Foot Passengers Subsidize Motorhomes on Ferries

[Gunny]

WARNING: This thread contains technical vocabulary (economics) and has the potential to be long, reader discretion is advised.

To perk your interest though, I do use "sunk" in relation to something involving ferries.

sgrant said:

If you don't mind, I'd appreciate an elaboration on the idea of the passenger and vehicle "markets" being separate, because that may well be an important consideration.

What do I mean by the two services being different "markets" (this would be WAY easier if the Vehicle fair did not include 1 adult), the amount of relatively fixed (you cannot suddenly add 1000 more passengers or 100 more cars to the Nimpkish, thus the size of the ferry is fixed). Slightly less relevant, but I may still refer to it, dare I use inappropriate economics terminology, but the cost for providing has been "sunk", and is irrelevant.

So what does this leave us with, a ferry that has a fixed number of cars & a fixed number of passengers. Thus supply is independant, 1 more passenger will not result in 1 less car, 1 more car will not result in 5 less passengers etc. (It is the people IN the car that determines the amount of passengers taken aboard).

Thus market supply for each service (Passenger & Vehicle) is independantly determined:

Passenger: TC Regulations & Life Saving Equipment (and Crewing Levels... go crew (y))
Cars: Car Deck Space

How about demand? Passenger service is a complement for car service. However, there is still, arguable, a seperate demand schedule for vehicles and passengers. If you increase the price for passengers, then some passengers may decide to not use the service or go to an alternative service (see additional stuff below), or if you increase car price then cars may not use the service.

So, what I am proposing is that Car Demand/Supply and Passenger Demand/Supply act, with a minor relationship with passenger service being a complement to car (the driver), independantly of each other. To further emphasis this (and my last point) consider the following.

Car Service is, most likely, highly inelastic, the price for cars can be raised as high as you want and cars will slowly disappear from the ferry because there is no alternative. Passenger, on the other hand, will disappear much quicker, as passengers decide to fly ($119 is one price I found) or use alternative service (HarbourLynx). Now before you say HarbourLynx(HL) is gone, I respond, if BFFerries charged $30 for a passenger, HL would be a near perfect substitute and so passengers would go to the cheaper service. (I can't remember HL's fares).


SO, why have I said all this? Well, you wondered why I called two different services on the same ship different markets? Well, it depends where you divide it, if you are viewing transport between Vancouver & the Island then it is one market, if you look at the (to me more rational) Services as a Market then you end up with 2 distinct (regulated) markets.

Did I actually even say anything in all this?

[Low Light Mike]

I followed your reasonings, Gunny.

[sgrant]

admin said:

sgrant,

The main flaw in your argument, in my opinion, is that you are only looking at the cost of moving mass through water. This only counts for some of the operations cost of a ferry. I am not sure of the proportion of costs for running a ferry, it is likely different for every ferry and every route.

The major cost for running a ferry is paying wages. A ferry hauling vehicles only (Seaspan for example) would probably have about 10 crew... just a semi-educated guess. Three or four on the bridge, same in the engine room, and maybe 2 deckhands. No matter how big the ferry is, if it was just carrying cars, it wouldn't require any more crew (maybe one or two at the most). However, the Spirit of British Columbia has almost 50 crew members per trip. So you're looking at 40 extra crew members... probably costing an average of $250+ per crew member per shift ($10,000 per shift, $20,000 per day). The only reason those crew members are on that ferry is for passenger safety.

....

I think it's in our best interest if fares remain how they are, whether it seems fair or not. If you are going to charge a car to pay $300 to get to the Island, there will be talk of a bridge before the new fare brochure exits the printing press. And then you'll have an even bigger environmental mess - even more cars and roads and pollution.

Thanks for raising some excellent points. I don't at all mind my argument being met with relevant, reasoned and apparently correct rebuttal.

I only have a ready objection to your suggestion that fares for vehicles would rise dramatically if foot passengers did not subsidize the vehicles. You already made some mincemeat out of that.

But earlier I made the point that most humans on the ferries arrive in vehicles, so any adjustment downward in the fares for humans, will benefit both vehicle passengers and foot passengers. Yes, the (revenue-neutral) shortfall would be made up by higher fares for the vehicles, but that would be mostly balanced out by the lower fares applied to the humans travelling in those vehicles.

You'd have to have the same fare for walk-on and vehicle occupants because otherwise some strange things would start happening. There's no way any such adjustment would result in $300 vehicle fares and the disruption that would cause.

Other than that, I thought your points were on the mark.

[sgrant]

Gunny said:

.... (this would be WAY easier if the Vehicle fair did not include 1 adult),....

And thank you for further explaining that.

When I first listed the numbers in my opening post, I also thought that the vehicle fare included one person, and I believe they used to. But on a closer examination of the Tsawassen / Swartz Bay route, it seemed that the person is no longer included in the vehicle fare. So I had to go back and recalculate everything. Have I got this wrong in the end? It would make a significant, but not huge difference.

It would be interesting to know if BC Ferries actually has a rationale or formula for setting fares for the various types of customers. Maybe the fares were basically set arbitrarily in the distant past, and since then any changes are just based on what the fares already are. As opposed to making any effort to calculating the cost to provide the service for the various classes of customers.

Anyone care to venture how you would set fares?