Current Northern Isles ferry operator Serco have been selected by the Scottish government as the preferred bidder for the new £450 million ferry contract.
Serco, who have operated this service since 2012, will now begin an initial six year contract.
There is an option for Scottish ministers to extend the contract for a further two years, valued at a further £160m.
Following the announcement, Transport Scotland announced islanders would also receive a 20 per cent discount on cabin fares from January on the Aberdeen-Kirkwall-Lerwick routes and would also benefit from a three year fares freeze for passengers, vehicles and cabins.
It comes after Northern Isles ferry services contract manager, Paul Linhart-MacAskill, said at an external transport forum meeting only on Wednesday that, while they hoped that the preferred bidder would be “announced shortly”, he could not “commit 100 per cent” to saying that contract would be awarded before the end of October.
While Liberal Democrat MSP for Shetland, Beatrice Wishart, said that she was “pleased” to hear that Serco had been awarded the new contract, she sounded a cautious welcome of the news that a 20 per cent islander cabin discount is set to be implemented.
“While it is welcome that cabin prices are to be cut by 20 per cent and fares frozen, there is more to be done to make this service fit for purpose.
“Islanders will remember previous promises of cuts of more than 40 per cent for passengers and more than 30 per cent for cars.”
Ms Wishart questioned the news that Serco will be upgrading ten of their cabins to “premium class”.
“What’s more the focus should not be on upgrading premium cabins when many people struggle to get a bed as is.”
As a result of the announcement, Serco have pledged to make a number of improvements to the service, which will include a “a new smart ticketing system for foot passengers”.
Rupert Soames, Serco chief executive, 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.”
The contract was originally supposed to be awarded in August.
Delays due to a legal wrangle have resulted in the hold up of the contract, which is due to commence on 31st October.