Has BC Ferries Crossed the Rubicon?

EXPENSES                            Original Projection                                  Current Projection

                                                        PT2                                                                          PT2 (ends Mar 31, 2012)
Vessel related:                             +15% $457  million                                                     $539 million

Terminal related:                        +36% $126  million                                                      $198 million

IT/Corporate/other:                 +50% $73  million                                                        $146 million

Here’s how much the revenue projections were off for 2010 specifically (the only year with data discussion in the report).

REVENUE

Projected 2010   $ 56.8 million

Actual 2010          $ 3.4  million  –94% (oops!)

According to Management’s Discussion & Analysis of Financial Condition and Results of Operations
$28.8 million (54%) of the variance is due to falling traffic levels
$15.7 million (29%) higher than forecast operating expenses
$9.7 million (18%) higher than forecast amortization reflecting higher than forecast spending levels
2011 and 2012 originally were forecast to show modest profit, but BCFS has “since  advised” earnings will be significantly lower than forecast.

Traffic Levels

Traffic Statistics for All Route Groups (all numbers x 1000):

                                            Passengers             Vehicles

2003/04                           21,367                     8,292

2004/05                           22,027                    8,557

2005/06                           21,730                    8,543

2006/07                          21,665                     8,522

2007/08                          21,788                     8,579

2008/09                          20,727                    8,130

2009/10                           21,036                     8,255

Forecast 2010/11         20,967                     8,369

Forecast 2011/12         20,967                     8,369

Debt repayments (principal) due in the next five years:

Year ended

2012                                                                                                       $ 22 million

2013                                                                                                       $ 24 million

2014                                                                                                       $ 164 million

2015                                                                                                       $ 274 million

2016                                                                                                       $ 24 million

Here we have the makings of a bad situation.

declining traffic = declining revenues

So where is the money going to come from?

(Hint: The Coastal Ferry Act specifies that “the designated ferry routes are to move towards a greater reliance on
a user pay system so as to reduce, over time, the service fee contributions by the government.” Routes 1, 2 and 30 receive no contributions now, and are not likely to do so in the future.)