For Immediate Release
23-040
November 24, 2023

SECOND QUARTER RESULTS REFLECT CONTINUED STRONG TRAFFIC

VICTORIA – BC Ferries’ net earnings for the three months ended September 30, 2023, were $102.1 million, an increase of $21.7 million over the same quarter the previous year. For the six months ended September 30, 2023, net earnings were $117.3 million compared to net earnings of $88.3 million in the prior year.

In the three months ended September 30, 2023, BC Ferries carried 7.8 million passengers and 3.0 million vehicles, compared to 7.5 million passengers and 3.0 million vehicles in the same period in the prior year. Year-to-date, the company carried 13.6 million passengers and 5.5 million vehicles, an increase of 5 per cent and 2 per cent, respectively, compared to the same period in the prior year, contributing to BC Ferries’ financial performance.

Revenue for the three months ended September 30, 2023, at $381.5 million, was up $38.4 million or 11 per cent over the same period in the prior year primarily as a result of an increase in vehicle and passenger traffic levels, tariff rates, fuel surcharges and retail revenue. Year-to-date, revenue was $668.4 million, up $60.4 million or 10 per cent over the same period in the prior year impacted by factors such as changes in overall traffic levels, traffic types and tariff rates.

While revenues were higher by $38.4 million or 11 per cent, expenses from operations in the second quarter increased by $20.7 million or 11 per cent to $269.6 million compared to the same period in the prior year mainly due to continued inflationary pressure across all cost categories. Year-to-date, expenses from operations increased $39.2 million or 8 per cent to $530.2 million.

It should be noted that due to the seasonality of ferry travel, BC Ferries typically generates higher net earnings in the first and second quarters (driven by high system utilization), which are subsequently reduced by net losses in the last two quarters of the fiscal year.

“While traffic revenues are strong, like many other transportation companies, BC Ferries continues to experience significant cost pressures,” said Nicolas Jimenez, BC Ferries’ President and CEO. “The outlook for year-end remains subject to these cost pressures, variability of economic conditions, and travel demand (which slows in the fall in winter months).”

“As we look to our final two quarters this year, our annual refit season is underway, during which time we’ll make substantial investments in vessels and terminals to maintain high levels of service reliability. We’ll also continue to focus on catching up on multiple years of deferred investments in our people and our infrastructure. This includes our early wage re-opener to provide employees with increases in advance of the timing in the collective agreement, as well as our recent application to the regulator to expand capacity on our minor routes with four new Island Class hybrid electric vessels.”

The company safely delivered over 24,277 round trips from July through September 2023, a 5 per cent increase over the same period in the prior year primarily as a result of the introduction of two-ship service on the Campbell River – Quadra Island route and supplemental summer service on the Buckley Bay – Denman Island route. Over 1,204 new employees joined BC Ferries so far this calendar year, helping to reduce sailing cancellations due to crewing issues from 0.6 per cent to 0.4 per cent. However, total cancellations are 1.0 per cent of sailings, reflecting an increase in mechanical cancellations during the quarter.

BC Ferries’ full financial statements, including notes, and Management’s Discussion and Analysis are filed on SEDAR+ and will be available at www.sedarplus.ca.
Media Contact:
BC Ferries,Media Relations
Victoria: (250) 978-1267

Customer Contact:
Victoria: (250) 410-1465
Toll-free: 1-888-BCFERRY (1-888-223-3779)

BC Ferries is one of the largest ferry operators in the world based on passengers transported annually and transportation infrastructure, and carried 21.6 million passengers and 9.4 million vehicles during the fiscal year ended March 31, 2023. BC Ferries provides frequent year-round ferry transportation services to the west coast of Canada on 25 routes, currently supported by 37 vessels and 47 terminals, and also manages other remote routes through contracts with independent operators.

FORWARD LOOKING STATEMENTS
This news release contains certain “forward looking statements”. These statements relate to future events or future performance and reflect management’s expectations regarding our growth, results of operations, performance, business prospects and opportunities, and industry performance and trends. They reflect management’s current internal projections, expectations or beliefs, and are based on information currently available. Some of the factors that have been considered in formulating the assumptions upon which forward looking statements may be based include: traffic demand, currency exchange rates, expense growth, fuel costs, inflation, interest rates, construction costs and timelines, cyclical demand, the state of the economy, financial markets, demographics, tax changes, and our regulatory and contractual requirements.

Examples of forward looking statements included in this news release include statements with respect to: economic conditions and their impact on financial performance, capital plans and capital investments, the impact of high inflation and expense growth, seasonal traffic patterns and the resulting impact on earnings and operations, vessel repair, maintenance and return to service timelines. In some cases, forward looking statements can be identified by terminology such as “may”, “will”, “should”, “expect”, “plan”, “anticipate”, “believe”, “estimate”, “predict”, “potential”, “continue” or the negative of these terms or other comparable terminology.

A number of factors could cause actual events or results to differ materially from the results discussed in the forward looking statements. In evaluating these statements, prospective investors should specifically consider the risks and uncertainties associated with, among other things: vendor performance, capital market access, interest rates, foreign currency, fuel prices, traffic volume, timelines for major capital projects, security, safety, environmental incidents, cyber security, legislative and regulatory changes, vessel repair facility limitations, tax changes, and Indigenous consultations.

Actual results may differ materially from any forward looking statement. Although management believes that the forward looking statements contained in this release are based upon reasonable assumptions, investors cannot be assured that actual results will be consistent with these forward looking statements. These forward looking statements are made as of the date of this release, and British Columbia Ferry Services Inc. assumes no obligation to update or revise them to reflect new events or circumstances except as may be required by applicable law.

NON-IFRS MEASURES
In addition to providing measures prepared in accordance with International Financial Reporting Standards (IFRS), we present certain financial measures that do not have any standardized meanings prescribed by IFRS and therefore are unlikely to be comparable to similar measures presented by other companies. These supplemental financial measures are provided to assist readers in determining our ability to generate cash from operations and improve the comparability of our results from one period to another. We believe these measures are useful in assessing operating performance of our ongoing business on an overall basis.
 
Significant events during and subsequent to the Second Quarter of Fiscal 2024 include the following:

General
 

• On August 17, 2023, BC Ferries experienced a mechanical issue with the Coastal Renaissance vessel, which is related to the drive motor of the vessel, and is not a simple repair. With the Coastal Renaissance out of service, BC Ferries was unable to provide additional round trips during our peak season. Every effort was made to manage resources to accommodate the traffic demand and minimize the impact to our customers. The Coastal Renaissance is expected to return to service in mid-December.

 

• On September 30, 2023, the British Columbia Ferries Commissioner (“the Commissioner”) issued Order 23-04 which established final price cap increases of 3.2 per cent for each of the four years of performance term six (“PT6”), being the four year period from April 1, 2024 to March 31, 2028. On March 31, 2023, the Commissioner had previously released a preliminary decision on price caps for PT6, setting increases at a maximum of 9.2 per cent per year. This final price cap decision setting increases at 3.2 per cent, factored in the favourable impact of $500 million in new funding from the Province, which had the goal of keeping annual average fare increases at or below 3 per cent a year for PT6.

Capital Assets
 

• On September 5, 2023, the Commissioner issued Order 23-03 which approves the withdrawal of a major capital expenditure, previously approved by Order 21-01, and allows BC Ferries to submit a new application with respect to Island Class vessel construction and electrification. Order 21-01, had conditionally approved BC Ferries’ application for a major capital expenditure to upgrade six existing Island Class vessels with associated terminals to enable the vessels to operate predominantly in full battery-electric mode.

 

• On October 10, 2023, BC Ferries submitted an application to the Commissioner under Section 55 of the Coastal Ferry Act (the “Act”) seeking approval of a major capital expenditure for the Island Class Phase 3 & Terminal Electrification Program’s (“IC3TEP”) planned direct cost of electrification. IC3TEP proposes to construct and deliver into service four plug-in hybrid Island Class vessels that will be able to operate exclusively in battery-electric mode, in addition to electrical upgrades for rapid charging from ashore at four terminals on the two routes connecting Nanaimo Harbour and Gabriola Island and Campbell River and Quadra Island. This application followed Commissioner Order 23-03, which approved the withdrawal of the previous Island Class electrification application. On September 11, 2023, BC Ferries issued a Request for Proposal (“RFP”) to prequalified shipyards, inviting them to submit a proposal for the design and construction of four new Island Class roll on/roll off passenger ferries by November 13, 2023. The award of any contract as a result of this RFP is pending the Commissioner’s approval of IC3TEP.