Here's the transcript (2 parts, this is part 1, part 2 is in next post in this thread).
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Shaw TV – Voice of B.C. transcript – June 26, 2007
8:00 p.m. Guest: David Hahn
VAUGHN PALMER: Good evening, and welcome to Voice of B.C. I'm Vaughn Palmer. Here we are, on the edge of the height of the tourism season in British Columbia. Everyone's a little bit anxious about what kind of a year it's going to be, looking at pretty much everything from fuel prices to travel. We've got the head of B.C. Ferries on the show tonight, David Hahn.
Welcome to the show. What kind of a year are you having on the ferries?
DAVID HAHN: So far, so good. The first two weeks of April were very soft for us, I think mostly weather-related. Through May it was pretty flat, which I think, given the environment, is probably pretty good. And June, we'll have to wait and see the final numbers, but I think we're okay. I wouldn't say it's as bad as others may be feeling and certainly not really good, but I think right now we feel pretty comfortable.
VAUGHN PALMER: Yeah, I've heard greater expressions of anxiety from the tourism sector than what you just said, so I think there are parts elsewhere where it's hurting more already.
DAVID HAHN: I think the hotels, particularly, are probably taking it pretty hard. Maybe people are shortening their trips. We just have to see. I think this weekend will be a very good example of what the season will bring, so we're watching it. We'll respond to whatever occurs in the market, but so far, so good. Again, I think I just have to get through this weekend and we'll see how and what kind of [inaudible].
VAUGHN PALMER: Maybe British Columbians will take a look at what it costs to get somewhere else by plane or to drive a long distance and holiday in British Columbia — which might be okay for you.
DAVID HAHN: I think it'd be very good for us. Skip Air Canada, don't go to Toronto, stay in B.C. — I think there's going to be a lot of that. We're seeing some signs of that already, and we would take advantage of that if it did occur. Again, I think we could see a lot of inter-provincial travel, maybe greater than in the past, because it's affordable.
VAUGHN PALMER: Yeah, and I notice the provincial government has upgraded a lot of the stuff they have online on travel and tourism in B.C., so maybe they're going to do a little promotion, too, and say, "If you're staying home, there are a lot of interesting places in British Columbia to visit" — including the capital here, if you're not in Victoria listening to us tonight.
The famous carbon tax takes effect on Tuesday, July 1st — happy Canada Day. When does the impact of that start showing up on your ferry fares?
DAVID HAHN: It'll actually be imbedded into the fuel surcharge issue that we're dealing with, which is a much bigger issue than the carbon tax. Any of that cost will be dealt with through the fuel deferral account through the fuel surcharge. I would expect that, while it won't show up on a ticket until the actual surcharge does, the impact of it will be built into the deferral account.
VAUGHN PALMER: You apply to an independent commissioner for approval of the fuel surcharge. He approves it. There's a public feedback process, so if people want to know about the details, they can look at the B.C. Ferry commissioner website, but it's something like 20 percent you're looking for, right?
DAVID HAHN: It's a little bit more complicated now. The commissioner, in his last ruling, actual said, "We'll put in an automatic mechanism to deliver the fuel surcharge if it moves within certain parameters." In this particular case, I think we've blown by any numbers anybody had been anticipating. Again, the price of fuel about the time he made the ruling was $100 a barrel. It's $140 a barrel today; we're up 40 percent.
We're actually going to go to him and have a discussion around whether he'll consider implementing it earlier than had been scheduled. The reason you do that is you start tackling a problem immediately, and the increase is less than it would be in the future.
Under the current analysis, we would see about 9 percent on the majors and something in the neighbourhood of 16 to 18 percent, probably, on the minors, which is a pretty substantial increase, but again, you have to go back how that's rolling through almost every segment of the marketplace.
VAUGHN PALMER: If you look around…. You mentioned, before we went on the air, a couple of examples from elsewhere. There's been some pretty big surcharges on the European services, eastern Canada.
DAVID HAHN: Eastern Canada — in one day Marine Atlantic went from 9 percent to 27 percent. Stena, which is in the Irish seas, just implemented a $3.50-per-passenger and a $16-per-car fuel surcharge. FedEx is charging a 38 percent fuel surcharge. I don't think it makes anybody feel any better, but I think it shows the depth of the problem affecting all parts of the economy.
VAUGHN PALMER: What now? What's the vessel delivery situation on the ferries? You've got six — seven? — new vessels.
DAVID HAHN: We started with the Kuper, which came almost a year ago. We then also brought in the Northern Adventure. We have all three of the Super Cs here now — the Celebration, Inspiration, and Renaissance. Our next vessel is the Island Sky; it should be delivered to us somewhere in the next 30 to 45 days. That'll go into service in the fall. Then next spring we'll get the Northern Expedition, which'll replace the QPR — the Queen of Prince Rupert; it operates in the north coast. That'll be about seven vessels in about 18 months, which is pretty substantial, I would argue.
VAUGHN PALMER: Four of them built in Germany, three of them in British Columbia.
DAVID HAHN: One built in….
VAUGHN PALMER: No, one bought from the Spanish.
DAVID HAHN: Actually, one bought in Lake Powell.
VAUGHN PALMER: So only one of the seven.
DAVID HAHN: Only one of the seven in B.C.
VAUGHN PALMER: Is it on time and on budget?
DAVID HAHN: From our perspective, it's totally on budget. We have a fixed-price contract. I don't know what Washington's budget is; I know there's been a lot of noise around it being over-budget. If it's over-budget, it's their budget. I don't know whether it is or isn't; it's none of my business. We've got a fixed-price contract.
I expect it's probably maybe two months late, but again, we've had a long-standing conversation with them focusing on the quality of the vessel, not the timeliness. When you look at the ability of us to bring it into service over the summer — which we won't do, because of the training issues; we need substantial training time — it made no difference to us. Again, I think we'd rather see a quality vessel. They agree. The vessel's going to last 40 years, and I'd rather give them the latitude to make sure the vessel's delivered the right way, and we have that type of agreement.
VAUGHN PALMER: If people are looking around this summer, you were saying before we went on that one of the three new C-class ships won't be in service this summer — because of crew training?
DAVID HAHN: We need a good two to two-and-a-half months to do crew training — to get through all the different ship's watches, everything that goes on. The Coastal Celebration, our last one, that'll serve Swartz Bay to Tsawwassen, has arrived in B.C. It'll probably be parked out at Departure Bay.
I can imagine a Sunday long weekend somebody is going to say, "How can he have this brand-new ship? Why is it not taking me over to the other side, and what's the matter with you?" We have to be very diligent around the training. These are new ships; it takes almost six or nine months for us to get everybody fully briefed, so you have to spend a good, hearty two months or two-and-a-half months getting everybody prepped. We'll start that in September, and hopefully by the end of October I'll bring that last ship into service. Same thing with the Island Sky.
VAUGHN PALMER: I guess the fuel thing — it goes beyond the ferry fleet. It goes right through the economy. But you look at some of these fuel surcharges that are being approved elsewhere; that's going to have an impact on your business, sooner or later.
DAVID HAHN: I think it's broader than our business. It affects people's disposable income. Disposable incomes evaporate. I took my wife's car a week ago to fill it up; it took $100. I mean, I'm stunned when that happens. She used to fill it halfway up, so she'd only have to give $50; it doesn't change the impact, but you feel better about it.
I think there's going to be an erosion of disposable income that could impact our business, but it's going to be broader than that. I think it may affect dining out. It may affect…. You know, rent the DVD instead of the movies. People are going to have to adjust to this price, and I think it's going to be a hard adjustment. I don't think the full effect has been seen.
We're very mindful. We're being very cautious around all of our spending. We're trying to watch how we staff up. I think we've got to be smart, because I think people are going to become smart, and we have to be part of a solution rather than ignoring it.
VAUGHN PALMER: I think there are two other adjustments that people aren't going to notice starting on July 1st or even with the current prices but will start to notice later in the year. One is the number of goods that have a travel component in the cost or a delivery component in the cost because they come by truck or by train or by plane, and that'll get added in. The other thing is when we get into home heating this winter, I think you're going to have another big impact on people's budgets.
DAVID HAHN: Again, I think that'll shrink that disposable income. That's going to force more decisions being made. I think it's going to be a life-changing event if it stays at these levels. Again, there are a lot of people out there predicting $200 a barrel and all these different things. I don't know how this can go on and you can expect to have growth.
I think this is all going to be sorted out. The market usually does its thing, but we may go through more pain before we start to see any upside here. It's troubling.
VAUGHN PALMER: You've been gloomy these days, Mr. Hahn.
DAVID HAHN: Yeah. Well, probably rightfully so. People every week probably have to fill their cars up with gas, and I think that can be troubling, particularly when you're not heating the house yet. You get into that — that's going to be a problem. The price of food goes up….
I love watching the economists that'll tell you the core CPI only went up two-tenths of 1 percent, but it doesn't include heating fuel, or it doesn't include food. Those are the two things all of us probably need in the wintertime — to have our homes warm and to feed ourselves.
I think it's worth just being watchful, and that's what we're doing right now.
VAUGHN PALMER: Does the Ferry Corp…? I mean, if business does decline, the Ferry Corporation — what, do you reduce the travel schedule? Do you reduce the staffing? You can't reduce the staffing levels, so you pretty much still have to stick to your schedules, whether you're full or empty, right?
DAVID HAHN: No, not necessarily. We've got a lot of discretionary sailings. Over the last five years, we've actually added more scheduled sailings that were greater than what we're required to do. We do that so that people have the ease of travelling. I think that's probably one of the biggest things we've done.
Now, we can do some work around that. We can…. Quite frankly, it might be very smart for us to cut back on some of our capital spending, do less construction right now. We could defer some of that. The side benefit to that will be that as the Olympic boom starts to wear down, there may be better value in the marketplace.
I think we can do some shaping if the decline is in the 2 percent range. If it goes to a 4 or 5 percent drop in traffic, we'd probably have to look at things a little deeper. Again, if someone leaves the company and goes to another job or retires, unless they're part of a key shipboard staff or terminal staff position, we could defer filling that position and then not impact somebody that is working. There are a lot of ways to manage through it, but I just think we have to be keenly aware.
VAUGHN PALMER: A lot of people wanted to tape questions for David Hahn on the show tonight, so we're going to get on to some of those. Maybe your favourite question will be on the list. The first one is just a good question about travel from a regular friend of this show who occasionally travels from the mainland to Vancouver Island, to Nanaimo, which is also where I used to go to school. Here's a question about the cost of getting from Vancouver to Nanaimo from Bill Tieleman.
Bill Tieleman: "For a car and driver to go to Nanaimo with a reservation on B.C. Ferries costs $71. You can fly on Harbour Air for $79 one way, a difference of $8, and you can get there in 20 minutes instead of over two hours. Are you concerned that B.C. Ferries is pricing itself out of the market?"
DAVID HAHN: Not really. I think the cost of running the ferry system is pretty large. Part of the issue we've had to deal with is the fact that there was a massive underinvestment in the company for years. We're buying ships now; that sounds really nice, but we're probably paying twice as much as if there had been a sustainable program over time.
I think where it gets probably a little more to what Bill's point is is if you start adding on compounding fuel surcharges. If it goes to $200 a barrel, it will become unaffordable. But the issue will be getting bigger than that. I think it'll be disposable income across the board for people [inaudible], and that's a bigger risk than Harbour Air.
Again, you can't put your car on Harbour Air. You can't put the camper. You can't take your canoe. We provide a pretty valuable link, and if you compare our fares to fares around the world, we're still in Canadian dollars much cheaper than most other people.
VAUGHN PALMER: Just to clarify something you said earlier, the independent commissioner set up this formula on the fuel surcharge. You said you're meeting with him to go over it, but the independent commissioner still decides the fares, right?
DAVID HAHN: He decides the fares. He reviews everything. He set the price caps for the next four years. With the fuel surcharge, it's a pure mechanism right now. What we're asking for is a better consideration, given the dramatic change in the marketplace, because we think it's beneficial to everybody to have a lower surcharge and start dealing with it right away.
VAUGHN PALMER: If people want more detail on some of the rulings that the commissioner has made, the B.C. Ferry commission website does have a fair amount of detail on some of these decisions. He's got Q&As, too — like people frequently ask questions; people write in and ask the same question again and again. He's got some answers on that.
I thought it would be interesting to get somebody who thinks the fares actually should go up. Who would possibly ask such a question? Well, my old friend Bob Plecas. Here he is.
Bob Plecas: "I just would like to suggest to the Ferry Corporation that if they're going to run like a business, run it like a business and charge those on the Gulf Islands the pay-as-you-go rate so that their rates would go up. Mine might not go down, but they should, because if the costs of capital and all the other expenses were spread evenly, then the government would have to decide how it was going to directly subsidize, and that would be a better way than running a business, pretending that you're being businesslike when you're subsidizing through your fares on another route these existing routes."
VAUGHN PALMER: Now, I thought of posting Mr. Plecas's address so that the mob with tar and feathers from Saltspring Island could find him, but….
Your reaction?
DAVID HAHN: First of all, there's subsidization between the major routes and the minors. The minors stand on their own. The government makes policy decisions around how much they're willing to subsidize. For example, in this next fuel surcharge issue we'll go to the commissioner and have a discussion. If he gives us what we want, we have to go back to government and give them the option of perhaps paying all of it so it doesn't go into effect, or paying none of it. They could do something in between.
Twice they've given us money. They gave us $7 million about a year and a half ago. They've agreed to take the duty remission from the Northern Adventure, around $14 million, apply that against the fuel charges that are going on and harming the communities. That's their public policy decision. Again, I think from our standpoint, where we run it like a business is in the day-to-day operations, keeping all this political interference out of the way, and we provide them options. What they pick is their public policy decision. They have to live with that aspect of it.
VAUGHN PALMER: The provincial and federal subsidies combined are approaching $150 million a year now.
DAVID HAHN: And it'll go up to probably over $160 million when the Northern Expedition comes on line.
VAUGHN PALMER: Is that the federal government that's giving that money back?
DAVID HAHN: No, the federal government every year gives us $25 million. The $14 million is the duty remission that comes from the federal government. The provincial government roughly gives us about $135 million, when all those other ships are in.
VAUGHN PALMER: It's approaching, you say, $160 million.
DAVID HAHN: Between the two.
VAUGHN PALMER: For the entire service.
Here is a question. Several people wanted to ask this question, but I thought Jim Sinclair's version had the most edge on it.
Jim Sinclair: "Sixty percent increases — not bad for the board of directors. David, when people are digging deeper and deeper in their pockets to pay for a ferry fare to go, often, to a place of work or to go home, don't you think it's a bit ridiculous that you're allowing 60 percent wage increases for the people at the top? Will you roll back those increases and send a signal to the rest of the province that you hear what's happening to the rest of us?"
VAUGHN PALMER: Well?
DAVID HAHN: I think it's a logical question. I, first of all, can't roll back. I don't make those decisions. I'm a board member, but I can't vote on board salary increases, if you think about that, or [inaudible].
VAUGHN PALMER: The board actually hires you.
DAVID HAHN: That's correct. It's an inverse relationship. I can't [inaudible].
VAUGHN PALMER: It would be an interesting discussion, if the CEO went and suggested to the board….
DAVID HAHN: I think it wouldn't be the CEO, probably, by the end of the discussion. But the issue there is….
VAUGHN PALMER: You are a board member, but you don't get the salary, either — the salary for the board, or the fees.
DAVID HAHN: I don't get the fees, no. God, no.
The issue here is more: are they delivering value? You have to go back and look at what's occurred in the past at B.C. Ferries. I can tell you that if we didn't have the type of expertise and advice — if I didn't get that type of counsel — we wouldn't be able to do the things that we've been able to do. Things around hedging, things around the financial transaction with the banks, the meetings around the Super Cs — the business case for the Super Cs was probably 400 pages. They had to study that ahead of time. We had to go through massive debates — more than I would have probably liked — but that's the nature of the job.
Incremental — I think it's $200,000-plus a year. It's probably worth every penny, if you avoid the $550 million or whatever the number was that went down with the fast ferries. Is it good timing? Probably not, but I think it's an appropriate fee if you're getting value for the money, and I would argue we are, big-time.
VAUGHN PALMER: I think the thing that bugged a lot of people about was the increase, but the other thing that bugged people was the Minister of Transportation, Kevin Falcon — who is the person we always go to when we have questions about ferries, even though sometimes he says he can't do anything about it — said he didn't like the increase either, and he told the chair of the board that, but he can't tell her to roll it back, either. The government can't tell them to roll it back.
DAVID HAHN: Well, again, they passed legislation designed to keep the political interference out of the way. I think that was just another example. Again, they weren't involved in the Super Cs. There have been a number of different instances when I'm sure they probably totally disagreed with some of the stuff I've done, but quite frankly, if there was that kind of interference, I wouldn't do the job. You have to have….
I've never seen a thing that could get so messed up by politics like B.C. Ferries. I think the only thing we've done in the last five years that I could really point to is build back pride in the ferry service, both from the public standpoint and from the employees' standpoint. The only way you could do that is if government was nowhere near it.
While I'm sure there are times he'd like to straighten out my words or fix it, he doesn't have that right. He doesn't try to impose that right. We have disagreements. We have strong debates around some of the funding issues or what's the right service in the north, but that's very good. I mean, that's logical business. We treat him as our largest customer, but again, they don't interfere with the operation of the business.
VAUGHN PALMER: What you've said tonight is if the government wanted to increase the subsidy, then that would reduce the need to increase fares and fuel surcharges. If this structure that makes it independent is going to change, they'd have to change the legislation.
DAVID HAHN: They'd have to go back to legislation — open up the whole thing — and the minute you do that you're going to bring in another level of interference.
VAUGHN PALMER: But ultimately, if…. People ask me — I've been asked it on an open line — "What can we do to change it?" Well, if the ultimate thing that has to change is the provincial budget or provincial legislation, the way you do that is change the government.
On that note, we'll take a brief break on Voice of B.C. Stay with us.
Maurine Karagianis: "I think that B.C. Ferries has to see that they are an integral part of the marine highway here and that they are an integral part of a shipbuilding industry here and make sure that they're dedicated to being a B.C.–supported business, rather than some kind of cruise-ship industry that's built offshore and is run like a for-profit organization rather than the marine highway support that it is."
Voiceover
Bill Tieleman: "B.C. Ferries has been set up by the B.C. Liberal government as a quasi-private corporation. There's no accountability in the Legislature. Freedom-of-information rules don't apply to it whatsoever. We're just supposed to have faith that the corporation and its shareholders and its president, David Hahn, are just doing the best for us, with no control over any of the money we give them. It's just not really good enough anymore. We need some degree of accountability for our own money."
VAUGHN PALMER: Welcome back to Voice of B.C. Tonight on the show it is David Hahn, B.C. Ferries. I can tell you that when word got around here that David Hahn was going to be on the show, there was one thing I got asked by everybody, which is, "I hope you're going to have the picture." Only some of the people who said that were members of the provincial government. [Laughter.]
There is the famous picture. This is — what? — the Oak Bay annual tea party teacup race. This is you capsizing.
DAVID HAHN: Yes. [Laughter.]
VAUGHN PALMER: Demonstrating your seamanship.
DAVID HAHN: Well, I've never been known for that. [Laughter.] I never pretended to be a mariner, and everybody knew that going in. But I had a lot of fun with that. I think that was probably one of the highlights. My daughter Valerie and my wife Karen both were thrilled that I got dumped. [Laughter.] The mayor was a very good sport about it all, and it was a lot of fun. I'd probably do it again. I'd like another shot. You go down sometimes.
VAUGHN PALMER: Imagine pneumonia after that. It's not warm in those waters.
DAVID HAHN: Great fun.
VAUGHN PALMER: Okay, we will now go with a couple of questions from a colleague of mine who works at the Vancouver Province, Christina Montgomery. She's written a lot about ferries over the last couple of years. Not all of it has gone over well at the Ferry Corporation, so we'll give David Hahn a chance to answer what she has to say. She has put it in the form of questions. Here's the first one.
Christina Montgomery: "It seems to me that at some point you're going to have to bring in a management team that has real-world, real-life experience running a maritime business. Things haven't gone so well in the last five years. They've spent $20 million on a payroll program that didn't actually pay people. They had crew mis-assigned and unassigned. They bought uniforms that fell apart.
"It may be time, at this point in their mandate, to actually look at a turnover. But to be able to bring those people in, to recruit them, and to oversee them is going to require a board with the same kind of experience, and I think pretty much that's what they've been lacking."
DAVID HAHN: I wouldn't pay any weight into much of what comes out of the Province. I've had that battle going on for three years. I think they've got an approach and an attitude that's negative. You'd have to survey customers. You could take a look at the employee base, and I would argue their uniforms are great. I don't think another management team could have delivered those ships — and by the way, they're coming in at $505 million out of a budget of $542 million. We get the duty remission. They'll come in at $420 million. I'll stand by that any time.
We've seen the failed promises and actions in the past. I don't put a lot into it — never had — out of the Province. I didn't talk to them for two years. I mean, I talk to them now.
VAUGHN PALMER: You didn't talk to them for two years?
DAVID HAHN: I wouldn't talk to them for two years, because I don't need to put up with that.
VAUGHN PALMER: An interesting media relations strategy.
DAVID HAHN: Personally I don't see where we have to put up with that. I don't mind tough questions. What I don't like is a bias. If you want to get to the heart of something…. If I make mistakes — I've made a mistake on your show once, and I called you the next day around that — I don't have any problem doing that, but when you're biased and take a certain approach….
I think people would have to look at the performance of the ferry system and judge the management team, and I think hands down we win.
VAUGHN PALMER: One more question from Christina. Here it is.
Christina Montgomery: "I'm curious how Ferries is going to deal with its crewing crisis. They're short of people now. Officers are threatening to quit if they're pulled out of the union in a labour battle that's going on now. There have already been sailing delays this year. With Ferries unable to find people to replace the ones that they need now and offering $2,500 to any employee who can bring in a living, breathing officer who qualifies for hiring, I'm wondering what else they have planned."
VAUGHN PALMER: Is this still a dispute?
DAVID HAHN: Well, I think there's a dispute over how many of them will be taken out of the union and brought into management ranks. Again, most ships in the fleet sail with one management person aboard. A Spirit — 52 employees, only one is a management person — is not acceptable. It never has been.
VAUGHN PALMER: The others are all — even officers — members of the union.
DAVID HAHN: Members of the bargaining unit. That's what the discussion is. That goes through Vince Ready. That's been clear from the beginning, when we started the process with Vince. It's being dealt with this fall. He'll make a ruling. He could say zero, or he could say up to 518.
I think the bigger issue is not that they're living and breathing officers but qualified. If we have to miss sailings because we don't have staff, then I don't think that's that big of an issue, but I'm not going to sail with just anybody. Our bigger issue is to build within. We're facing some shortages, just like any other industry in B.C. right now, but like anything else, it'll change over time. We've put in aggressive recruiting programs. We're going to run a national and probably international ad campaign. We're talking, and if there's anybody out there from Esquimalt in the navy looking for a job, we'd probably want to talk to them — I get the plug in while I can.
I think we're pretty aggressive on it, but I'm not worried about those issues so much as just trying to keep the system as efficient as it can be. We'll work through all those issues.
VAUGHN PALMER: You mentioned Vince Ready. He's the famous — at least to those of us who follow industrial relations in B.C. — mediator, arbitrator, settler of disputes. He's in sort of a permanent relationship with Ferries, or at least a long-term one, sorting out labour issues like this current question, which is: how many of the ship's officers shall remain in the union and how many shall be taken out and become management?
DAVID HAHN: He's imbedded, I would say, into our future for a long time. The current agreement goes through 2012. If we don't come to terms, he'll rule on that. Hopefully, if both sides are smart and logical, they'll find a way to do something well before 2012. We've stayed ahead of the curve on all these labour issues by having a longer timeframe, and I think if you can solve the issues in 2010 and extend it to 2014 — I'm making up numbers now; I don't want everybody calling my office tomorrow — that would be very logical and smart, both from the union's side and from the company's side.
I think the employees, at the end of the day, would tell you, "I don't want to know all this fight between the company and the union. I want to go to work. I want to do my job, and will you guys stop fighting and start working together?"
The biggest program where we've made progress on — and I don't think Christina gives both sides credit — is the Sail Safe program, which is a joint effort by the company and the union to bring a better safety culture to B.C. Ferries. I think that's a huge step forward in building a better relationship, and that's part of what Vince has done. It's an offshoot of the Queen of the North. I think we've made a lot of progress.
VAUGHN PALMER: There have been suggestions that the next new ferry be named after Vince Ready, actually.
DAVID HAHN: It's not going to happen, either. [Laughter.]
VAUGHN PALMER: I don't know — the SS Vince Ready has kind of a nice ring to it.
Let's go on to…. You mentioned new vessels, and I talked about them a little bit earlier, but here is somebody else who's had some fairly sharp things to say about B.C. Ferries over the years, particularly when you went offshore to get four vessels built in Germany. With a question on it is another friend of yours, George MacPherson.
George MacPherson: "Over the past five years you've spent a lot of money on the upgrade and extending the life of the C-class ferries and building new vessels offshore, as well as the Island Sky over in North Vancouver. Once the Island Sky is delivered later on this year, what plans do you have in the future for more vessels, and are you confident that you have the source of funding required to build those vessels?"
DAVID HAHN: I think we have the source of funds. The question is where they'll be built. Again, we'll go through international tender again, whether it's small, medium, large. We'll try to find the best value for the dollar, and we won't make any commitments to build anywhere. We'll go to get the right contract with the right terms, the right guarantees, the warranties — everything that protected us with the Super Cs, the same type of thing we got when we'd cut the deal with Washington Marine Group. I don't think we'll change our process at all.
VAUGHN PALMER: The protections you're referring to are on time and on budget, and a standard of construction.
DAVID HAHN: On time, on budget, and post-operation warranties. They have performance criteria they have to….
VAUGHN PALMER: The decisions you've already said about down the road. But Ferries does a fair amount of maintenance work in British Columbia, too.
DAVID HAHN: We'll do, I would venture, $125 million this year in B.C., refurbishing ships or upgrading, maintenance, all sorts of work. The Queen of New Westminster is going through a $50 million upgrade right now, in North Vancouver, so I think we've been an integral part for many, many years of the marketplace. We'll remain that way in terms of repair and maintenance. Whether build is in the future of B.C. I still don't know. I think it's up to companies to sort that out.
VAUGHN PALMER: A follow-up question from George about competition in British Columbia — whether one of the problems is we've only got one big yard.
George MacPherson: "David, it must be very frustrating and difficult for you to try and maintain a fleet in the province of British Columbia when the major shipyard is owned and operated by one company. Do you plan, in the future, to assist and encourage the medium-sized shipyards, such as Allied and Nanaimo Shipyard, to compete for some of this work?"
DAVID HAHN: I think we'd like to see that. One of the reasons we have our own shipyard maintenance facility over at Deas in Richmond is because of that. I think you have to have a check and balance in the marketplace. Of course, somebody would say, "Well, then why don't you have one on the ferries, in terms of competition?"
VAUGHN PALMER: That'll come up. We'll get to that.
DAVID HAHN: The issue there is we have a limit on what we want to operate in, and we're not in the business of trying to make somebody else's company work better. We would try to give them work, we would try to work with them, but if we can't get the financial guarantees to back up the work, we're not to give someone the work.
We've done some really good work. The Kuper was done with Allied Shipyard. It was done in a first-class way. We've done some work with Nanaimo Shipyard. Again, we'd like to see it. It helps us. We're very accepting of that, but we have be to careful how we become some kind of agent for putting people in a business. They've got to sort it out themselves.
VAUGHN PALMER: Bill Tieleman made this reference just before this segment started about openness and transparency at the Ferry Corporation. It comes up a lot. I addressed it a little earlier by suggesting that some of the problem is actually with legislation; it isn't with the way the corporation is run. The government set it up this way through the laws. But here just asking a question again that comes up a lot — openness and transparency — is Norman Ruff.
Norman Ruff: "The ferries are an interesting situation. It's neither fish nor fowl — partly public, partly private. Although I would applaud Mr. Hahn for being frank and open in the way he gives interviews, that's not really full accountability. I think we really do need to open up the whole ferry system to the kind of transparency and accountability that we find in the rest of the public sector."
DAVID HAHN: I would doubt that you have that kind of openness and transparency in the public sector.
If you go back through
www.SEDAR.com, which is an access site, you can find all the information you need. Mr. Coons has often been on this bandwagon around accountability, and I can tell you we brought him in; we gave him three boxes of material that was printed off that webpage. You can get anything you want.
But I think the real accountability around B.C. Ferries for us was the fact that I and the chief financial officer, Rob Clarke, have to certify the financial results of B.C. Ferries. I have to sign documents that are filed with the securities commission, and I believe if we are found in terms of fraud or putting out statements that aren't true, we get fined $5 million and go to jail for five years. I don't know anybody that runs a Crown that probably runs that kind of risk.
I think we're extremely accountable. We provide anybody any information they want. You can find almost anything; you just have to want to look. In fact, one of Mr. Coons's complaints was there was too much information. He didn't know how to get through it to find what he was looking for. I don't think that's our job. You've got to be able to digest these things, and there's tons of information out there.
VAUGHN PALMER: The site that he's referring to — and I have occasionally looked at it — is all capital letters: SEDAR. It's essentially…. If you're trading stocks on the stock market in Canada or borrowing money on the money market, you have to file. You have to meet these disclosure requirements.
B.C. Ferries files an enormous amount of information there. There's a lot of stock market talk there and money borrowing talk, but there's a lot of just discussions by management of what they're doing, why they're doing it, what their targets are for the year ahead. There's actually a fair amount of detail there, and if people want some of that, it doesn't take away the political debate about how it could be done other ways, but there is a lot more information there than some people realize.
Let's go on. Mr. Coons — that's Gary Coons, who is the member of the Legislature for North Coast and the New Democratic Party's critic on Ferry matters. In fact, we've got a question from him coming up later on, but right now, one more question from Bob Plecas, this one on the issue that David Hahn just raised, which is the question of competition for the Ferry Corporation.
Bob Plecas: "I think when the Ferry Corporation got going, there was lots of process and lots of discussion about how to sell parts of it to the private sector to introduce that competition while keeping controls on the outcomes — on the service levels. That never happened. The union dug in, management went along with the union and formed an alliance, and that introduction of competition — which I think would make it a better company — has gone away."
VAUGHN PALMER: It was a monopoly when you took it over, and it's still a monopoly.
DAVID HAHN: First of all, it wouldn't be pure competition. Competition is people going head-to-head on existing routes and fighting it out to see who can survive and provide better service and value.
What the alternative service provider process was was going out in the marketplace — which we've done; the Mill Bay is a great example of that. We solicited proposals, put out a very public document. We had, I think, seven parties express interest. Only three submitted proposals. One of the proposals was pulled right after they submitted it, which put us down to two parties. One withdrew within two months after that. The lone party submitted a proposal, and their cost was higher than what we operate at today.
VAUGHN PALMER: So that's not happening.
DAVID HAHN: It's not going to happen on the Mill Bay. There was no collusion with the union. The union was asked whether they wanted to make any adjustments to the cost structure or anything else. They said, "No, we'll stand pat." We compared our cost, which is very well-known and benchmarked. We went out, got a proposal that was higher than our cost. If it's not, I would argue, 6 to 7 percent lower than our cost, at a minimum, we would never contract it out, because the cost of doing that — plus we're held responsible, even when another party takes over — doesn't make sense.
But that's not competition. Competition is HarbourLynx that tried to go against us in Nanaimo, didn't survive. We've had several players go into the Gibsons and Langdale market and come to downtown. There's another one that's going to start soon; I'll even give them a plug: Coastal Link. I don't know if they're going to make it.
I think most of these companies fail because they have one ship. They can't survive the winter when the business is horrible. This is a very tough business. You'd better have deep pockets, and you'd better have a pretty good appetite to suffer in the wintertime, because we just bleed money in the wintertime. Our job is to make as much as we can in the summer, manage the cost down in the winter, and if somebody can do that better, I think the commissioner would make us do it.
We'll do more tendering. We'll find out what the market will bring. That's in the legislation.
VAUGHN PALMER: You mentioned HarbourLynx. The ship broke down, and the people that relied on them — there wasn't a backup ship.
Whatever happened to the idea of having competition? There was somebody going to bid for the northern services.
DAVID HAHN: That's still out there. I think the issue…. What occurred that night when the Queen of the North sand threw everything into a different mix. I think it really would be unfair to that party to try to tender until you know what the actual final product is, and that's part of what we're sorting out right now.
VAUGHN PALMER: So that may still happen.
DAVID HAHN: That could still happen.
VAUGHN PALMER: We'll take a brief break on Voice of B.C. with David Hahn. Stay with us; we'll be right back.
Jock Finlayson: "The corporation I think is being run better. It's doing better long-term capital planning. A lot of the problems we've had in the Ferry Corporation were because we didn't have a proper capital plan in the past, when the government was interfering on a more day-to-day basis with the corporation. I think we're better off, as taxpayers and voters, with the current model than what we had before."
Voiceover
David Schreck: "It seems that the priority of B.C. Ferries is to get the ferry fare up as high as possible. The priority should be to improve service and work on its capital plan."
VAUGHN PALMER: Welcome back to Voice of B.C. Next week on the show we have a couple of members of the Opposition on the show: John Horgan, who's their ferocious critic on carbon taxes and fuel and fares and all sorts of things — he'll be on the show — and Leonard Krog. I think Leonard is the justice critic. He's also going to try — as we sometimes try on the show — to deal with the B.C. Rail case and some other issues that are fairly controversial politically. We'll probably talk about Bountiful as well and the fact that Wally Oppal is back as Attorney General.
Tonight on the show, however, we're doing B.C. Ferries. David Hahn is on the show.
David, you've got some ships for sale, too — "Honest Hahn's Used Ferry Mart," right?
DAVID HAHN: I think we have — not think; I know we have — four ships that are coming up for going out of service. One's the Queen of Tsawwassen, one of our original ships; the Queen of Esquimalt, which has been sold; and then the Queen of Saanich and Queen of Vancouver.
VAUGHN PALMER: Who bought the Esquimalt?
DAVID HAHN: The Esquimalt was bought by a firm out of Dailin, China. They paid us a handsome fee — I don't want to get into that right now — for the ship. Clearly we would have thought it would have taken probably $100,000 or $200,000, at least, to get rid of these ships, and we were able to sell it for — I'll say — north of a million dollars, which we thought was….
VAUGHN PALMER: That is open bidding, right?
DAVID HAHN: Open bidding. We had six or seven different tenders. There was a gentleman at our place, Paul Matson, that ran a great process.
VAUGHN PALMER: It's on its way to China?
DAVID HAHN: It's over at Deas, actually, being worked on so that they can seal it up and make sure that she's safe for the transit, because they have to go to the Arctic Circle.
VAUGHN PALMER: Are they going to use it as a ferry?
DAVID HAHN: They're going to use it as a cargo ship off the coast of China.
VAUGHN PALMER: You've got three others for sale.
DAVID HAHN: Three more for sale. They're interested in them. There are some other parties that are talking to us. We'll do this as they come offline.
VAUGHN PALMER: Washington State — I follow this controversy through the Seattle Post-Intelligencer — they had some ships ordered out of service for safety reasons. How come they didn't buy the ones that were available here?
DAVID HAHN: I think they were given a shot at it, couldn't make a decision. They're probably a pretty good example of transparency, government accountability — all the things that everybody wants to see. Go down there. Those communities that are affected by those four ships being yanked out of service by the Coast Guard are suffering badly. They would probably gladly pay a higher fare to have ferry service.
People have to understand: our mission is the lowest possible fare, but we can't control the price of fuel. If the price of fuel does go down, the inverse of a surcharge will occur, which is a rebate. I'd like nothing better. I can't think of a better marketing program. I can't think of a better environment. Have the price of fuel go down to $50 and we start giving out rebates? I'd love it. I'd love nothing better.
VAUGHN PALMER: The last couple of times you've been on the show we talked a lot more about the Queen of the North — the tragedy. There've been inquiries; there've been investigations; there've been reports. This is an issue that's still lingering around this sinking, and that's the employees. Well, let's just go to the question, first of all. This is from the leader of the Green Party of British Columbia, Jane Sterk.
Jane Sterk: "Mr. Hahn, this question relates to the Queen of the North. I'm wondering how it is that in a Crown corporation employees cannot be compelled to testify in a hearing on what happened that night."
VAUGHN PALMER: It still enrages people.
DAVID HAHN: First, we're not a Crown corp. Independent of that, this gets back to personal accountability — how you manage yourself. They had choices. Their lawyers would have probably told them not to talk. I think that's the biggest issue. If I was their lawyer, I probably would have told them the same thing.
But the real endgame in all this will be whatever the RCMP decides to do. I don't know any status on that. I don't pretend to know. We'll just have to see what they ever do some day, but I don't know if we'll ever know what happened.
VAUGHN PALMER: You fired three people over this.
DAVID HAHN: Yes.
VAUGHN PALMER: Where do those firings stand?
DAVID HAHN: There are hearings going on that Mr. Ready will arbitrate around this issue on all three of them.
VAUGHN PALMER: So they're exercising their right, under the contract, to grieve or fight the firings.
DAVID HAHN: That's correct.
VAUGHN PALMER: They're fired, but the matter is still not resolved.
DAVID HAHN: That's correct.
VAUGHN PALMER: The transportation safety board has done its thing, right? It's reported out. Is that closed?
DAVID HAHN: [Laughter.] They did their thing. I'm not going to comment on it.
VAUGHN PALMER: Yes, I remember the famous press conference. Several of my colleagues…. My colleague Les Leyne of the Victoria Times Colonist wrote a terrific column on it; I'll plug him. But that's finished. There's still the question of an RCMP investigation?
DAVID HAHN: I believe. They don't tell us what they're doing.
VAUGHN PALMER: They've indicated that. Is the litigation arising out of the sinking concluded, or is that…?
DAVID HAHN: No, that'll be ongoing, I would suspect, for awhile. There are a number of different levels to that involving a number of different parties, and I don't think that'll be quick. Those things tend not to be.
VAUGHN PALMER: The ship is sitting on the bottom. It is monitored environmentally. You're not going to be bringing it up?
DAVID HAHN: No. The Coast Guard went in, did a study, came back and said that the bulk of the fuel was out of there — in their opinion; nobody can know for sure. We do monitor it. We do provide some support. In fact, I think we had a team out there in the last two or three weeks. We've trained a lot of people in Hartley Bay around some of the equipment so that they have spill equipment, should a spill at that site or any other site occur. Again, I think we still have to maintain a very open dialogue with them, because they are the ones that are impacted over the long term.
VAUGHN PALMER: Let's go to just a few more questions before the end of the show. Here's one on greenhouse gas emission management in B.C. Ferries from David Schreck.
David Schreck: "It is sometimes said that the impact of shipping in the port of Vancouver has a bigger environmental footprint than all of the automobiles in the lower mainland. Has B.C. Ferries looked at what its greenhouse gas emissions are and whether you can use some sort of fuel additive to reduce carbon dioxide emissions from the ferries?"
DAVID HAHN: It's monitored. We're doing studies around specific sites and also specific ferries. Our newer ferries are much better, obviously, than the older ones on those issues.
In terms of the additive, it take on two approaches. One, some of those additives can provide a lower cost of running, so you get a lower fuel surcharge. You also get the benefit of greenhouse gases. There's quite a bit of activity in that, as you'd expect with everything else going on today.
VAUGHN PALMER: Variable sailings, from Maurine Karagianis.
Maurine Karagianis: "I think David Hahn has, again, got a completely crazy idea about what the ferry system is really about here in British Columbia. It's part of our marine highway, and variable sailings mean it'll just be more confusing for tourists trying to get back and forth on the Island here, for people who have to get to Vancouver for medical appointments or to work. Once again, David Hahn shows that he has completely missed the point that this is part of a marine highway, not some kind of ocean-going cruise."
VAUGHN PALMER: You're sure she didn't tip your teacup over when you were…?
DAVID HAHN: I don't know, but I'm still trying to figure out what a variable sailing is. I don't know what she's referring to.
VAUGHN PALMER: Oh, I'm very sorry that I asked the question, then.
DAVID HAHN: If you give me a sense, I'll give you a response.
VAUGHN PALMER: What I will do is I will ask the New Democrats to get Maurine to explain to me. I will relay the question to you, and I will give the answer on a subsequent show, because she's entitled to an answer on that, but I can't sort it out anymore.
DAVID HAHN: Sure.
VAUGHN PALMER: Gary Coons — you mentioned him, as well. This is a question on assured loading.
Gary Coons: "My question to David Hahn is: businesses and truckers have noticed that assured loading has gone up from $56 to $100. A lot of people are wondering when that happened, and was it advertised?"
DAVID HAHN: It's actually gone to a hundred and a quarter, not a hundred. It went up in April, I think, with the other fare increases. It was done to restrict, if you will, through price demand the use of it. It was getting out of control. I've never been a big fan of this. I've never hidden that I'm not a big fan of it.
VAUGHN PALMER: Why don't you like it? People love it.
DAVID HAHN: Because I think, for the family of four that can't afford that and something shows up 20 minutes ahead of time and they cut in line and they pay a small premium — which used to be a very small premium — it just doesn't make sense to me, from a fairness or service standpoint. I get a lot of grief at the golf course around this, but I think they're cheap at $125. We'd probably look to raise those again in the future.
I'm not putting a timeframe on it, but they're a tremendous value if you can avoid a two-sailing wait and get there 20 minutes ahead of time. I think that's worth an awful lot of money. It's just like having a first-class ticket in an airline, and you look at the gap in those prices and they'll floor you. It's a great service. We're not going to discontinue it, but I think it has to be priced to the value it delivers.
VAUGHN PALMER: You're pricing it high so that people are actually paying for the benefit they're getting, in terms of their time.
DAVID HAHN: What they'll do is deliver income to us that'll help keep other fares down, because we can divert that money back into other services. I think it's pretty logical.
VAUGHN PALMER: So all those capitalists on the golf course are just being told to pay what the market will bear for the extra service — plus it helps, probably, to reduce the aggravation from the guy with three kids who can't afford it.
Here's a question, this one again from Jim Sinclair asking whether you like it here in British Columbia. [Laughter.] This is a good question; I like this.
Jim Sinclair: "David, you packed up your life and came to Canada from the United States to take on, obviously, a challenging job. I guess the question is: once that challenging job is over and you've packed up, will you leave, or do you love us enough to stay around for awhile?"
VAUGHN PALMER: I think that was a friendly question.
DAVID HAHN: No, I think it is. I think it's a pretty legitimate question. We like Canada. We've put in our papers for citizenship; that probably speaks volumes right there. We're hoping to get my son through that process, as well, which would be very helpful for us making a longer-term decision. We live here, work here, and have a lot of fun here.
The key to this is to have fun, and I've always like British Columbia before I lived here. I like it even more now. We go over throughout the province. We're having a good time.
