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BC Ferries CEO says ferry system ‘losing about $1 million a day’

BC Ferries is in uncharted waters.

The company is losing roughly $1 million a day because traffic is so low, according to its president and CEO, Mark Collins.

Vista Radio spoke to Collins about the challenges BC Ferries has faced since the pandemic started, and what lies in the weeks, months, and years ahead.

BC Ferries president and CEO Mark Collins. (Supplied by BC Ferries)

How busy was ferry traffic over the Victoria Day long weekend?

Ferry traffic on the long weekend was down substantially year over year – about 80 per cent lower than the year before. It ticked up a little bit from what we’ve been experiencing in the depths of the pandemic. Let’s say it was down about 80 per cent instead of 85 per cent, but generally I think people got the message. They stayed home, they avoided non-essential travel… we had a little bit of a pulse on the Friday, but it was a very quiet weekend, otherwise.

How is the company faring, overall?

It’s an unprecedented and challenging time, no doubt about it. Back in the 2008 financial crash, we lost about five per cent of our traffic over the course of a year. Here, we lost about 80 per cent of our traffic in about 10 days. It was just really incredible. Right now, the ferry system is losing about $1 million a day because traffic is so low. That said, things are beginning to open up and I think we’re turning a corner. Traffic is starting to come back and we look forward to the end of the state of emergency, when we can get back onto a more normal footing. In the long term, this will definitely be a very difficult year for the ferry system – difficult financially, difficult for the communities we serve, of course – it’s going to take some years to recover from this.

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How long do you expect the recovery to take?

We don’t expect traffic to be back to normal levels for as much as three years. This year, probably on average, we’ll be down about 50 per cent year over year, by the time we reach the end of the year. That’s accounting for some return to normalcy in the later part of the year. Next year maybe we’ll be down about 20 per cent, the year after maybe down five percent. So that’s kind of what our forecast curve looks like. So that is kind of what our forecast curve looks like. That’s our best estimate right now, but we are braced for potential change.

Do you believe you can weather this storm?

We’re fortunate in one important respect. The governance model under which the ferry system operates is an independent contractor model, so we are an independent provider of ferry services to coastal British Columbians, and that gives us control over our financing and the way we raise money. So we came into the crisis in a fairly strong financial position, and we have the resources to weather this storm. It’s going to take a big hit, it’s going to delay some of our investments, some of our capital spending, we will have to be a smaller company in the future, we’ll have to forgo doing some other non-core services that we used to do in terms of our relationship with communities, but the core is going to be protected. We can continue to deliver core services because of our financial strength.

Did you apply for government assistance?

We did apply for the Canadian Emergency Wage Subsidy, unfortunately we were found not eligible for that. That would have been a big help. We continue to work with federal officials to see if there might be some way to access that program. But even if there’s no help, even if there’s no outside support, the ferry system will carry on because of the financial strength that we were able to build up in the years leading up the pandemic.

Are capital projects on hold?

One of the ways that we are able to get through this is by restraining our capital spending going forward, so there’s no doubt we’ll have to slow down the pace of ship construction, slow down the pace of terminal construction. We will have to make existing assets work a little longer. We will never compromise on safety, we won’t compromise on reliability to serve our customers, but we may have to get a few more years of service out of some of these assets while we digest this shock.

How are you getting through this?

We’re taking on debt and we can carry that debt, but we have to pay that debt back which means we’re going to have a little less money to invest in new assets for a while.

Will you see more layoffs to make up for the shortfall?

Some have already happened when we first came into the pandemic. It was a very difficult decision for us to take because our employees are like family to us. Many of them have worked for us for many, many years and we hate to make layoff decisions. At the same time we have to protect the core sustainability of ferry service for British Columbians. As we continue to look for ways to reduce operating costs, it’s possible there will be more layoffs in the future. We’re in discussions with our union and with our board of directors about what steps we can possibly take, so we’ll have to see how that unfolds as we come out of the pandemic. 

Will fares go up?

We are a regulated entity. Our fares are regulated by the BC Ferry Commissioner. In the long term, the debt that we’re taking on to come through this crisis will need to be repaid and so if we can amortize that debt over a sufficiently long period, the impact on fares should be modest but ultimately, the debt has to be repaid and it will come from the fare box, hopefully over a long enough period of time that it is acceptable to consumers.

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