Details of Subsidy contracts

[swest]

Greetings,

Newbie here, and soon-to-be first-time Traveller (Mongoose) campaign referee.

Can someone explain the details of, or point to source material for, subsidy contracts for merchant vessels. I'm trying to compare and contrast subsidies vs. mortgages. I'm wondering things like:

• Who 'owns' the ship?
• How long does the typical subsidy contract run?
• What happens at the end of the contract?
• etc.

Specifically, I'm trying to understand and flesh out the arrangement alluded to in The Traveller Adventure, Vol 2, #202, pp. 129-130.

That text (p.129) says:

"The usual text of a subsidy agreement calls for a ship to service an agreed-upon route for at least 70% of each year; for the remainder of the year, the ship can undertake charters or service routes to other worlds. in all cases, however, the subsidy holder receives 50% of gross revenues."​

and (p.130, emphasis mine):

"The March Harrier's income and expenses pass through a fund managed by the owners of the ship (the captain, the pilot, and the engineer). All salaries, fuel and maintenance costs, and other expenses are paid from the fund, and all income generated by the ship goes into it.

The fund is managed by a board of three. The captain has five shares, the pilot two, and the engineer three. The board votes to decide how money is to be used. Payments to the subsidy holder are the fund's first requirement, followed by other expenses. If there is excess money, the board may vote dividends to the shareholders."​

Any help would be appreciated.

Thanks.

- s.west

 

[mmbutter]

I've always GMed it as the subsidy holder makes the loan payments (or paid for the ship outright) and ownership of the ship passes to the three people listed at the conclusion of the subsidy agreement.

 

[Whipsnade]

S. West,

You've got yourself all tied up in knots for nothing. You've focused too much on just one meaning for a single word, owners, while also ignoring the situation presented by the text as a whole. With regards to the term "owner", look at the example of home owners. They are called the owners of the home even if they still owe the bank decades of payments. Just as a mortgage owner is said to own their home as long as they keep making payments, the captain, pilot, and engineer in TTA are owners of the March Harrier as long as they keep making subsidy payments.

This explanation from S:7 may make things more clear:

This ship, however, is a subsidized merchant. The government makes the monthly payments, and also takes 50% of gross receipts. The owner pays all expenses, and thus is responsible for paying the overhead of Cr82,337 per month. The owner also receives half of the gross of up to Cr546,000 per month. In fact, the ship could run at 35% of full load and still make a (small) profit.

The usual text of a subsidy agreement calls for the ship to service an agreed upon route for at least 70% of each year; for the remainder of the year, the ship can undertake charters or service routes to other worlds. In all cases, however, the subsidizing government is entitled to 50% of all receipts, before expenses are paid. In practice, however, the shipowner often resorts to smuggling in order to retain higher profits. Alternatively, the shipowner may sell cargo space to himself and ship speculative goods in that space rather than give up 50% of the profits on such transactions.

What's a subsidy? As shown in the text, it's basically a government held mortgage.

In the case of a private mortgage, a potential ship captain approaches a bank for the money with which to purchase a ship. The potential captain must convince the bank they have a viable business plan in order to qualify for the mortgage. Viable business plans usually involve flying proven routes and that where subsidies come in.

In the case of a subsidy, a government which wants to establish and/or maintain trade along unproven or marginal routes funds the construction of a ship. The government then looks for someone to operate the ship for them along the desired route. Unlike the bank, the government doesn't care whether or not the route is profitable at first or even in the long run. Having the route serviced, regardless of profit, is the driving force behind the subsidy in the first place. In fact, profit is such a minor concern for the government that it gladly offers to share any profits with prospective crews as part of the recruiting pitch.

Now, back to your original questions:

* Who 'owns' the ship? - The crew currently flying it, as long as they live up to their part of the subsidy contract.

* How long does the typical subsidy contract run? - For as long as the government(s) in question feel there is a need for the route to be serviced. Remember, they're subsidizing a route, not a specific ship. This means routes could be subsidized for centuries with several ships flying them in turn. As each ship is paid off, gets too old, or reaches some other point, the government(s) in question replace it with another which services the same route.

* What happens at the end of the contract? - Either another crew is contracted to fly the same ship serving the subsidized route or another crew and ship is contracted the fly the route. (In the case of TTA, the latter is assumed to occur when Oberlindes buys out the March Harrier's contract thus freeing her from her subsidized route.)

Hope this helps.


Regards,
Bill

 

[swest]

Very helpful guys. Especially the Oberlindes reference.

You have answered all my questions.

Thanks, a lot.

- s.west