Subsidised Hong Kong ferry firms to cut fares due to excessive profits amid low oil prices

Two ferry companies operating routes connecting Hong Kong, Kowloon and the outlying islands will cut fares by around 10 per cent from July as a way of sharing excessive profits from the low oil price, the transport and housing minister said yesterday.

Anthony Cheung Bing-leung said the discount would last for “several months” and the two government-subsidised operators – Hong Kong and Kowloon Ferry Holdings, and New World First Ferry – should work out details based on their profit margins and other factors.

The reduction would apply to monthly tickets and weekday single journeys, he said, but possibly not Sundays or public holidays.

First Ferry charges fares of up to HK$30 on weekdays and HK$43 on Sundays and holidays, while Kowloon Ferry charges up to HK$22 and HK$42.

It is unclear whether the discount will only cover the companies’ six subsidised island routes or all of the routes connecting Hong Kong and Kowloon.

The outlying island routes connect Central with Cheung Chau, Mui Wo, Peng Chau, Yung Shue Wan and Sok Kwu Wan on Lamma Island, plus several inter-island connections.

Due to the falling oil price and the operators’ increased non-fare revenues, First Ferry and Kowloon Ferry recorded profit margins of 9.8 per cent and 21.4 per cent respectively by the end of last year from mid-2014, when the government renewed their licences for three years until 2017.

To help the operators keep their fares relatively low for outlying island residents, the government will grant an expected subsidy of HK$190 million in the three-year licence period through reimbursement of certain expenses, excluding fuel and staff costs.

As of mid-2015, the two companies had received HK$60.3 million in subsidies, based on an estimated profit margin of 5.4 per cent for First Ferry and 3.5 per cent for Kowloon Ferry.

The discount from July will only lower the profit margins to 7.5 per cent for First Ferry and 13.5 per cent for Kowloon Ferry. Both also raised fares by around 6 per cent after renewing their licences.

“We see the need for the operators to share their windfall profit with passengers,” said Cheung during a Legislative Council session. He said such measures would continue if the companies recorded extra profits during the remainder of the licence period.

Cheung added that the government would study the possibility of extending the licence period. The law only allows for three years at one time and a maximum accumulated licence period of 10 years for one operator.

The minister said the government would also look at whether to extend the subsidy to the rest of the 14 licensed outlying island ferry routes.

New People’s Party lawmaker Michael Tien Puk-sun said that instead of offering discounts, the government should require the companies to pool excessive profits into a fund for future use.

Labour Party legislator Lee Cheuk-yan said the companies should use all excessive profit margins to reduce fares.