Port in a storm

There aren’t many CEOs making multi-million dollar investments in their businesses at a time when most are cutting back. But as Diana Milne discovers when she meets Stena Line CEO Gunnar Blomdahl, the tide hasn’t yet turned for Europe’s biggest ferry operator.

“This is a very complex business with two very different sides to it, the passenger business and the freight business”
-Gunnar Blomdahl, Stena Line

As CEO of Europe’s biggest ferry operator Gunnar Blomdahl knows he will be steering his business through stormy waters in the year ahead. Soaring fuel prices last year, followed sharply by the European economic downturn have already dealt a big blow to the firm, which in 2006 doubled its profits and in 2007 achieved profits of around €665 million: “We think the next year will be a problem so we do not have high expectations,” says Blomdahl. “Definitely we will make less money.” Describing how oil prices resulted in extra costs of around 25 to 30 percent, he says the company’s freight business has been hit particularly hard: “I think the recession hit freight quite early, because the factories don’t produce as much as they are cutting down. So there’s less freight going from the factories to the consumers and so on. Like most companies we are down between five and 10 percent on freight. It’s not so easy to judge the passenger business yet.”

Because Blomdahl is unable to forecast how conditions will develop as the economic downturn unfolds he says it difficult for him to know what areas to invest in: “We are challenged of course by the recession. I mean, you have got to be really careful about what you are doing in terms of planning long term. It will be more difficult than when you have growth each year. Oil prices and currencies are also a concern. It’s very hard to predict what the actual currency rates will be. You have to plan carefully and be focussed on tight cost control.”

Despite this uncertainty, Blomdahl is keen to forge ahead with plans to expand the company’s North Sea operations through the launch of two brand new superferries, which will travel on the Harwich-Hook of Holland Route. The ships will be the world’s largest RoPax ships and will have a capacity for 30 percent more passengers. The company has also invested in upgrading and lengthening its Stena Britannica and Stena Hollandica ships at a cost of around €70 million.  Describing the importance of these investments Blomdahl says: “The next area for investment will be in the North Sea where we will introduce the biggest ferries in the world and that investment has a value of about €100 million.  That will happen between 2010 and 2011 and will be a very important investment for Stena Line. There is a lot of business between Holland and the regions of Holland into England. So we need to have big and efficient ferries travelling between there.”

He goes on to say that the ships, though requiring a huge initial investment, will eventually result in energy cost savings for the company: “These ferries actually have less fuel consumption per unit and it’s very important in the future to be more effective,” explains Blomdahl. “We made the investment because we believe in the market and we want to be more efficient per unit. That is very important if oil prices go up again.”

Stena Line has also invested in €39 million in a new port terminal in Belfast to capitalise on growing passenger travel between Scotland and Ireland, which increased by
one percent to 1.2 million in 2007. The three storey terminal built on reclaimed land will enable Stena Line to relocate its Belfast operations two miles closer to the Scottish coast facilitating easier travel between the two markets.  “It’s a big market for passengers and freight and it’s very important to keep hold of that,” says Blomdahl.

One of the reasons why Blomdahl is confident in continuing to make these sorts of investments despite difficult operating conditions is that he believes that there is strong demand for passenger travel on ferries – a demand which he says could in fact become stronger in view of current economic conditions – given the relative cheapness of travelling by sea rather than air.
“If you look back there is that pattern before when we had other recessions. There is the possibility that this could be an opportunity for us.”

With this in mind he says the company is not planning to make any significant cutbacks: “We have no plans right now. We are looking more at the timetables and maybe taking out the odd roundtrip here and there. But no plans to do any bigger things.”

It has also invested significantly in its customer reservations and ticketing systems in a bid to ensure the booking process is as painless as possible for its passengers. These systems have been home-grown to ensure those that created them have as good an understanding as possible of the company’s operations: “All our systems are brand new and have been designed to ensure there are no disturbances,” says Blomdahl. “We have our own IT department that constructed most of the systems so it’s an in-house operation but it’s very high quality. We have our own booking systems for freight and passenger travel and we also have a goods booking system on the internet. More and more of our bookings are coming in that way. Around 50 percent of our bookings both in freight and travel are now done online.”
He goes on to say that the system ensures that Stena Line meets regulations to register all customers:” We need to register our customers as per the law. So it’s very important to have good systems. We have invested a lot in this in the last five years.”

The fact that Blomdahl has to manage both Stena Line’s passenger and freight operations, makes his role doubly complex as he must stay on top of two very different parts of the business. However, he says the key to achieving this is effective delegation: “This is a very complex business with two very different sides to it, the passenger business and the freight business,” he says.

“We are not making all the decisions from the top. There are professional and dedicated people that work for us. For instance route directors on both sides of the business, take most of the decisions about any changes to the routes.”

He is also supported by the management of Stena Line’s parent company Stena AB, which also runs Stena Bulk, Stena RoRo, Stena Drilling, Stena Teknik, Northern Marine Management, Stena Fastigheter and Stena Adactum. “We have a strong and dedicated owner. He is a private person so we can take decisions very quickly so that’s good for us,” he says. Blomdahl’s role however is to make some of the biggest decisions about the business – one which he admits is not for the faint hearted: “(to do this job) you have to be brave enough to make big decisions and be able to invest 100 million euros here and there. Because if it goes wrong that could cost you a lot.”

While he is keen to stress that he does not micromanage, Blomdahl says he is by nature a stickler for detail – a quality exacerbated by his background in hotel management - and when travelling on his own ferries, cannot help but notice the slightest thing that is out of place: “Because of my hotel background I am used to watching all areas. So when I travel on the ferries I can always spot if a bulb is not working properly. I’m interested in that because I think it’s all about the detail sometimes.” It’s this attention to detail which he hopes will steer Stena Line through the economic storm and ensure that it remains on course despite the tough challenges it faces in the year ahead.

About Stena Line
Stena Line is an international transport and travel service company and one of the world's largest ferry operators. It has three business areas: Scandinavia, the North Sea and the Irish Sea. Stena Line’s route network consists of 18 strategically located ferry routes. Stena Line has a modern fleet with a total of 34 vessels including fast ferries (HSS), traditional combi-ferries, RoPax-ferries for freight and passengers, and pure cargo ships.
 During 2006, approx. 15,860,000 passengers travelled with Stena Line. 2,990,000 cars and 1,788,000 freight units were transported during the same period.