Legislative Council Panel on Transport
Hongkong & Yaumati Ferry Company Limited (HYF)
Application for Fare Increase

BACKGROUND

In view of rising operating costs and a decline in patronage, Hongkong & Yaumati Ferry Company Limited (HYF) has applied for a fare increase averaging 8.1% to take effect from January 1997. HYF has requested the Administration to adjust the fare increase in line with inflation if the proposed implementation date is deferred.

2. HYF’s fares were last revised on 12 January 1996 by a weighted average of 13.96%.

Forecasts of Patronage and Revenue

3. Patronage of HYF’s franchised services is expected to decrease by 16% from 1995 to 1998. This is due to -

  1. the relocation of ferry piers in the Central District in 1995;
  2. the relocation of Jordan Road Ferry Pier in 1996;
  3. the opening of the Western Harbour Crossing, Route 3 (Tsing Yi Section) and the Lantau Link in 1997; and
  4. the opening of Route 3 (Country Park section) and the MTR Lantau Line in 1998.

4. The decline in patronage is expected to continue despite HYF’s service improvement initiatives (see paragraph 12 below). Because of patronage reduction, fare revenue is forecast to continue to fall in the coming years.

Expenditure Forecast

5. A breakdown of the operating costs of HYF in 1996 is annexed for Members’ information. Operating costs are projected to increase in 1997 but to decrease slightly in 1998. The increase in 1997 is mainly due to -

  1. service improvements to be implemented as described in paragraph 12 below; and
  2. loss on disposal of redundant vessels.

6. The expected decrease in operating costs in 1998 is mainly due to the cost saving measures on cross-harbour routes. In light of the low patronage on the cross-harbour routes and to reduce vessel operating costs, HYF proposes to replace the 600-seat vessels used on five of its cross-harbour routes with smaller vessels of about 300 seats. A 3 month trial for this proposal will start on 10 March on the North Point - Kwun Tong ferry service.

7. In view of the financial difficulties franchised ferry operators are facing, the Government has recently conducted a review of the division of pier maintenance responsibilities between Government and the ferry operators. As a result of the review, Government will reimburse the franchised ferry operators for the cost of maintaining the structure of ferry piers starting from the financial year 1997/98. Under the scheme, HYF would be able to obtain a reimbursement of about $3.0 million in 1997 and $6.0 million in 1998. The actual amount of reimbursement will be determined by the Administration after scrutinizing HYF’s application.

The Recommended Fare Scale

8. Following a thorough assessment of all relevant financial information submitted by HYF, the Administration is recommending a weighted average of 8.35% for HYF.

9. Under the recommended fare scale, it is estimated that -

  1. 31.1% of the passengers will have to pay 20 cents to 50 cents more per trip. These are mainly users of cross-harbour services, and ordinary class child/senior citizens on outlying services (weekdays and weekends);
  2. 54.7% of the passengers will have to pay 70 cents to $1.0 more per trip. These are mainly users of Tsuen Wan/Tsing Yi - Central service, outlying district ordinary class (weekdays and weekends) and outlying districts deluxe class (weekdays); and
  3. the remaining 14.2% of the passengers will have to pay $1.5 to $2.5 more per trip. These are mainly users of the hoverferry services on Tuen Mun - Central and outlying districts, Tuen Mun - Central catamaran service and outlying district deluxe class at weekends.

Projected Financial Position at Recommended Fares

10. Even with the recommended fares, HYF is expected to suffer substantial losses in 1997 and 1998. The Governor in Council approved in July 1995 the general terms of a pier development package which would enable HYF to improve its services and to cover its operating losses up to 1999. The Administration is discussing the relevant legal documents with HYF. A key component of this package is that HYF would be able to cover part of its operating costs by increasing its fares annually in line with inflation.

Justifications for Fare Increases averaging 8.35%

11. We believe that the recommended rate of increase is reasonable bearing in mind that -

  1. the recommended rate of increase is in line with the forecast rate of inflation of 8.6% between January 1996 (date of the last fare increase) and June 1997 (timing of the proposed fare increase);
  2. the impact of the increase on CPI(A) is only 0.01%;
  3. the amount of increase will be $1.0 or less for 85.8% of passengers; and
  4. HYF has been providing an acceptable level of service and has introduced service improvements despite its poor financial position.

HYF’s service performance

12. HYF has been providing a generally acceptable service. Its vessels have a good safety record, and its services are generally adequate in terms of capacity. HYF has also been very positive and helpful in providing relief services during emergencies such as MTR service disruptions and road closures. In the past year, HYF has made a number of service improvments including -

  1. operating additional trips on the Mui Wo - Central, Cheung Chau - Central, Peng Chau - Central and Yung Shue Wan - Central services;
  2. installing a new gate at Peng Chau Pier to ensure that vessels leave on time;
  3. cleaning more frequently the hull of the vessels to reduce water resistance created by shells stuck onto the surface;
  4. assisting in more efficient loading / unloading of cargo;
  5. more frequent cleaning and pest control measures on vessels and piers;
  6. improving the toilets, public address system and lighting on vessels;
  7. stricter enforcement of the "No-smoking" rule;
  8. encouraging courtesy and discipline among staff by providing training and holding a Best Performance Staff Campaign; and
  9. installing a 24-hour Ferry Schedule Enquiries Hotline.

In the coming years, HYF has plans to introduce the following service improvements -

  1. the provision of one additional catamaran on the Tuen Mun - Central service in 1997 and redeployment of two hoverferries on the Cheung Chau - Central and Mui Wo / Peng Chau - Central ferry services during peak hours;
  2. the replacement of two old vessels by two new triple-deck vessels on the outlying district services in 1997/1998; and
  3. the replacement of four old vessels by four new triple-deck vessels for the outlying district services in 1998/1999.

Implementation

13. The Administration intends to seek the Governor in Council’s approval of the proposed fare increase shortly. If approved, the new fare order will be tabled at the Legislative Council with a view to implementation in June 1997.

Transport Branch
Government Secretariat
March 1997

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