Cruise liner officials claim that the withdrawal of tax free status will result in fewer ferries, higher ticket prices and substantially higher freight charges.
Tax-free sales onboard Swedish, Finnish and Danish ferries and luxury liners generated revenues of $5 billion in 1995, including revenues from bars and restaurants.
In order to compensate for the loss of much of their income, Nordic luxury liner and ferry operators say they will have to increase ticket prices by 30% to 50%, according to a report from the Swedish Maritime Authority.
"We don't expect that prices will be increased at once. The shipping companies will instead gradually increase prices in the period leading up to the withdrawal of tax free status," says Anders Lindstrom, the SMA's general manager.
Stena Line is already planning to increase passenger fares by up to 40% on Nordic ferries, the most luxurious of which resemble floating five star hotels, while freight charges are expected to increase by 15%.
Nordic shipping groups have traditionally used travel fares as a loss leader strategy to attract the maximum number of passengers, retrieving any loss suffered from discounted fares from money spent onboard, and in particular on tax free sales which accounts for over 70% of the operating revenues of ferry and luxury liner companies.
Copyright December 1996, Crain Communications Inc.