Designing Capasity and Service Level at Ferry Crossings
Finn Jørgensen, Nord University, Business School, Gisle Solvoll, Nord University, Business School
The article presents a model to determine how economic optimal frequency on a ferry crossing depends on demand, passengers’ time cost and the cost of making a roundtrip. The results have implications for the authorities tendering policy.
Background and objective:
The road network in Norway consists of a large number of ferry crossings. The operations on these crossings are set out for tendering normally every eight year. The transport authorities determine capacity and service level by setting opening hours, frequency, the size of the ferries and maximum number of remaining vehicles permitted. Because of strong traffic growth, many crossings need increased transport capacity. Increased capacity is obtained by using lager ferries or putting an extra ferry into operation. The purpose of the article is to develop a model that aims to determine the economic optimum frequency on a ferry crossing when the demand per hour, passengers’ time cost and the cost for the ferry company of making an additional roundtrip are known. Optimal frequency is the value that minimizes social costs; that is the sum of ferry cost and passengers’ time cost. We also, however, discuss how optimal frequency changes when the ferry operators have other goals than minimizing social cost (for example profit maximization).
The model allows us to discuss in more detail how the level of traffic, the length of the ferry crossing, the ferries’ costs structure and passengers’ time costs influence optimal frequency. Special emphasis is placed on analyzing the substitution possibilities between large ferries that run less often and small ferries that run more often. The model is tested empirically using traffic - and cost data from a selection of ferry crossings in Norway.
Minimizing social cost implies that the frequency on a ferry crossing should be increased until the cost of an extra round trip exceeds the reduction in waiting time costs for the travelers. The model indicates that current capacity and service level guidelines for Norwegian ferry crossings generally provide too low frequency on short crossings and too high frequency on long crossings from an economic point of view.
Implications for Research/Policy
Two main implications from our findings are:
• Current practice from the authorities to operate with standardized service levels for broad categories of ferry crossings is not optimal.
• As tender periods for ferry transport are usually eight years there can be significant changes in both travelers’ time costs, ferry costs and demand for ferry transport in the contract period. Consequently, reliable demand - and ferry cost forecasts related to each ferry crossing are important because they are the key factors determining economic optimal service level. The greater the uncertainty in demand and costs, the wiser it will be for the authorities to design flexible tenders which may change during the contract period.
Association for European Transport