Cargo shipping line Grimaldi has accused Tirrenia of destabilising the market by cutting prices to “unsustainable levels”, with the rival Italians rebutting this, stating that the situation has improved since they introduced competition.
Grimaldi executive manager Eugenio Grimaldi told The Sunday Times of Malta that Tirrenia was offering rates that were below cost, which would disrupt the equilibrium of the market.
“This is dumping. It is a strong word but they are ruining a market that we defend strongly from operators from other parts of the world. Until today 90 per cent of Maltese import/export trailer traffic has been carried by Maltese operators, which is not to be underestimated. But would foreign operators have the same community commitment and sense of social responsibility?” he said, giving as an example its cadet training programme.
“We have no issue with competition,” he said, when asked whether Tirrenia was merely trying to win market share after re-introducing the service after a decades-long absence.
“We are the leading company in the world in the Ro-Ro sector. We have competition everywhere and that is fine – as long as it is fair and sustainable. But when the strategy is unsustainable, it damages all the industry and its clients, from logistics companies to customers. This is the worst scenario for the island,” he warned.
Grimaldi’s local agent, Sullivan Maritime, was also unhappy about the situation, saying that if prices were driven down across the sector, this would affect the amount available for future investment.
“And the shame is that even though the freight rates are being driven down, none of these savings are being passed on to consumers, who still pay the same for their goods. If we do something that is supposed to benefit the economy, then it should benefit the end user,” director Ernest Sullivan said.
Grimaldi started operating to Malta 13 years ago after the demise of Sea Malta and was the sole Ro-Ro operator between Malta and Italy for several years.
Mr Grimaldi said that over that period, it had actually reduced prices by becoming more efficient, and was investing huge amounts in new ships which would carry more cargo and benefit from better economies of scale, the average age of the fleet standing at seven years.
Tirrenia sees the situation in Malta quite differently to Grimaldi, saying the amount of merchandise it is being contracted to carry shows that there was a need to shake up the ‘monopoly’
He also said that its new vessels, currently being built, would have considerably lower emissions, while his competitors’ ships were “decades old and much more polluting” with little chance of investment given its poor financial status.
“Old and obsolete ships, zero investment policies, high fuel consumption, are not an option anymore in today’s business environment,” he told a corporate event recently.
“The financial results of other shipping companies are public so I am telling you something that you can read and see on your own: those shipping companies are not financially able to face such big investments, so they will not be able to compete on the market with sustainable and competitive strategies anymore,” he continued.
Tirrenia’s parent company Moby had €233 million in cash on its balance sheet at the end of December 2017 and an Ebitda of €135 million but was downgraded by two notches by Moody’s credit rating agency in May, which cited increasing probability of default. This hinges mostly on the potential outcome of an Italian €29 million anti-trust fine and an ongoing investigation by the European Commission into €72.7 million subsidies, which Moody’s said “could overwhelm its financial resources, though with an undetermined timing”.
Tirrenia sees the situation in Malta quite differently to Grimaldi, however, saying that the amount of merchandise it is being contracted to carry shows that there was a need to shake up the “monopoly”. A spokesman for the company said that Tirrenia was reacting to market demand, and optimising its offering, teaming up in a joint venture with GNV to double the capacity available.
He also noted that Tirrenia was also operating to Naples, a destination that had been “abandoned” by its competitor, with six services from Malta since it re-started operations in 2016, linking to services to the Baltics, Nice/Bastia, and Genoa/Cagliari. Grimaldi operates over 40 routes a week.
With regards to Moody’s, he said that the agency had painted the worst scenario, which did not reflect the actual situation, adding that some of the woes were also down to Italy as a whole and not to the company. Freight and logistics companies have their own views on the situation – mostly positive – with one saying that the introduction of competition had improved the service.
“Although Grimaldi believes that they were not exploiting their monopoly, an element of complacency and arrogance does slip in,” a source shrugged.
For example, Grimaldi dragged its feet when it came to settling claims for damaged trailers, with payments made “in dribs and drabs”.
“It was much easier to insist that we work exclusively with them when they owed us considerable sums,” he said, saying that they were now speeding up payments and making them on a regular basis.
“We are also having regular meetings with them to iron out issues, whereas these were quite rare before. It suits us to have multiple operators.”