Thursday, December 01, 2005
Steering through troubled waters
By Mark Oliver
November 29, 2005
Photograph: Gareth Fuller/PA
A brief history of British ports and ferries operator P&O, which today agreed to end 168 years of independence when it backed a £3.3bn takeover bid by DP World of Dubai
Since its establishment in 1837, the Peninsular and Oriental Steam Navigation Company has played a key role in linking the British Isles with countries overseas.
The firm grew out of a partnership first formed in 1822 between Brodie McGhie Wilcox, a London ship broker, and Arthur Anderson, a Shetland-born former Royal Navy clerk.
During the Portuguese civil war and then the Spanish conflicts of the early 1830s, they ran guns, raised loans and chartered steamers as warships and troop carriers for the heirs to both thrones.In peacetime, cargoes included anything from machinery for minting money to giraffes for the London Zoo.
In 1835 Willcox and Anderson were joined by Captain Richard Bourne, a Dublin shipowner, and began a regular steamer service between London, Spain and Portugal, under the name of the "Peninsular Steam Navigation Company".
A key date was August 22 1837 when Bourne and the Admiralty signed the first commercial contract for carrying mails by sea, for a weekly service between Falmouth, Vigo, Oporto, Lisbon, Cadiz and Gibraltar.
The firm adopted as its house flag a quartering of the royal colours of Portugal and Spain, which it still uses today.
The financial security of the 1837 deal with the Admiralty laid the traditional foundations of P&O, with mail contracts continuing to be a major source of the firm's revenues until the second world war.
After incorporation as P&O in 1840, the company pressed ahead with routes to Egypt and India, using the overland route across Egypt until the opening of the Suez canal in 1869.
By 1845, P&O's regular steamer service reached Malay and China, hence the addition of "Oriental" to the company's name.
The firm and its numbers of ships expanded, helped by the technology and machinery of the industrial revolution, and it served all corners of the British empire.
Its passenger services became famous for shuttling civil servants travelling to India and elsewhere in the empire with soldiers, bankers, industrialists and missionaries.
In its heyday in the mid-1920s, it owned a fleet of nearly 500 ships, ranging from its traditional black-hulled passenger vessels to pleasure steamers on the Thames.
But, when long-distance passenger services started to decline, the company transformed itself, carving out a reputation in container shipping, ports and ferries.
It converted liner routes to container operations at great expense, and began building infrastructure in ports to handle large amounts of freight. Its ferries division mushroomed out of the North Sea Ferries and Normandy Ferries partnerships which were set up in the 1960s and were later wholly owned.
Today's bid approach for the firm by DP World, owned by the government of the United Arab Emirates, presents a new challenge for the stewards of P&O led by its chairman, Sir John Parker.
However the current board's predecessors proved themselves to be adept at steering the firm through choppy waters.
The company was almost fatally damaged by the opening of the Suez canal because it had not believed the project would work and its long-distance steamer ships were too large to use the short cut.
Its survival was down to extensive economising which involved slashing overheads and abolishing the practice of providing passengers with free alcohol at meals.
P&O also recovered from two world wars when its ships played a key role in the victories against Germany, supplying Britain and its allies with munitions, food and raw materials.
A total of 85 of its vessels were lost during the first world war and almost double this number were sunk during the second world war.
More recently the company has been challenged by the rise of no-frills airlines, which have launched a competitive onslaught on its cross-Channel ferries business.
P&O currently has three divisions - ferries, ports and cold logistics - but it has dabbled in a number of sectors outside shipping during its history.
It made a short-lived push into oil exploration in the 1970s and is a former owner of housebuilder Bovis Homes and Earls Court & Olympia exhibition centres.
The curtain fell on its interest in cruises when P&O Princess Cruises was demerged in 2000 and this company was subsequently swallowed by Carnival Corporation.
It got out of container shipping earlier this year by raising £381m from its 25% stake in Royal P&O Nedlloyd when it was bought by Danish giant AP Moeller-Maersk.