Editing Hoverspeed (section)

== Background and formation ==
=== Early attempts to consolidate operations ===
During the early 1970s, when both [[Hoverlloyd]] and [[Seaspeed]] were struggling to return a profit, the two operators had been in negotiations on a partnership to amalgamate operations.  However, management at Hoverlloyd was not convinced the UK government would sanction any form of arrangement between Seaspeed and a foreign company.  The situation was exacerbated when discussions became public knowledge and plans for a consortium were quickly abandoned.<ref>{{Cite book|last=Moses MBE|first=William|title=The Commercial and Technical Evolution of the Ferry Industry 1948-1987|publisher=University of Greenwich|year=2011|pages=209}}</ref>

=== Loss-making company ===
In late 1981, when the two companies eventually merged, the situation was dire. Despite a valuation at £110 million, combined losses were £8 million with ticket prices 25 to 30% higher than the ferries. Under the terms of the merger, Hoverspeed was also under obligation to accept the two French hovercraft in exchange for a 10% participation in share capital by French state-owned [[SNCF]].<ref>{{Cite journal|last=Wilkins|first=Robin|date=Winter 1988|title=The Role of Hoverspeed in the Cross Channel Market|journal=Transport Economist|volume=16|pages=5}}</ref> The new company was spearheaded by Gerry Draper, new Chief Executive and a former marketing director at British Airways. Draper had been involved in filling empty passenger seats aboard the new [[Boeing 747]] jumbo jets in the early 1970s when [[International Air Transport Association|IATA]] regulations prohibited discounting. He was also successful in turning [[Concorde]] services profitable.<ref>{{Cite book|last=Robin Paine, Roger Syms|title=On a Cushion of Air|publisher=Robin Paine and Roger Syms|year=2012|isbn=9780956897800|pages=633}}</ref>

Nevertheless, a number of early decisions plagued the new company. First, Hoverspeed inherited an antiquated reservation system which was inadequate, resulting in potential travellers having great difficulty in contacting Hoverspeed and many being told crossings were fully booked when they were not. This necessitated the reversion to a very basic manual reservation system to try to cope with demand.<ref>{{Cite journal|date=1984|title=Hoverspeed|publisher=Kalerghi Publications|journal=High-speed Surface Craft|volume=23-25|pages=5}}</ref> In 1982, loss income was estimated at between £3 million and £4 million.<ref>{{Cite journal|last=Fisher|first=Andrew|date=24 January 1983|title=Hoverspeed to consider deal|journal=Financial Times}}</ref> Second, excess capacity drove profit margins down. The most damaging mistake was to increase the number of crossings operated, over 10,000 in 1982, which did not match demand and the decision to briefly re-open the Ramsgate route for the summer season which was counter-productive.<ref>{{Cite journal|date=1985|title=Hydrofoils and Hovercrafts|journal=Fairplay International Shipping Weekly|volume=292|pages=19}}</ref> Third, parity pricing continued with ferry operators, even during peak season.  This was a source of concern since 70% of the turnover (and traffic) was generated during the summer season between mid-June and mid-September.<ref>{{Cite journal|title=Hydrofoils and Hovercrafts|journal=Fairplay International Shipping Weekly|volume=292|pages=19|via=Financial Times}}</ref>

Despite carrying 2.5 million passengers and 400,000 vehicles, a 21% market share, with 35% fewer flights and 250 staff made redundant, the new entity continued to register losses with £5.5 million for the year 1982, £3.5 million in 1983.<ref>{{Cite journal|date=1985|title=High Speed Ferries Outlook|journal=Fairplay International Shipping Weekly|volume=292|pages=19}}</ref> The new French hovercraft, the [[N500 Naviplane|N500]], achieved only 60% reliability and did not meet ride comfort or control standards. It was eventually broken up for spares and scraps. The [[SR.N4]] craft, moreover, could not accommodate the recently introduced double-deck and one-and-a-half deck coaches and this part of the market was lost. By 1984, the company was near collapse.<ref name=":0">{{Cite journal|last=Wilkins|first=Robert|date=Winter 1988|title=The Role of Hoverspeed in the Cross Channel Market|journal=Transport Economist|volume=22|pages=6}}</ref>

=== Management buy-out ===
In February 1984, the UK government refused to provide further guaranteed loans, British Rail sold its 50% ownership which it had retained in the company (and its losses) for a nominal sum of £1 to a syndicate consortium of 5 directors.  Thus, Hoverspeed was effectively given away to its own management and was wholly owned within the private sector backed by merchant bank [[Kleinwort Benson]] providing guarantees and underwriting the cash needed to operate via [[NatWest Group|NatWest]].<ref>{{Cite book|last=Pirie|first=Madsen|title=Privatization|publisher=Wildwood House|year=1988|isbn=9780704531024|pages=139}}</ref>

{| class="wikitable floatright"
|+Hoverspeed Ltd Profit/Loss (1984–1990)<ref name=":0" />
!Year
!Turnover (£)
!Profit/Loss (£)
!Margin of Profit (%)
|-
|1984
|£28,590,000
|(-£621,000)
|(-2.1%)
|-
|1985
|£33,083,000
|£194,000
|0.5%
|-
|1986
|£34,698,000
|£625,000
|1.8%
|-
|1987
|£42,334,000
|£1,637,000
|3.8%
|-
|1988
|£44,062,000
|£4,775,000
|10.8%
|-
|1989
|£46,070,000
|£2,490,000
|5.4%
|-
|1990
|£49,121,000
|(-£7,973,000)
|(-16.2%)
|}
The company immediately adopted premium instead of parity pricing, justified on the grounds that a faster service was expected to be more expensive. An aggressive advertising campaign was mounted against the ferries and more effort was made to target fares accurately.  For 1984, the company made a loss of              £621,000.   Its performance went up with a pre-tax profit of £194,000 for 1985 with an increase in US passengers.  This figure rose to £625,000 in 1986.<ref>{{Cite journal|last=Wilkins|first=Robin|date=Winter 1988|title=The Role of Hoverspeed in the Cross Channel Market.|journal=Transport Economist|volume=22|pages=6}}</ref>

=== Purchase by British Ferries Ltd ===
[[File:Hoverspeed im Hafen von Dover.jpg|thumb|Dover hoverport]]
Ripe for sale, in February 1986, Hoverspeed was sold by the management consortium to British Ferries ([[Sealink]] UK's holding company) owned by [[Sea Containers]], a transport group engaged in marine container leasing, manufacturing, depot and logistics operations, railways operator, ferry operator and [[leisure industry]] investor for a sum of £5 million, each syndicate making a profit of £600,000.   Large financial gains made by former managers of British Rail was to become a feature of rail privatization.<ref>{{Cite book|last=Parker|first=David|title=The Official History of Privatisation: Volume 2|publisher=Routledge|year=2009|isbn=9780415692212|pages=443}}</ref>

In 1987, Hoverspeed returned a profit of £1.6 million with a turnover of £42.3 million per year and £4.7 million in 1988 and a turnover of £44 million per year.<ref>{{Cite journal|last=Wilkins|first=Robin|date=Winter 1988|title=The Role of Hoverspeed in the Cross Channel Market|journal=Transport Economist|volume=22|pages=7}}</ref>

Being part of a larger shipping company allowed fresh re-capitalization, cheaper fuel as well as access to legal services.  With the reduced fleet of hovercraft aging, it also permitted capital investment into more fuel efficient vessels with the first SeaCat catamaran services introduced in 1991 and larger Super SeaCats in 1997, the latter to achieve economies of scale in the face of stiff competition from the [[Channel Tunnel]] and the ferry companies.<ref>{{Cite book|last=Robin Paine, Roger Syms|title=On a Cushion of Air|publisher=Robin Paine and Roger Syms|year=2012|isbn=9780956897800}}</ref>