Legislative Council
Panel on Transport
Long Term Development of Ferry Services

INTRODUCTION

Ferries provide an essential link to the outlying islands, and an useful alternative between Central and the New Towns. In the inner harbour, ferries play a supplementary role.

2. Ferry services in Hong Kong are mainly provided by two franchisees, Hongkong & Yaumati Ferry Company Limited (HYF) and Star Ferry Company Limited (SF). HYF operates a network of 15 routes and SF a total of three routes. Franchises are granted by the Executive Council.

3. A ferry operator may also be granted a right to operate a ferry route in the form of a licence. Licensed ferry services cater for demand that does not justify enfranchising the routes, e.g. non-essential services, excursion services and special services such as vehicular services for dangerous goods vehicles. Licenses are granted by the Commissioner for Transport.

FRANCHISED FERRY SERVICES IN HONG KONG

4. Due to improved road links, harbour reclamation, declining patronage and rising operating costs, franchised ferry services in Hong Kong are no longer viable.

Declining Patronage

5. With the opening of more cross-harbour tunnels, new road networks and rail links, there has been a persistent decline in ferry patronage. The inner harbour services are the worst hit. The annual patronage of HYF’s inner harbour routes dwindled from 160 million in 1970 to a mere 9 million in 1996. SF’s patronage has also fallen from 57 million in 1970 to 35 million during the same period.

6. Ferry patronage has also declined due to the relocation of piers away from the main catchment areas to make way for reclamation. Patronage on HYF’s Central - Jordan Road ferry service dropped 56% after piers at both ends were relocated in 1995 and 1996. SF forecasts that patronage on its Edinburgh Place - Kowloon Point service would fall drastically following the reprovisioning of the Edinburgh Place piers, now planned for 2002/03.

Rising Operating Costs

7. Ferry services are increasingly costly to run. Other than staff costs, which account for 50% of the annual costs, the cost of pier maintenance has also shot up.

8. In response to a suggestion from some Members, Government conducted a review of the division of responsibility over the maintenance of ferry piers. With effect from 1997/98, Government, as landlord and developer of the ferry piers, will take over the financial responsibility for maintaining pier structure. Franchisees, as tenants of the piers, would continue to take care of the day to day maintenance. This new arrangement should provide some relief to franchisees.

9. Whilst Government will strive to provide convenient transport interchange facilities near ferry piers to facilitate passenger movements, one would have to recognize that with the completion of more infrastructural projects and continuous improvements of land transport, ferry services are not competitive in terms of convenience and travelling time. This is particularly so for the inner harbour services.

FRANCHISEES’ FINANCIAL POSITION

10. HYF’s current franchised network comprises six inner harbour routes, two new town routes, six outlying island services and one vehicular route. Please see Annex A for details.

11. The Company has incurred heavy losses since 1994. Only two of its routes are profit-making. The remaining 13 routes are all loss-making. The greatest drain of HYF’s resources is due to the operation of the inner harbour route group and the new town route group. Income from other sources such as excursion services, chartered services, and shop rentals and advertising at piers is not sufficient to cover such losses.

12. SF operates the cheapest cross-harbour public transport services in the territory. But none of its three cross-harbour routes are able to recover even the operating costs. Only with income from shop rentals and advertising is SF able to sustain its operations.

13.The financial position of HYF and SF illustrates the fact that, with a persistent decline in patronage and increase in operating costs, ferry operators are finding it increasingly difficult to maintain the overall viability of their services on the basis of the existing networks. This also calls into question the rationale for keeping non-essential inner harbour and new town routes which are heavily loss-making.

14. Against this background, a more pragmatic approach would be to institute a complete revamp of the current network, to excise from it those heavily loss-making routes with land transport alternatives. The objective is to ensure that, following the rationalization, the franchisees are able to deploy their resources to improve essential ferry services, whilst being able to achieve a positive return to sustain operations. This is the approach taken by the Administration in dealing with the renewal of the franchises of HYF and SF.

15. As to the future of services excised from existing network, it is probable that some of these routes may become viable if they are operated with different service levels, fare levels, vessel types and cost structures. We would examine carefully whether it is commercially viable to tender out some of the routes as licensed services and let market forces determine the future of such routes.

HYF’S FRANCHISE RENEWAL

16. In view of HYF’s financial predicament, ExCo approved in 1995 the grant of development rights above four piers on the Central Reclamation to HYF by way of a private treaty grant. Profits generated from the development will be used for service improvements, to keep fare increases in line with inflation and to meet HYF’s accumulated loss.

17. As part and parcel of the pier development package, HYF was required to apply for a new franchise to the year 2010. This would enable ferry passengers to benefit from the development profit generated beyond the term of the current franchise (to expire in March 1999). Franchise negotiations are ongoing.

18. Under this package, HYF will rationalize its inner harbour routes prior to the expiry of its current franchise. This route group has continually been incurring serious losses since the introduction of cross-harbour road and rail links. Concurrently, Government is reviewing the patronage of HYF’s new town route group and its vehicular service which also suffer heavy losses to see whether there is room for further rationalization. So far, statistics have revealed that -

  1. Following the opening of the Tuen Mun Road Bus-only Lane in March 1995 and the addition of four climbing lanes on Tuen Mun Road in 1996, the average daily patronage for HYF’s Tuen Mun - Central service has declined by 20% from 11,600 in 1994 to 9,300 in 1996. Coupled with the introduction of direct cross-harbour bus services via Route 3 and the commissioning of the Western Harbour Crossing, the average daily patronage for the service has further declined to 8,200 in May 1997. Currently the spare capacity of the service stands at 33% and 50% during the morning and evening peak hours.

  2. Following the opening of the Western Harbour Crossing, the daily patronage of the Tsuen Wan - Central via Tsing Yi service in May 1997 has dropped by 13%, when compared with the average patronage figure in 1996.

  3. Also since the opening of the Western Harbour Crossing, the average daily number of vehicles using the North Point - Kowloon City vehicular service has dropped by 25%. In view of this decline, Government is considering HYF’s proposal to cancel this franchised vehicular route altogether. Vehicles so displaced can make use of the three cross-harbour tunnels.

SF’S FRANCHISE RENEWAL

19. SF’s franchise expires in March 1998. We are satisfied that SF is able to maintain a proper and efficient ferry service. We are taking a critical look at the relationship between SF’s projected financial position and its network and are considering options to help improve the commercial viability of SF’s operations in the long term.

SERVICE IMPROVEMENTS

20. During the past two years or so, the following improvements have been introduced by HYF -

  1. the Tsuen Wan hoverferry service was diverted to operate via Tsing Yi to Central. Ordinary ferry services from Tsuen Wan to Central via Tsing Yi was also strengthened;

  2. eight additional trips were added to the Mui Wo - Central, Cheung Chau - Central, Peng Chau - Central, and Yung Shue Wan - Central services;

  3. two catamaran trips were added on the Tuen Mun - Central service;

  4. an evening peak service was introduced on the Tuen Mun - Wan Chai service; and

  5. five trips were added on the Gold Coast - Central service.

TRANSPORT FACILITIES BETWEEN THE NEW AIRPORT AND OUTLYING ISLANDS

21. The opening of the Lantau Link and the MTR Lantau Line will provide more choice for commuters to travel on land-based transport from South Lantau to the new airport. Commuters may take feeder buses from Mui Wo, Tai O and other places along the South Lantau Road to reach the Tung Chung New Town and then interchange to bus or MTR services to the new airport.

22. Residents in Cheung Chung and Peng Chau may either take an inter-island ferry service to Mui Wo and then interchange to the new airport via Tung Chung New Town. Alternatively, like Lamma Island residents, they may take the ferry to Central and then take the airbus or AEL to the new airport.

Transport Branch

Government Secretariat

June 1997

Annex A

List of Existing HYF Services

Franchised Ferry Services

Vehicular

1. North Point - Kowloon City

Passenger

(a) Inner harbour

  1. Central - Jordan Road
  2. North Point - Kwun Tong
  3. North Point - Kowloon City
  4. North Point - Hung Hom
  5. Wan Chai - Hung Hom
  6. Central (Edinburgh Place) - Tsim Sha Tsui (East)

(b) New Town

  1. Tsuen Wan - Central / Wan Chai via Tsing Yi
  2. Central - Tuen Mun

(c) Outlying Islands

  1. Central - Mui Wo
  2. Central - Peng Chau
  3. Central - Cheung Chau
  4. Central - Sok Kwu Wan
  5. Central - Yung Shue Wan
  6. Peng Chau - Mui Wo - Chi Ma Wan - Cheung Chau

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