1. Passenger and freight market structure, economic and employment trends

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  • Information about the market structure, economic and employment trends, are essential so as to understand and interpret quantitative data available regarding the European inland navigation sector labour market.
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    RIVER CRUISE MARKET AND EMPLOYMENT STRUCTURE

      (Sources used for this chapter: IG River Cruise position paper on the situation of the western European river cruise business environment, October 2019. IG River Cruise represents around 2/3 of the total fleet capacities of European river cruises (it represents companies having in total 240 vessels) management companies included Interview with the European Transport Workers’ Federation (ETF) and with AQUAPOL. Further input (written comments) from European Inland Waterway Industry Associations (EBU and ESO) and DG MOVE)
       

    • River cruises in Europe have been in existence since the 1960s. While there were only 50 cruise vessels operational in Europe in 1995, by 2019 there were already 378 (Source: Hader, A. (2020) The River Cruise Fleet Handbook).
    • According to European Inland Waterway industry associations, competition between companies in this sector is fierce. Economically, the river cruise market is a flourishing sector, which is confirmed by analysing three main indicators. The river cruise fleet in Europe has constantly increased since 2004 and the newbuilding rate is high. In 2019, 19 new river cruise vessels entered the market in the EU. The number of active cruise ships on EU rivers increased by 55% between 2012 and 2019, up to the above-mentioned number of 378 vessels in 2019 (See: Inland navigation in Europe, Market observation, annual report 2020: https://inland-navigation-market.org/wp-content/uploads/2020/09/CCNR_annual_report_EN_2020_BD.pdf).
    • Demand for river cruises has been growing for several years, and between 2012 and 2019 has more than doubled, with up to 1.79 million passengers in 2019, highly driven by cruisers from non-European countries. River cruise vessel traffic has also increased. The yearly number of cruise ships passing the lock of Iffezheim on the Upper Rhine has increased from 1,603 ship transits in 2012 to 2,929 transits in 2019 (+83 %) (See: Inland navigation in Europe, Market observation, annual report 2020: https://inland-navigation-market.org/wp-content/uploads/2020/09/CCNR_annual_report_EN_2020_BD.pdf).
    • The fact that the river cruise sector is booming, with an ever-increasing passenger demand, is reflected in employment figures for the whole passenger transport sector, which follow a positive trend in Europe. However, in a sector where labour force shortage is a concern, ways to strengthen the attractiveness of the sector is also an important challenge in order to meet the rise in demand for river cruises in Europe.
    • The impact of the Covid-19 crisis will be felt in the years to come, including, most certainly, the way in which the labour market evolves.
    • The river cruise industry is characterised by international and rather complex company structures. For example, a river cruise vessel may be registered in Switzerland, with a crew having Cypriot employment contracts, hosting guests from Europe and overseas, and then might cross several countries during its journey.
    • In contrast to the early days when a ship owner also dealt with all the main aspects of a river cruise (hotel management, nautical aspects, etc.), four main types of players running a river cruise business can nowadays be identified.
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      FIGURE 1: GENERAL OVERVIEW OF ORGANISATIONS INVOLVED IN RIVER CRUISING AND THEIR FUNCTION


      Source: CCNR based on IG RiverCruise
       

    • The IG River Cruise (Association of the leading European River Cruise Companies representing 239 cruise ships) points out that Cypriot, Maltese or Swiss employment contracts for employees on river cruise vessels sailing on the Rhine and Danube, reflect the maritime history and knowledge of navigation matters in these countries (Source: IG River Cruise website (https://www.igrivercruise.com/pdf/Positionspapier-V2-en.pdf), (October 2019)).
    • However, there are serious concerns about this argument. It is indeed questionable why employees working on a river cruise vessel sailing on the Rhine or Danube should be employed by a company registered in Malta or Cyprus. One simple reason why this is questionable is the fact that these two countries do not have any navigable rivers and therefore no river cruises are proposed in these countries. ETF and AQUAPOL raise serious concerns regarding such company models, based on their experience. They report a lower wage and social security level for the staff employed within such company models. They also report that communication with the labour market authorities in Cyprus and Malta is very difficult (If employees working on river cruise vessels in the Rhine or Danube region are employed by a company in Cyprus or Malta, both ETF and AQUAPOL report that this goes hand in hand with a lower level of social security for the workers. In addition, both organisations report that, in cases of employment and labour law disputes, the relevant public authorities in Cyprus and Malta barely show any willingness to cooperate with ETF and AQUAPOL, with the result that it becomes very difficult to defend the interests of the worker in such a case).
    • Regarding employment figures, IG RiverCruise estimates that there are currently 12,000 persons active in accommodation and gastronomically related activity on European river cruise vessels, compared to 2,500 persons who are working in the nautical field. According to this same association, recruitment concentrates on traditional navigation nations (both maritime and inland) such as Bulgaria, Hungary, Romania, Slovakia, the Netherlands, France, and Asian countries. Despite efforts deployed to attract workers of other nationalities, Germans, Spanish and Portuguese are less willing to work on river cruise vessels.
    • Indeed, a main difference lies in the fact that crew members cannot return home in the evening, which represents a specific working condition that is different to hotels ashore. European inland waterway industry associations advise that crew members can earn a substantial income in just one cruising season, live off this money, travel or enjoy other activities during the winter months, which makes work on board a cruise ship quite attractive for many crew members. On the other hand, AQUAPOL reports on police controls in 2018 on river cruise vessels in Passau, Germany, which revealed that employees working on these cruise vessels (at least on those that were controlled in Passau) earned a wage that was clearly lower than the legal minimum wage in Germany (Since 1 January 2020, the legal minimum wage in Germany is 9.35 Euro per hour (gross wage). This gives a legal minimum gross wage of 1,621 Euro per month. Source: Federal Ministry of Labour and Social Affairs: https://www.bmas.de/DE/Themen/Arbeitsrecht/Mindestlohn/Rechner/mindestlohnrechner.html). These rather alarming results were also reported by ‘Bayerischer Rundfunk’ (Bavarian Broadcasting), the public-service radio and television broadcaster in Bavaria, and by the Dutch journal ‘INVESTICO’, a journal for investigative journalism (Source: Article in the Dutch journal Investico (2018), Rijncruise drijft op arbeidsuitbuiting, https://www.platform-investico.nl/artikel/rijncruise-drijft-op-arbeidsuitbuiting/ and an article on the website of the Bavarian Broadcasting: Bayerischer Rundfunk (2018), Auf Flusskreuzfahrtschiffen weiter gravierende Mängel entdeckt: https://www.br.de/nachrichten/bayern/auf-flusskreuzfahrtschiffen-weiter-gravierende-maengel-entdeckt,Qwtunaf).
    • In general, crew members live on board on the lowest deck, while the upper deck is reserved for the tourists. In modern cruise vessels, two crew members generally share a cabin (three to four crew members on older cruise vessels). These older vessels are however being progressively phased out of the market.
    • According to IG RiverCruise, the large river cruise management in the European river cruise market (River Advice, G&P, sea chefs and others) employ around 4,000 persons active on European cruise vessels.
    • With regard to working hours, IG River Cruise reports that fluctuation is high, mostly at the beginning of the season, when the personnel has to adapt to the specific rhythm and culture of a river cruise working life. This is also confirmed by the data presented in the following chapters. Uneven and long working hours are a challenge for the entire hospitality industry. There are indeed times when the staff have to work considerably more than eight to ten hours a day. However, according to IG RiverCruise, this is only temporary, and compensations are provided whenever possible in the form of days off, which in general are spent on board the vessel. Other reasons given by IG RiverCruise to explain long working hours are the irregularity of some jobs on board, such as bartenders, and the lack of space on board, preventing employers from having more than three extra staff members on board. Working hours are also controlled by official authorities and are governed by legislations (e.g. Directive 2014/112/EU concerning certain aspects of the organisation of working time in inland waterway transport (Council Directive 2014/112/EU of 19 December 2014 implementing the European Agreement concerning certain aspects of the organisation of working time in inland waterway transport, concluded by the European Barge Union (EBU), the European Skippers Organisation (ESO) and the European Transport Workers’ Federation (ETF) Text with EEA relevance, OJ L 367, 23.12.2014, p. 86–95) ).
    • The subject of working conditions of crews on board river cruise vessels is debated and claims are also raised on the part of workers’ federations, such as the European Transport Workers’ Federation (ETF) (https://www.etf-europe.org/our_work/inland-waterways/). Indeed, workers’ federations also explain that some river cruise companies take advantage of the EU single market rules to hire workers from countries with limited economic opportunities in an attempt to minimise wage costs, their wages thereby not reflecting the hardships of the work on board a cruise vessel.
    • Similarly, as reported above, there are instances when controls by official authorities reveal that some companies are likely to circumvent law. While in other instances, such non-compliance situations might result from a misinterpretation of the complex set of rules that apply in this sector, this complex set of rules can also result in some river cruise companies exploiting the situation. ETF regularly alleges abuses on the part of some river cruise companies, with recent scandals in Germany or in the Netherlands for instance, relating to unacceptable low wages, excessive working hours, unpaid overtime, and appalling working or living conditions on board. Such situations might also be exacerbated by the fact that river cruises have been experiencing a boom since 2013, mainly due to the large number of US-American tourists booking river cruise holidays, with an ever-increasing passenger demand. It is at least possible that the rapidly increasing activity in the sector created such a rapidly increasing demand for labour, that the needed amount of labour (personnel) could not be found, resulting in the above-mentioned phenomenon, such as the heavy workload and large amount of extra-hours.
    • Awareness of these issues exists both on the side of employers and workers’ representative organisations. As an example, in July 2019, the European Barge Union (EBU), the European Transport Workers’ Federation (ETF) and IG RiverCruise signed an agreement, committing to work together on measures that support fair employment in the European river cruise sector (https://www.etf-europe.org/ebu-etf-and-ig-rivercruise-sign-agreement-regarding-river-cruise-activities/).

     
     

    IWT FREIGHT MARKET STRUCTURE AND COMPANY SUCCESSION

    • The economic development of a given sector is – sometimes with a timely delay – reflected in the labour market developments. While passenger transport figures have been following a positive trend in recent years, the number of freight transport companies and volumes of goods transported decreased between 2014 and 2019 in western Europe. According to Eurostat (Eurostat [iww_go_atygo]), transport performance (in tonne-kilometres) in inland waterway freight transport in the EU decreased by 7% between 2014 and 2019, and transport volume (in tonnes) by 5%. To a certain degree, this is a rather different background for employment trends in freight transport compared to the growth in demand in passenger transport. This is reflected in the data presented in the following chapters which show a decrease in the overall number of persons employed in the European IWW freight transport sector. However, the situation also differs depending on the countries, the years and the market segments under study.
    • IWW freight transport market trends and possible outlook considerations are a good indication as to how employment might evolve in the future (Source of this outlook and trends: Inland navigation in Europe, Market observation, annual report 2020: https://inland-navigation-market.org/wp-content/uploads/2020/09/CCNR_annual_report_EN_2020_BD.pdf). Overall, it is expected that the energy transition will continue to have an important effect on transport volumes in inland navigation. In western Europe, this concerns coal in particular. Liquid mineral oil products are expected to continue to be an important component of inland navigation volumes, but a gradual decline is underway in certain regions. A stagnation or even a decline is expected in IWT iron ore transport in western Europe. Concerning the Danube region, steel production is however expected to grow further. For chemicals, the outlook is overall positive in Europe and IWW chemicals transport exhibits high growth rates, in particular in the Netherlands. Regarding agricultural products, food products and foodstuffs, it is expected that a certain regionalisation of production and a change in consumer habits to more regional products will influence long-distance transport. A further slowdown of world trade is expected to have an influence on the growth rates in container transport on the Rhine, although a high dynamic in national container transport in Belgium and in the Netherlands is foreseen. Drawing on these findings, employment figures in the dry cargo sector might develop less positively than in the liquid and container IWT market segments, particularly in western Europe, unless IWT succeeds in conquering new market segments. In addition, it cannot be excluded that the Covid-19 crisis might have a negative impact on employment in the IWT sector in the years to come.
    • The overall decrease in the freight inland navigation labour market, also described by many IWT actors, can be explained in the short term by the financial crisis, which had a negative impact on the volumes of goods transported and therefore on the demand for nautical personnel. Over the last decades the shortage of labour force could partly be counterbalanced by technological innovations as well as the enhanced mobility of crew members from countries inside and outside Europe. However, in the long run, a shortage due to fewer new workers on the market compared to those retiring should become more intense. Therefore, the aging of the workforce is a great challenge for the inland navigation labour market of today and tomorrow.
    • In addition, equipment and technology used on inland navigation vessels are becoming more and more complex. Therefore, inland navigation companies are seeking to hire more specialised and better qualified crew members. An example relates to the additional provisions concerning the expertise of crew members of inland vessels fuelled by liquefied natural gas (LNG), for which a specific certificate of qualification is now required. The shortage of such competencies is due to employers who recruit from the same pool of employees across all inland navigation sectors.
    • The high technological level of the vessels, the level of qualifications required and the more modern accommodation that is now available on board the vessels might not always be recognised by people who are not active in the sector.
    • Regarding the liquid cargo segment in western Europe (Information collected based on an interview with the Director of CITBO, Alain Devos)) in particular, it is perceived as having certain advantages, such as job security, career opportunities both on board and ashore as well as quite an attractive salary. In parallel to the general trend, according to which operations on board of vessels are becoming more complex – and specifically in the liquid cargo segment – the transport of dangerous goods has also become far more complex in the last ten years and important steps have been taken in the field of safety and quality, thereby further increasing the requirements and qualifications necessary to work in this field. Another interesting development relates to the changing corporate structure of tanker barging companies, moving away from the traditionally family-owned company towards a structure with shareholders.
    • An important topic for the long-term economic and employment trend in freight transport is how to organise the succession between generations within freight companies. As has already been pointed out, around 80% of all IWW freight companies in western Europe are small independent barge owner-operators. The succession of the activity in these companies must be seen in the light of economic and social aspects. Company succession in inland navigation is directly influenced by several factors, in particular:
      • economic factors: demand evolution and economic outlook in a given market segment, overall economic framework conditions, etc.
      • labour and social factors: age structure of a given segment, working conditions, appropriate work/life balance, previous knowledge of the sector concerned, etc.
      • company and asset related factors: characteristics of the company such as its size and profitability, the type of assets concerned and the technical features (old or modern vessel, large or small, green or polluting), financing conditions for investments.
    • In this chapter, expert interviews from the banking sector were carried out in order to identify those critical factors influencing company succession in the IWT sector. Overall, such interviews allowed to draw the following main conclusions:
      • The dry cargo market is a more difficult market for company succession compared to the liquid cargo or container market which benefit from better economic framework conditions.
      • Whether the vessel is modern or not and whether “greening” investments have already been made appear as critical issues for company succession.
      • Social factors and working conditions have increasingly become key factors. Indeed, there is a low incentive for younger entrepreneurs to take over an existing business if it entails a heavy and demanding workload, if the economic outlook of the market segment is difficult, and if costly technical investments in the vessel have to be undertaken. This is generally the case for smaller barge owners-operators who tend to work long hours away from home, possibly combined with wages that are not very attractive.
      • It is generally observed that sections of the younger generation favour land-based jobs with regular off-times and weekends at home, in comparison with their parents’ generation.
      • Cooperatives (which are especially observed in the dry cargo market) are seen as an effective concept to foster company succession, as they allow for better social, logistical and economic conditions for barge-owners and operators.
      • Vertical integration is also presented as an important goal for IWT in the future which would facilitate company succession.

       
      Info Box: Vertical integration in logistics
       

      Vertical integration in logistics - and in particular in inland navigation - could exist in various forms. In general, it would mean that an IWT company is not only transporting goods from point A to point B, without any influence on the backward and forward parts of the logistics chain. Backward vertical integration would be present if an inland waterway transport company also owns the freight forwarding process which is quite often done by other (larger) logistics firms. These freight forwarders negotiate volumes and freight rates with large clients from the chemical, petrochemical, agri-food, or steel industry.
       
      If inland navigation companies would take over this role, by backward vertical integration, they would gain more influence on freight rates. A forward vertical integration would mean that inland navigation companies could also control the selling and marketing of the products that they are transporting, for example by owning trading or marketing companies. This would give them more insight into the development of the demand side, and in market conditions of the products they are transporting.
      Source: CCNR

       
      The experts’ views regarding company succession in inland navigation are presented below.
       
      ING Bank
      Interview partners: Rico Luman, Sector Economist Transport, Logistics, Chemicals; Arthur de Bot, Relationship Manager Transport and Logistics

      Company succession must be seen in the context of the economic development of the inland navigation sector. In the years after the 2008/2009 financial crisis, the number of bankruptcies increased. Banks tried to help the companies by postponing reimbursements of loans so that companies could continue to be active in the sector.

      Even if there was a recovery from the financial crisis, the long-term economic framework conditions have deteriorated again in recent years. This concerns notably energy transition and the phasing out of coal. This structural change has a strong impact on transport volumes in IWT. In the agricultural sector, the high amount of nitrogen emissions in the Netherlands puts pressure on this sector to reduce its output. Overall, these difficult economic framework conditions represent a rather problematic basis for company succession in the dry market segment. These structural framework conditions do not make it easy for young entrepreneurs willing to work in this sector and develop a profitable business plan for the future.

      Another aspect which is important for company succession is the size of companies. By far, the large majority of inland navigation companies in western Europe are very small barge owner companies with only one vessel. Small companies often face more financial risks and less access to loans when faced with necessary technical modernisation. The long working hours, including at the weekends, are an important factor, especially in the case of small independent barge owner-operators. At the same time, the earning capacity of small companies is limited, due to a restricted loading capacity of the ship. Taken together, these conditions often fail to generate a high incentive for the younger generation to take over the company from their parents. The bank underlines that investment in greening the vessel is a ‘trigger point’ for company succession.

      The liquid cargo market is characterised by a different company structure. The average size of inland navigation companies is larger in the liquid cargo market and there are more employees compared to the dry cargo market.

      Container transport also has a more growth-orientated economic outlook than dry cargo transport. The liner service structure (24-hour service) makes it easier to earn money and to reimburse loans. In the Netherlands, national container transport is a growth market (this is also shown by statistical data from Eurostat).


      Rabobank
      Interview partner: Mr. Marco van Beek, Sector Manager Inland Navigation

      Similar conclusions are reached regarding the situation in the various market segments. The liquid cargo market has a more modern fleet and with companies of a larger size, providing more incentive for company succession. The outlook for the transport of chemicals is positive, making the liquid cargo market overall profitable for the future.

      Cooperatives could be a possible solution for small barge owners, also in the dry cargo market, to merge together and develop size and scale advantages, thereby allowing economies of scale and lower transport costs to be realised. This is important in the logistics sector. Larger companies or cooperatives could also have more bargaining power for negotiating freight rates and would be more able to achieve a vertical integration within the whole supply chain. Vertical integration is considered as an important topic for inland navigation and should be seen as a goal for the future.

      ABN AMRO bank
      Interview partner: Mr. Albert Jan Swaart, Sector Economist Industry, Transport and Logistics

      Many of the young entrepreneurs who want to start their own business in inland navigation and are eager to take risks come from IWT families.

      Cooperatives (such as NPRC (See: https://nprc.eu/vloot/. The NPRC assembles 120 IWT entrepreneurs, has a fleet of 200 vessels sailing and transports 13 million tonnes of cargo each year on European inland waterways. This makes NPRC the largest corporation in inland navigation in Europe. The 200 vessels belong to different size categories and include also small vessels with a loading capacity of less than 750 tonnes. The corporation is active in all goods segments, from iron and steel, over sands, stones and gravel, grain to containers)) could be a solution to organise supply chain management in a better way, also regarding the social life of the barge owner-operators in inland navigation. They would make it easier to organise transport activities in such a way that barge owners can be at home during the weekend. This would be an important incentive for company succession, given that many young entrepreneurs want to have a family and be at home during the weekends.

      Staff shortage is already a major problem in inland navigation, and it is important that young people also have “social” incentives in order to become a barge owner-operator.

      Ostfriesische Volksbank
      Interview partner: Mr. Dieter Schneider, Head of Bank für Schifffahrt

      An important point for the foundation or the succession of a company in IWT is to present a solid business plan, which should also include a freight forwarding concept. Indeed, freight forwarding companies often participate even financially in the acquisition of a new vessel, hence the added value for young entrepreneurs to be in contact with such freight forwarding companies. Such relationships are win-win solutions as both parties have an interest in future inland waterway transport with modern vessels. During the process of company succession, contacts between banks, the entrepreneur and the freight forwarding company are intensive.

      Among company successions, there are several different models. Often, young entrepreneurs come from an IWT family and have already been working on a vessel for several years. As they want to become more independent, they decide to invest in their own vessel. Given that older vessels are often more costly in maintenance and that it is more difficult to install a new engine in older and smaller vessels, company succession is often combined with the acquisition of a new vessel. There are also other models possible, where the son of an owner-operator continues to sail with his father’s vessel on the latter’s retirement.
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