Carnival Victory

Guaranteed asset performance – a win-win for Wärtsilä and Carnival

5 min read

12 Apr 2021

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Sam Down

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Wärtsilä

5 min read

12 Apr 2021

Text:

Sam Down

Photo:

Wärtsilä

After seeking new ways to draw even greater mutual value from their partnership, Wärtsilä and Carnival arrived at a solution that is unique in the civil maritime industry – a performance-based agreement that guarantees certain metrics are met for one fixed price. No more spare parts sales, additional maintenance costs and uncertain fuel consumption, just worry-free, assured performance as well as fuel savings and emissions reductions. The agreement has not only helped the companies’ collaboration go from strength to strength, but it has also proved invaluable to keeping up with the intense logistical challenges caused by the COVID-19 pandemic.

 

“With a Wärtsilä Guaranteed Asset Performance agreement the customer pays one fixed price for everything, so we have to ensure our internal processes are as efficient and cost-effective as possible to avoid losing money,” explains Andy Dickinson, PBL Director at Wärtsilä. “Because we guarantee performance levels across the fleet for efficiency and reliability, fuel savings and emissions reductions are predictable and unplanned maintenance costs are eliminated – at least for the customer.” 

 

Shared risks, shared rewards

The 12-year agreement between Wärtsilä and Carnival came into force in April 2017, and during the year the two companies worked together to align the operating model and ways of working between all parties: “Carnival is very happy with how the agreement is improving their asset performance, reliability and safety. Because we focus on their specific performance targets – reliability as measured by keeping to schedules and a fleet-wide efficiency gain as measured against a starting baseline that exceeds 1.5% SFOC abatement – Carnival doesn’t need to worry about maintenance or unexpected costs,” explains Andreas Vestergren, General Manager, Contract Management and Operations at Wärtsilä. “Carnival do their part to help Wärtsilä optimise the assets covered by the agreement by operating in accordance with our guidelines and manuals, supporting our maintenance programmes, carrying out any minor maintenance we require and providing the information we need via their cloud-based system,” he continues.

The true strength of the agreement lies in the shared risks and rewards for both parties. “We have to keep quality levels high and make sure everything is working perfectly, which means we have employed more performance monitoring and data-driven analysis to enable better control over maintenance schedules. This has enabled us to increase service intervals from 12,000 to 16,000 hours,” highlights Dickinson, adding that this is also what makes this deal so different from a traditional transactional contract: “OEMs are used to a transactional spare parts approach, but guaranteed asset performance agreements turn this on its head. Carnival and Wartsila have a shared interest in driving down the overall cost to Wartsila while improving the reliability of the assets covered by the equipment at the same time.” In an industry that has traditionally been driven by transactional sales, this has required a big change of mindset.

 

Piecing together a logistical puzzle

When COVID-19 related restrictions started impacting Carnival’s operations in early 2020, the company’s strong relationship with Wärtsilä proved invaluable. “Carnival had thousands of crew members who couldn’t get on planes so they used their ships to sail them back to their home countries. The vessels then had to be laid up in places that they wouldn’t normally visit and then moved around for various reasons, including local laws changing. In terms of getting parts and maintenance personnel to the vessels, it was a logistical nightmare,” Vestergren explains.

Despite being laid up, the vessels’ engines still needed to be run at low load and maintained regularly. “The engines onboard cruise ships are designed to be run at high load for extended periods, and our service schedules are based on that, Dickinson points out. “Running at low load for months on end forced us to be flexible. We provided technical support and new maintenance procedures, including running the engines at high load for periods to make sure they will be ready to go when the time comes.”

Dickinson believes that the trust between the companies allowed for streamlined communication and was key to achieving the performance targets: “We were in constant contact about how we could extend the maintenance interval if an engine was due for maintenance and what we needed the onboard crew to do to keep the engines running.”

 

Leave it to the experts

Being able to offer this type of guaranteed asset performance agreement puts Wärtsilä in a fairly unique position in the maritime industry. “Because we have our own in-house global service operations we don’t have to rely on external third-parties,” explains Dickinson. “Like other cruise companies, Carnival’s core goal is to provide an unforgettable experience to its guests. They are not a technical service company, so it makes sound business sense to outsource that peripheral work to the OEM experts,” explains Dickinson.

At the end of the day, a guaranteed asset performance agreement has to be a win-win. The service provider’s fixed price has to be more attractive than the unpredictable transactional costs the customer is used to. “The success of performance-based agreements then relies on both parties working to achieve the shared values,” explains Vestergren.

 

“We have been very pleased with the way the agreement has been going. It took some effort from both sides to get it up and running smoothly but we are now seeing the results and the full potential of the programme. Reliability and uptime have increased while unforeseen maintenance events have decreased, and with early anomaly detection, enabled by the Expert Insight service, we expect to deliver further improvements in all these areas. Improvements have been seen across all aspects of our operations, from day-to-day activities to major overhauls, where everything – down to the smallest details – is being handled better and smarter and with a focus on constant improvement of engine performance and SFOC reduction. 

- Riccardo Cordara, Senior Director, Fleet Asset Management, Carnival Corporation

 

To learn more about how a Wärtsilä Guaranteed Asset Performance agreement could help your business.




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