewwa, it is a visual check made by those who moor the ship and is therefore subject to human error. We are putting a lot of pressure on them to be accurate but it is not necessarily lost revenue…

There was a variance of over 95,000 passengers and 11,000 cars. Surely that cannot be down to human error alone!

There might be abuse and more controls might be needed but I am not sure that the discrepancies were as big as reported.

I am not convinced. And neither was the NAO… None of the theories would account for the numbers… The only possibility would appear to be systematic abuse.

What can I tell you? Look, we have a number of controls in place now and the numbers still do not tally. I still put it down to human error. I can see that you are still not convinced… I want to make the system electronic. In my opinion, one of the biggest disasters for Gozo Channel is that there is no ticketing in Ċirkewwa: the €15 million terminal was designed that way! To introduce ticketing, we would have to change everything around. There is not even a holding area for passengers behind turnstiles, as there is at Mġarr!

There was so little control that one ticket seller apparently “recalled” that he still had €9,700 in an attaché case. Some ticket sellers had monthly undeposited amounts of up to €33,694. What kind of Mickey Mouse operation was this?

Nowadays no one is allowed to retain cash. Tickets are not being sold that way.

The public service obligation (PSO) runs out in 2017…

Look, the PSO bid was a great mistake. Income was boosted and the expenses were reduced to make it sound viable. The intention was to ensure that the joint venture between Gozo Channel and Gozo Ferries was the best option.

I do not understand why the government was so scared of another operator coming in… Of course, there would have been concern about the Gozo Channel workers and there was an election looming.

The government used to pay €5 million a year through the PSO and this has now gone down to under €1 million. You have to be kidding! This is what threw the company into chaos!

You yourself are showing the company is viable if run properly, even with a PSO of €720,000…

But no one is talking about the money owed by Gozo Ferries, which owns the ferries and needs to spend over a million a year to maintain them! Gozo Channel is just the operator.

The ferries are already 15 years old – which means they have around 15 years of reasonable life left. If the decision to build a tunnel goes ahead, it would be ready within five years, according to Transport Malta CEO James Piscopo. Will you still replace all three vessels – which would cost around €135 million?

You need to ask Gozo Ferries Ltd! The vessels would be theirs…

You cannot have just one as you always need a back-up. However, the frequency could be reduced if there were a tunnel, probably to a trip very hour. It depends on what happens once the tunnel is up and running.

We do not know if there will still be a PSO once the tunnel is opened. Would it still make sense?

I think Gozo Channel will continue to run ferries as there are people who like the experience of crossing over by sea – including tourists.

Why would I spend 50 minutes to take a ferry when I can cross in the tunnel in 12 minutes?

If you are going up to Gozo for a holiday, you will not be in a rush, so it will not matter as much. For a Gozitan going to work or to study, well, they would certainly use the tunnel.

If you did not operate under a PSO, you would have the flexibility to operate as a commercial enterprise, cutting night trips which always operate at a loss, for example. Before you had no choice…

Precisely. The fares are also subsidised: how can you charge €1.15 if you did not have a PSO subsidy? That is less than a cup of coffee for a return trip! We are charging the same as we did 10 years ago – the euro equivalent of Lm0.50.

Having said that, the subsidy works out to only 1 cent for every Gozitan that uses the ferry… How can you work with that subsidy?

Yet you managed to report a profit of €42,600, turning things around from a loss of €1.3 million in 2013. And you expect to make a profit of €500,000 this year.

To do that we had to increase efficiency, cut waste and introduce significant internal controls: a number of wrongdoers were either forced out or are in court.

We cannot escape the fact that we have to balance the need to run a commercial operation with the need to provide a social service. We increased the number of evening trips in winter – we now only have summer and winter schedules – so that there are trips every 45 minutes until 9.30pm. It is not in my commercial interest to do this. We did it because we are aware of the need to provide a service to our customers.

In the mornings, we are bringing in extra crew to cope with the additional work on the early morning ferries as there are so many more Gozitans commuting to Malta. And those ferries go back virtually empty.

Isn’t this is also a problem when you operate a shuttle service? A trip breaks even when a vessel carries 56 vehicles, according to the NAO.

If you had to think that way, you would cut half the schedule! But you have to provide a service. Gozo Channel is the only link between Malta and Gozo. There is no alternative.