Ottawa to pump millions into Marine Atlantic — with conditions

PORT AUX BASQUES, Nfld. — Transport Canada will funnel about $270 million over the next five years to revitalize Marine Atlantic’s ferry service, but tourism and trucking officials aren’t too happy with some strings attached to the investment.

Even with the new cash, the deal calls for the vital Port Aux Basques-North Sydney ferry link to increase in rates by an expected 2.1 percent and add a fuel surcharge to cover rising fuel costs.

Trucking companies can’t absorb those cost increases on their own and will have to pass them on to shippers — meaning higher prices for goods on the shelf, Gary Dowden, provincial director with the Atlantic Provinces Trucking Association and past-president of the Newfoundland and Labrador Carriers Association, told the St. John’s Telegram. “It’s all going to flow down,” he said.

To get the $270M, Marine Atlantic will have to
increase rates and introduce fuel surcharges

Transport Minister Lawrence Canada said Marine Atlantic’s new annual rates — currently, he says, among the lowest in North America per kilometre — will be adjusted to the Consumer Price Index.

“Revenues have not kept pace with these rising costs,” the ministry stated in a release. “Increasing deficits are due to slow revenue growth and rising costs, particularly in fuel and legally mandated pension contributions.”

The government says the annual average for fuel expenses has jumped an average of 15 percent in the past five years, while pension liability increased
84 percent in the same time.

“This extraordinary increase has not been passed to the user and has been carried by the taxpayer,” said Transport Canada.

The proposed fuel charge formula mirrors the approach taken by other large ferry operators, according to Transport Canada, whereby fuel expenses are analyzed on a monthly-quarterly basis with the previous year, and the increase is passed on to the user.

To mitigate the impact on customers, Marine Atlantic will be asked to provide a five-year fuel savings plan that outlines short and long-term measures that can be implemented to reduce fuel consumption.

Meanwhile, in a second phase of the plan, Transport Canada will continue advancement of a fleet renewal strategy.

“Traffic trends, traffic patterns, and operational efficiency and capacity of the fleet will be monitored to ensure that a cost-effective charter is available when needed,” the Transport Canada report stated.

Before final approval and funding for the fleet renewal, further cost benefit and feasibility studies are required and design of the new ships and specific requirements for mid-life refits needs to be determined and costs examined.

— with files from the St. John’s Telegram