Comparing the efficiency of public and private ferry services on the Pentland Firth between mainland Scotland and the Orkney Islands

Case study analysis is applied to investigate the efficiency of competing ferry services operating on the Pentland Firth between Scotland and the Orkney Islands. One operator is state-owned and subsidised via a tender arrangement; the other competing service is privately owned, does not receive any subsidy and operates independently of any tender process. Yet both provide more or less the same service in terms of carrying passengers and vehicles across the Pentland Firth, one costing the taxpayer (i.e. via operating subsidy) and the other not. Here we investigate reasons why a state-owned ferry operator running a tendered service requires a subsidy, whilst a competing private operator does not, both serving the same market. Analysis of the respective transport operations serves to highlight key differences in operating cost structure between the competing operators. This reflects different corporate strategies and knowledge, also influenced by key stakeholders objectives in respect of the state-run operation, and by normal corporate objectives on the part of the private operator. The study offers better understanding of the remote island ferry sector from an interdisciplinary perspective, highlighting outcomes in relation to state subsidy, competition, and transport policies which have implications for delivery and management of remote island ferry services.