The people of British Columbia are unhappy will the governance of the B.C. Ferry Corporation as fares increase and service declines. But another B.C. transportation company shows what can be done with a little entrepreneurial spirit.
The ferry services it provides are considered an essential part of the highway system of British Columbia. However, the ferry services were moved out of the transportation ministry into a crown corporation and then, in 2002, into a privately held corporation.
Making the ferries private meant that the government of B.C. no longer had the $1.3 billion of debt owed by the ferry corporation on its books. It would not have to worry about how to pay for the $3.1 billion of capital maintenance and improvements that are upcoming, nor would it have to deal with the annual losses the ferry operations generate.
But BC Ferries have some worries: insufficient revenue to cover direct costs, capital costs and debts. The corporation has been dealing with this by raising fares in the hopes of increasing revenues and by reducing service in the hopes of lowering costs. These methods have not worked.
Higher fares and less service have reduced ferry ridership, put downward pressure on revenue and generated anger and antagonism from those who live, work or just want to travel in the ferry dependent locations in British Columbia. From 2003 and 2012, ridership has declined by 11 per cent at a time when other means of travel were increasing by amounts of up to 68 per cent. A Union of B.C. Municipalities report has estimated that high ferry fares and reduced ridership has cost the B.C. economy more than $2 billion in gross domestic product.
In 2016, there will be new caps on how fast ferry fares can grow. The amount of the maximum ferry fare increase is not yet known, but pressure from the ferry-using public is already mounting, not only against any further increase but for fare reductions. The B.C. government has budgeted for a subsidy of $177 million.
The federal government does provide a subsidy to B.C. ferries, but the subsidies it provides for ferries in Atlantic Canada are 350 times what they offer B.C. on a per-passenger basis. The East Coast subsidies originate in promises made at the time of Confederation but similar promises made around that time for subsidized B.C. ferry service from Victoria to Olympia and San Francisco are not being honoured today. Nor does any increase seem likely.
The Vancouver Airport Authority provides an example of a successful, privately-operated transportation business. YVR won an award as the best North American Airport five years in a row and is the only airport in North America to be listed in the global top 10. It does not seek government subsidies even though it is competing against heavily-subsidized airports like the one in nearby Bellingham, Wash. Rather than asking for government money, it pays more than half a billion dollars to the various levels of government.
YVR sees itself as a private, profit maximizing company, but its profits are not distributed to shareholders. Rather, they are used to pay for more and better airport services and the infrastructure needed to ensure the Vancouver airport is one of the best in the world.
When extra revenue is needed, YVR does not raise fees; instead, it looks for related business opportunities that can generate a profit. One such subsidiary business is the Vantage Airport Group which improves, manages and operates airports in Canada and around the world.
YVR has turned the airport from a government subsidized necessity to a booming export industry for B.C. and Canada. As YVR improves, it has more to offer an expanding group of clients. The Airport Passport Control (APC) machines, for example, are time-saving machines conceived of at YVR to reduce airport bottlenecks. Developed in B.C., they are in demand in airports around the world. This is but one example of how an entrepreneurial attitude has made the Vancouver airport a global success.
The BC ferry company can become more entrepreneurial and less dependent on subsidies and self-defeating fare increases by answering one question: What goods and/or services can I provide that people are willing and able to pay for? Then it too might start winning prizes as one of the best in the world.
Troy Media columnist Roslyn Kunin is a consulting economist and speaker.