BC Ferries reports red ink and falling traffic

JUNE 18, 2012 — British Columbia Ferry Services Inc. (BC Ferries) has released its year-end results for fiscal 2012. The company reported a net loss of $16.5 million for the year ended March 31, 2012, compared to net earnings of $3.8 million the previous year. The net earnings from fiscal 2011 included a one-time gain of $9.3 million from the sale of the company's former head office building.

Vehicle and passenger traffic declined by 3.5 percent and 2.8 per cent, respectively. The traffic in fiscal 2012 is the lowest vehicle traffic that BC Ferries has experienced in 13 years and the lowest passenger traffic in 21 years.

Revenues for the year decreased from $739.3 million to $738.2 million, while operating expenses increased from $672.2 million to $682.7 million. The $10.5 million increase in fiscal 2012 operating expenses includes increases of $4.0 million in fuel expenses and $8.5 million in amortization costs, partially offset by reductions in advertising costs, public relations expenses, cost of retail goods sold and a number of miscellaneous items.

Capital expenditures in the three and twelve months ended March 31, 2012 totaled $31.6 million and $122.2 million, respectively. For fiscal 2012, these investments include: $48.5 million in vessel upgrades and modifications; $44.0 million in terminal marine structures; $18.6 million in information technology; and $11.1 million in terminal and building upgrades and equipment.

BC Ferries notes that on January 24, 2012, the British Columbia Ferries Commissioner (the Commissioner) released his report following a comprehensive review of BC Ferries and the commercial regulatory structure in which it operates. The review reconfirmed the company is an efficient and well run operation. The report makes recommendations covering a wide range of ferry related issues and clearly articulates the challenges ahead if BC Ferries continues to operate the same level of service with the same level of government funding.

In May 2012 in response to the Commissioner's report, the Province of British Columbia enacted Bill 47 which implemented changes to the Coastal Ferry Act designed to balance the interests of ferry users, taxpayers and the sustainability of the ferry operator. In announcing Bill 47 the Minister of Transportation and Infrastructure (the Minister) also announced a commitment of $79.5 million to reduce pressure on fares and price caps. Of this amount, $25 million was a contribution to equity in the fiscal year ended March 31, 2012. The remaining $54.5 million will be provided over the next four fiscal years.

 "The legislative changes and committed funding are important to the long term financial sustainability of BC Ferries in order to provide British Columbians with a reliable and affordable service without compromising safety," said Mike Corrigan, BC Ferries' President and CEO. "We look forward to working with the Province, local communities and the Commissioner to help find solutions that are in the common interests of our customers, the government and BC Ferries."

BC Ferries is currently forecasting "a small loss for fiscal 2013, largely driven by significantly lower traffic levels than those originally included in setting performance term three price caps. The company expects to return to profitability in fiscal 2014, assuming no further deterioration in traffic."

BC Ferries says it "does not anticipate that economic conditions or its traffic levels will improve in the near future and the company is continuing its program of cost containment and deferrals without compromising the safety of its operations."