OUTSOURCING giant Serco has been named as the preferred bidder to continue ferry services linking Aberdeen with Orkney and Shetland after being awarded a £450 million contract renewal.

Islands Minister Paul Wheelhouse said islanders will get a 20% discount on cabin fares on Aberdeen-Kirkwall-Lerwick routes from January.

There is an option for the Scottish Government to extend the Northern Isles Ferry Service contract for a further two years, valued at an additional £160m.

Improvements will include continuing to undertake the planned maintenance and dry docking of the vessels in Scotland, to ensure “strong levels of resilience”, and upgrades to the terminal facilities at Kirkwall in the Orkney Islands, as well as “enhanced passenger information systems” at all the terminals.

There will also be a three-year fares freeze for islander passengers, non-commercial vehicles and cabins on those routes.

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Wheelhouse said: “In addition to the new contract, the Scottish Government is also helping island residents with a package of fare reductions. Building on the 30% discount for passenger and vehicle fares already enjoyed by islanders, cabin fares on routes from Orkney and Shetland to and from Aberdeen will be reduced by 20% from January, and we will also introduce a three-year islander fares freeze for passengers, non-commercial vehicles and cabins on those routes.

“We have placed our island communities at the heart of the new contract and as preferred bidder Serco are making some exciting new customer focused enhancements. These include an extra ten premium cabins on the Aberdeen-Kirkwall-Lerwick routes, a full refurbishment of the terminal lounge at Hatston, earlier boarding at Aberdeen harbour and extended opening hours of NorthLink’s customer services centre."

Serco boss Rupert Soames said: “We are delighted to have been awarded this contract by Scottish Ministers. We are very proud of our track record over the past seven years, during which time we have improved almost every aspect of the lifeline service for the communities and businesses of the Northern Isles, while also reducing materially the annual subsidy and thereby reducing the burden on the Scottish taxpayer. We look forward to further improving the service in the coming years.”

Orkney’s MSP Liam McArthur said the report contains "some glaring ommissions".

He added: “I welcome confirmation that Serco has been chosen as the preferred bidder for the Northern Isles ferry contract. This will allow for continuity in the delivery of this lifeline service upon which our island communities rely.

“The reductions in fares and cabin costs on the Aberdeen routes are also a move in the right direction, though they fall short of what was promised by ministers last year. There is also no sign of fare reductions being implemented on the Pentland Firth route, where they could make a significant difference in lowering costs, or indeed a reinstatement of sailings on that route that were cut when the contract was last tendered.

“I am concerned too that there seems to be no movement in increasing freight capacity serving the Northern Isles.  While greater flexibility in how existing capacity is used may be helpful in some circumstances, the clear message from key business sectors in both Orkney and Shetland over the past year is that additional freight capacity is desperately needed.

“It will be important, of course, to consider the detail of this new contract, but already it appears there are some glaring omissions.”