Report finds BC Ferries cuts ‘more aggressive than necessary’

BC Ferries saved several thousands of dollars more than its target last year through service cuts

BC Ferries saved several thousands of dollars more than its target last year through service cuts, according to a report done by the chair of the Ferry Advisory Committee.

John Hodgkins, a transportation specialist and head of a group of Ferry Advisory Committee chairs, found that BC Ferries achieved significantly more in savings than it was ordered to by the province three years ago.

“The actual cost reductions indicated by our estimates…varied widely from the net savings targets set by government – in some cases by a factor of two or three – suggesting that the approach to cost reduction was, in some cases, more aggressive than necessary to deliver the mandated targets,” Hodgkins wrote.

Jim Abram, regional director for Quadra Island, said Hodgkins found the figures for the Campbell River-Quadra Island route to be the “most striking.”

Hodgkins admits in his report that while the figures are derived from BC Ferries data, the numbers have not been confirmed by BC Ferries.

Nevertheless, Hodgkins’ report finds that operating costs on the Quadra Island ferry route were reduced by roughly $450,000 in 2014 while BC Ferries estimated the route would lose $125,000 in revenue. That means BC Ferries achieved a savings of $325,000 last year, which is $140,000 more than the $185,000 BC Ferries was ordered by the government to cut out of the route through service reductions.

Abram said the “enlightening” report reveals that BC Ferries went too far.

“Instead of saving $185,000 as they projected, they in fact saved $325,000, which is a good indicator of how much we are being gouged,” Abram said in an email.

And Hodgkins agrees.

“Taking account of best estimates of the likely revenue effects, it does appear that the net savings achieved on some routes are below the targets set by government, whereas on other routes the net savings delivered substantially exceeded those targets,” Hodgkins wrote.

Indeed, while the Quadra Island route did produce an excessive savings for BC Ferries, that wasn’t the case on all minor routes.

The Crofton-Vesuvius Bay (Salt Spring Island) run only achieved $40,000 in savings compared to the government’s target of $105,000; the Buckley Bay-Denman Island route had $224,000 in savings which fell short of the $330,000 target while the Denman Island-Hornby Island run missed its target of $180,000 with a savings of just $137,000.

The Nanaimo to Gabriola Island ferry route reported the greatest savings. Through service reductions, a savings of $886,000 was realized while the government’s target savings was $400,000.

Hodgkins said BC Ferries has told the Ferry Advisory Committee that it is unlikely to publish its own details of savings achieved on a route-by-route basis due to “perceived commercial confidentiality.”

He said BC Ferries “was satisfied that the government’s financial objectives had been met.”

Hodgkins said the province is not requiring BC Ferries to provide financial outcomes for each route and that “government was satisfied that as long as BC Ferries made the cuts, they would achieve the required savings.”

BC Ferries was ordered by the government in 2013 to come up with $18.9 million in savings with cutbacks to its minor and major routes effective April 2014 after the corporation suffered a $16.5 million loss and a 21-year low in passenger traffic and a 13-year low in vehicle traffic in 2011.

Ferries, however, recently announced that foot passenger traffic was up five per cent while vehicle traffic rose by 4.7 per cent in the first quarter of this year. The corporation said the increase in traffic generated a $5 million increase in Ferries’ net earnings compared to last year.

In response, BC Ferries has announced it is slashing passenger fares by 50 per cent from Sept. 8 to Oct. 15 on off-peak days of the week and on off-peak times of the day on its minor and major routes.

The discount only applies to the passenger fare, not the vehicle rate, , which means that an adult fare, which is normally $16.90 on the major routes and $10.30 on the Quadra Island route will be reduced to $8.45 and $5.15 respectively.