BC Ferries President and CEO David L. Hahn this week announced plans for a major cost containment effort - and said that, as part of it, he had "elected to retire effective December 31, 2011." Mr. Hahn noted "I want to be clear on one thing. It's my choice to retire and it is on my terms that I'm leaving. I believe it to be in the best interests of the organization, otherwise I would have never considered it."
Mr. Hahn unveiled the cost containment plan to address a significant drop in revenues in the first half of this fiscal year.
"I want to stress that this is by no means a crisis situation," he said. "We are taking prudent action now to reduce our operating and capital expenditures over the next eighteen months until the final price caps are determined by the B.C. Ferry Commissioner. This past summer, we have seen a significant drop in our traffic levels and we need to manage our costs to match our anticipated revenue short fall for this fiscal year. This drop off in traffic is largely due a number of factors, including a weakening economy, decline of the American tourism market and an exodus of Canadian tourists to the United States."
BC Ferries traffic is at a twenty year low in passenger levels and an eleven year low in vehicle traffic. This situation has resulted in vehicle and passenger traffic being down about three and four per cent, respectively, this year. In its August 24t first quarter report, BC Ferries reported that it anticipates a year end loss to be in excess of $20 million for fiscal year 2011/12.
Mr. Hahn said, "Over the last month, I have conducted an extensive review of our operating and capital costs and the following is a list of cost saving actions to be undertaken:
- Hiring freeze of all non essential positions
- Wage and salary freeze for next two years
- Select early retirements
- Reductions in executive compensation through elimination of the long term incentive plan
- Cancellation of discretionary expenses
- Reduced use of outside contractors and consultants
- Elimination of many charitable and community donations
- Cancelation of Vancouver Canucks partnership
- Eighteen month delay in select capital expenditures
- Application to provincial government for cancellation of up to 400 round trips per annum (major routes only).
"I anticipate these adjustments will generate approximately $11 million this fiscal year," stated Mr. Hahn. "We are confident that these actions will contribute positively to the ongoing financial sustainability of BC Ferries, pending the BC Ferry Commissioner's final price cap ruling."
"As part of this cost containment effort, I have elected to retire effective December 31, 2011. This has not been an easy decision, but it will help facilitate a more constructive dialogue around future service levels and funding."
Commenting on Mr. Hahn's retirement decision, BC Ferries Services Board Chair Donald P. Hayes praised Mr. Hahn's "unsurpassed vision, dedication and commitment to the company" saying he was owed "special thanks for the tremendous service he has provided these eight years in making BC Ferries a success."
Mr. Hayes said, "As Mr. Hahn's decision to retire was voluntary it triggered no severance payments."
Mr. Hayes stated, "The Board has a succession plan in place and we expect to make an announcement on a successor sometime after our Board meeting in November, 2011. The a of the successor will be subject to an executive compensation plan to be established by the B.C. Ferry Authority, and will be compliant with the new requirements for executive compensation set by the Miscellaneous Statutes Amendment Act (No.3) - 2010, commonly known as Bill 20."
September 30, 2011