Neil
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Post by Neil on Nov 4, 2010 20:14:09 GMT -8
Here's a simple comparison to illustrate what Scott and Nick are saying. In 60' of vehicle deck space, taking into account that people don't always park bumper to bumper, a boat on route 30 will fit in about three cars. That generates exactly $137.25, not counting passenger fares. A commercial vehicle taking up the same 60' will pay $309. With regard to volume, Here's an excerpt from the 2008 Coastal Ferry Services Contract, as of 2008: Route 30 links Tsawwassen, on the Lower Mainland, and Duke Point, on Vancouver Island. It is served by two vessels with large commercial vehicle capacity. Commercial traffic is the mainstay of this route as it carries 23 percent of BC Ferries total commercial volume, compared to only 7 percent of the total traffic. This route generates 15 percent of total revenue.The one thing I would add, and I know I've said this before, is that over the course of the year, on average only 20% of the people on board route 30 trips are commercial passengers, so this business of amenities being "wasted on truckers" is nonsense. I take route 30 a lot. This old game of "why don't they put this ferry here instead" really gets a bit tiresome. BC Ferries knows exactly how to utilize capacity to best advantage, although they probably should have a few more fifteen year olds in their operations department.
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Post by lmtengs on Nov 4, 2010 20:41:35 GMT -8
although they probably should have a few more fifteen year olds in their operations department. I can't tell if that's sarcasm or if that's you saying albeit kinda indirectly, that teens need to get more part-time jobs?
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Post by Low Light Mike on Nov 4, 2010 21:03:22 GMT -8
....as a member of the Institute of Chartered Accountants of BC, I'd like to point out that "revenue" and "profit" are different things. Less space to clean may result in lower crew costs, which might increase profit. But it has no bearing on revenue. ;D ;D ;D I'm assuming you're referring to my post above... and I'll point out that I was referring to the New West's smaller capacity, which does reduce revenue, which may also reduce profit. ...actually I was referring to Luke's use of the word "revenue" in reply #266.
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Post by lmtengs on Nov 4, 2010 21:07:24 GMT -8
Thanks for the feedback and teaching. I didn't know the Inspiration was the highest-earning vessel in the fleet. I'd've thought it would've been one of the Spirits, or maybe the C-Cel.
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Neil
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Post by Neil on Nov 4, 2010 21:39:52 GMT -8
Coastal Inspiration while serving Route 30 is the most profitable vessel in the fleet. Scott, where does this statistic come from? According to the latest report to the ferry commissioner, route 30 generated $4 million more in tariffs than it claimed in expenses, while route 1 generated in excess of $35 million more in tariffs than expenses. Granted, route 30 has become profitable- just- since the CI was added, but even if the CI gains more revenue than the other boat on the run, it seems to defy the statistics that it could be as much of a cash cow as the Spirits on route 1.
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Post by Scott (Former Account) on Nov 4, 2010 22:32:39 GMT -8
Coastal Inspiration while serving Route 30 is the most profitable vessel in the fleet. Scott, where does this statistic come from? According to the latest report to the ferry commissioner, route 30 generated $4 million more in tariffs than it claimed in expenses, while route 1 generated in excess of $35 million more in tariffs than expenses. Granted, route 30 has become profitable- just- since the CI was added, but even if the CI gains more revenue than the other boat on the run, it seems to defy the statistics that it could be as much of a cash cow as the Spirits on route 1. Sorry, my mistake. That should be cost effective, not profitable... David Hahn mentioned it at the AGM in 2009 that a bunch of us attended, yourself included.
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WettCoast
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Post by WettCoast on Nov 4, 2010 22:49:10 GMT -8
Sorry, my mistake. That should be cost effective, not profitable... David Hahn mentioned it at the AGM in 2009 that a bunch of us attended, yourself included. So do you have any idea what is meant by "cost effective"? Is this like the claim that the NorAd has the most "creature comforts"?
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Post by Scott (Former Account) on Nov 4, 2010 23:04:07 GMT -8
So do you have any idea what is meant by "cost effective"? Is this like the claim that the NorAd has the most "creature comforts"? It is in reference to the profits generated versus the expenditures required to run it...
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WettCoast
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Post by WettCoast on Nov 5, 2010 5:47:34 GMT -8
It is in reference to the profits generated versus the expenditures required to run it... Perhaps Flugel can put on his CA hat & explain how this differs from 'most profitable'. David Hahn may have made this claim but I am finding it rather hard to believe.
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Post by Northern Exploration on Nov 5, 2010 7:00:49 GMT -8
It is in reference to the profits generated versus the expenditures required to run it... Perhaps Flugel can put on his CA hat & explain how this differs from 'most profitable'. David Hahn may have made this claim but I am finding it rather hard to believe. "Most profitable" is more a marketing term than an accounting term unless it is fully defined. There are many ways of measuring profit and you need to go to the next level to get a true comparison. For example most profit per nautical mile sailed. Largest $ amount of profit. Most profit per foot of vehicle. Complex companies look beyond just cash in the bank and look at profit a ton of ways trying to find ways to improve. So someone in a senior position or a marketer can take any of the detailed examples of profit and can label a product or service the "most profitable" but unless they define it further, it is more marketing than substance.
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Post by Low Light Mike on Nov 5, 2010 7:48:41 GMT -8
"Most Profitable" - how much total profit (revenues minus expenses) can this asset generate for the company. - consider both the maximum profit per load, as well as the impact of the number of total loads during the year. - The is used in context of how a route can impact the overall company, by contributing to the overall profit of the company.
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"Cost Effective" - This is more of a limited term. ie. the vessel "Mill Bay" is very cost effective, as the costs are low in order to service the route's traffic. But with 16 cars per trip, it doesn't have much chance of realizing the impact of "Cost effective x volume" to equal large profits for the company. - Cost-Effective is when you are focusing on doing a specific thing (like operations of 1 route) and you want to find the cheapest way to still deliver the same amount of customers. - A definition is "producing good results for the amount of money spent; efficient or economical"
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Ok, so a comparison using the context of the Mill Bay route ship choices. What is the best ship for this route?: (yeah I know this is a super-C thread, but this example is easier).
Choice of 2 ships: - MV Mill Bay - MV Kahloke (larger than Klitsa, so just play-along please).
If you know that traffic demands are only going to require on-average a ship that can hold 16 cars, then would you choose the Mill Bay or the Kahloke?
Well, the Mill Bay can deliver 16 cars much cheaper than the Kahloke, since it has lower operating costs (smaller crew, less fuel consumption).
But the Mill Bay can't deliver more than 16 cars. If the company wants the potential of more traffic and more profit, then maybe a larger ship will result in more demand and then that full Kahloke will generate more profit. - But if there are only 16 cars that use the Kahloke, then that extra capacity is wasted.
Profitable: - Kahloke has potential to be more profitable, but only if its capacity is utilized. There is a good chance of losing money, because demand might not rise-up to meet the increased supply.
Cost Effective: - If there is only demand for 16 cars on average for this route, then using the Kahloke would be silly and non-cost effective, because there would not be enough revenue generated by 16-cars in order to cover the operating expenses of the ship. Oof course, the company could decide to raise rates so that "Operating costs per trip / 16 cars = fare price per vehicle", but that would be cost-prohibitive to the user (what hey, what's stopping them from doing that now.... ;D) - But given the constraints of demand (unlikely to have more than 16 cars wanting the service, on average) and the constraints on price (not reasonable to have 16 cars share the cost of operating the larger Kahloke), then the smaller mv Mill Bay is the most cost-effective ship for the route.
... so you could conclude that these terms are similar, and then it just depends on the context in which you're using them.
If traffic demand is fixed (low potential for increase), then you should focus on the most cost-effective way to meet that demand.
If traffic demand has potential for increase, then you should consider increasing supply (larger ship), in order to generate more profits (assuming that the ship's operations costs are cost-effective for the expected revenue from the expected traffic demand).
2 risks that you must deal with: - the risk of having too little supply. Result is that loads are full, and lots of overloads, so users aren't happy. - the risk of too much supply. Result is that traffic and revenues are not large enough to pay for the operations of the too-big ship. Users are happy, but company loses money.
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