How efficient are ferries in providing public transport services? : the case of Norway

In this paper we provide a yardstick for measuring the performance of ferries involved in the Norwegian trunk road system. We establish a best practice frontier from which individual ferries are measured against. The potentials for efficiency improvements can then be derived giving the decision makers knowledge of the magnitude of efficiency gains that can be achieved if the current subsidy regime is changed. The approach we use for establishing the frontier is the Data Envelopment Analysis (DEA) which is known to tackle problems of this type appropriately and which is now popular in assessing the efficiency of public transport services. Further, we use rich data comprising about 82 ferries operating throughout the country. The data are from the account years 2003 ¿ 2005 and includes as inputs; fuel, labour, capital and maintenance costs, and as output ferry kilometres and hours in operation per year. Our results indicate that there is a large potential for efficiency improvements in the sector as whole. Further, we find that area of operation e.g. whether open sea or not has a significant impact on efficiency thus we warn the decision makers not to be indifferent concerning the area where services are provided when assessing performances of the ferry sector. Our findings if used appropriately could improve the ferry subsidy schemes. Today, subsides are based on negotiations with companies where factors that impact cost such as oil prices and wages are discussed. However, the government that negotiates knows too little about efficiency potentials.