6 Releasing our full potential THESE SHIPS ARE lIkE RACE HORSES SAyS UWE BAkOSCH, yOU HAvE TO lET THEM RUN FAR. THEy NEEd TO BE ABlE TO RUN, ANd RUN FAST ON THE lONGEST POSSIBlE ROUTES WITHIN THE BAlTIC.
The ships in question are <strong>Finnlines</strong>’ five Star-class Ro-Pax ferries, glossy young thoroughbreds with capacity for 4,200 lane metres of rolling cargo and 500 passengers. Capable of 25 knots, they also have speed to burn. As <strong>Finnlines</strong>’ chief executive explains, however, their fate over this last year also makes them a useful metaphor for the changes that have taken place at the company over that period. From sorry victim to Exploiting thE rEcovEry A year ago, two of the five were operating between Malmo and Travemunde, “a trade where in places you can only go at five or six knots because of the wind farms along the route.” They were, in effect, hobbled. Now they have been given their head. All five ships, which he calls “among the most modern and efficient in the world,” are now operating on routes through Helsinki that demand exactly their kind of speed and size. It was a question, Mr Bakosch says, “of using our best ships to support the Finnish economy to the maximum.” But it was considerably more than that. Matching the right ships to the right routes for maximum efficiency was one element in a sweeping overhaul of <strong>Finnlines</strong> designed to transform it from a sorry victim of the financial downturn into a company poised to exploit the recovery. The vessels, he says, are fun to watch becoming productive. NETWORK Baltic Sea North Sea Russia Mediterranean Sea Cork Setubal Wallhamn Göteborg Kapellskär Aarhus Halmstad Esbjerg Malmö Hull Travemünde Sassnitz Lübeck Rostock Immingham Liverpool Hamburg Gdynia Tilbury Bristol Sheerness Amsterdam Flushing Southampton Antwerp Bilbao Valencia Savona dEEp undErstanding oF thE company – and Quickly! The story of the Star-class ferries, however, is symptomatic of the problems afflicting <strong>Finnlines</strong> before Mr Bakosch’s arrival last year. A year ago, it was disorganised enough not just that the wrong ships were running on the wrong routes, but that individual ships were handling their own procurement, a very costly way of doing things. It was also weighed down with assets and companies – 49 separate companies, for instance, compared with 27 now – that often bore little relation to its core business and delivered less still to the bottom line. And it was detached enough from the wealthgenerating possibilities of its own operations that major potential profit centres, such as the passenger business, were all but ignored. As Mr Bakosch puts it, the last year has been about putting as much right as possible. He says “we had to go down to the 17th level of the mine to really understand the company, and we had to do it quickly.” They went to work. Cost reduction was immediately high on the agenda, and the company made significant gains both in cutting back port expenses and bunker costs. Focus on FlEEt and routE optimisation Optimising the assets was also a critical part of the campaign to get the company fit again. <strong>Finnlines</strong> reallocated ships where they were most suited, including new routes to Poland and Germany. But it also began a major effort Monfalcone Venice Koper Ravenna Livorno Rauma Naantali Turku Kotka Helsinki St. Petersburg Civitaveccia Yenikoy Cagliari Salerno Palermo Gemlik Izmir Trapani Catania Tunis Malta Piraeus Limassol Mersin Latakia Tartus Beirut Tripoli Haifa Al Khums Tobruk Alexandria Ashdod to winnow down the chartered component of its fleet, which had become ruinously expensive as demand plunged with the financial crisis. Over the course of the year, <strong>Finnlines</strong> redelivered nine chartered vessels to their owners and four more will follow this year, substantially reducing the average age of the fleet as well as the company’s costs. <strong>Finnlines</strong> also moved to sell off non-core assets, from flats, warehouses and car parks to container port operations and a cement port business, that were in many cases both a distraction and a cost. And it focused hard on yield management, adjusting prices meticulously to lure in new traffic, filling its ships to the gunwales where in the past such efforts were lackadaisical at best. BEnEFits From closEr knit grimaldi opErations In circumstances such as this, the benefits of being part of a larger group come very quickly into focus. Mr Bakosch says synergies with its parent company, the Naples-based <strong>Grimaldi</strong> <strong>Group</strong>, have been a critical element behind <strong>Finnlines</strong>’ turnaround thus far, and are likely to prove highly beneficial as the recovery gets underway in earnest. Centralising procurement in <strong>Finnlines</strong> and other costs had an immediate impact because of the economies of scale it made possible, but there was more to it than that. While <strong>Finnlines</strong> expanded its network around the Baltic, it also began to knit itself 7