Rough waters ahead for Marine Atlantic as ferry traffic tanks

With a massive decrease in passenger numbers, Marine Atlantic could soon face a formidable financial crunch a situation that couldlead to ticket increases or a reduction in service.

Under a federal policy in place for more than a decade, theCrown corporation must recoup roughly 65 per cent of its operating expenses through ticket revenues. The interprovincial ferry servicehas never failed to meet that target.

But Marine Atlantic said the number of transport trucks aboard its ferrieswas down by about a thirdin April.

Figures from April 1 to 26 show the ferry service carried 882 fewer transport trucks compared to the same period last year. During the same period, the number ofdrop-trailers transported dropped by 559, a 15 per cent slump despite the fact Oceanex, Marine Atlantic's main competitor for commercial shipping, has reduced its frequency of tripsto St. John's.

Meanwhile, the number of passengers, excluding truckers, dropped 72 per centcompared with the same period in 2019. Marine Atlantic typically carries in excess of 100 non-commercial passengers per trip at this time of year, but last month consistently ferried as few as 15 to 20 passengers per run,never reachingthe 100-passenger limit for crossings in place since April 1 to ensure physical distancing.

3 options

Marine Atlantic spokespersonDarrell Mercer told Radio-Canada the corporation has three options if the drop in traffic continues long term, adding discussions haven't begun on next steps.

Although Marine Atlantic established rates for 2020-21 before the pandemic hit Newfoundland, ticket prices could be altered to shore up revenues.

Ferry services could also be reduced. While the Port aux Basques-North Sydney route is guaranteed by the Constitution, the summertimeArgentia-North Sydney run, linking the Avalon Peninsula to Cape Breton, is operated on a cost-recovery basis, Mercer said.

In-depth discussions that would have to take place from a financial view have taken thebackseat until we get through this initial phase of the pandemic.- Darrell Mercer

Mercer said Marine Atlantic could also look for extra funding from Ottawa, if the federal government relaxed its policy on cost recovery.

"No decisions have been made on any of those pieces right now. We're still too early in the process, but obviously thoseare the options that could be under consideration," Mercer said.

"Nobody predicted that we were going to be into this type of a pandemic situation. So there's still a lot of uncertainty and unknowns as to what that's going to mean forour budgetary projections," he said, adding the 2020-21 fiscal year has only just begun.

Pandemic response main focus

A spokesperson for Transport Canada said "at present, funds allocated [to Marine Atlantic] are sufficient to sustain its activities."

"As an independent Crown corporation, Marine Atlantic is responsible for managing its activities, including fares and revenues," said senior communications advisor Annie Joanette.

Since the beginning of the pandemic, Mercer said, Marine Atlantic and the federal government have focused on revamping and implementing new safety protocols for vessels.

"The in-depth discussions that would have to take place from a financial view have taken the backseat until we get through this initial phase of the pandemic," he said.

Joanette said the department "has maintained constant contact with Marine Atlantic since the beginning of the COVID-19 pandemic and will maintain regular communication as the situation evolves."

Newfoundland and Labrador Premier Dwight Ball said Monday price increases and service reductions at Marine Atlanticare "not a concern right now."

"When you look at the way the federal government has stepped up to support businesses right across the country, there's no reason at all to believe that they would not be there to support Marine Atlantic if, indeed, more subsidies are required to put in place what is a constitutional requirement," he said.

Impact on consumers?

Jean-Marc Picard, executive directive of the Atlantic Provinces Trucking Association, said any increase to fares would have consequences for consumers in Newfoundland.

"It's people in Newfoundland who I have pity for in this situation. We [truckers] can't absorb those costs. It makes zero sense," Picard said.

"We depend on the ferry service, which is already very expensive, and it'll be people in Newfoundland who end up paying exorbitant prices ifthey increase fares."

Closed border

Normally, Marine Atlantic fields a much larger number of non-commercial passengers during the summer. But the province closed its border to tourists Monday, a decision which indefinitely shuts the tourism sector to out-of-province travellers.

Mercer said the volume of fresh food transported by Marine Atlantic remains stable. But the volume of otherfreight is down. Ferries are operating well below capacity, he said.

In 2018-19, Marine Atlantic's operating and capital expenses totalled $242.7 million. The corporation received $133.6 million in funding from Ottawa and generated $109.3 million in revenue from tickets and other ancillary sources, enough to cover 65.5 per cent of operating costs.

The four Marine Atlantic vessels completed 1,634 trips, ferrying more than 300,000 passengers and 88,000 transport trucks. Financial statements for the 2019-20 year have not yet been released.

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