BAR HARBOR — The international ferry here operated with no government subsidy between 1997 and 2006, according to the private company that operated the service.
That was a first in the 50-year history of the route, said Mark MacDonald, CEO of Bay Ferries Ltd.
In discussions about the whether international ferry service could or should resume in Bar Harbor, concerns often are raised that the business is viable only with large government subsidies and that it’s not predictable enough for long-term planning.
“The Nova Scotia ferry has been a money loser for most of its existence,” resident Stewart Brecher said at a public meeting earlier this month. “And it only survives because of subsidies from the government of Canada. There was a struggle as to whether or not they would continue operation to Portland until Portland finally managed to fork up some money this year to make significant changes to the terminal.”
Unlike Marine Atlantic, the former owner of the terminal property, Bay Ferries Ltd. is not a state-owned enterprise.
“We get confused all the time for being a government company,” MacDonald told the Islander Monday.
The confusion is understandable. Between 1986 and 1997, Marine Atlantic was the operator of the ferry service as well as owner of the property, and Marine Atlantic is owned by the Canadian government. But in 1997, Marine Atlantic transferred operation of several of its ferry routes to Bay Ferries.
“We worked under a lease from Marine Atlantic,” MacDonald said. “Whatever was required to properly run the ferry service, including improvements to the terminal, was our responsibility.”
Bay Ferries paid for all the capital improvements and two new high-speed boats. Their investment of 100 million Canadian dollars “wasn’t an equity injection,” he said. “Our company went out and borrowed the money. We were able to build a case as to the credit-worthiness” of the business.
What changed in 2006 was that the province of Nova Scotia sought to add Portland back into the ferry service mix. There had been no ferry service to Canada from Portland since 2004, when a different company terminated its Portland route.
Bay Ferries added a Portland route in 2006, with the same vessel serving both Portland and Bar Harbor on alternating days. A subsidy from the province helped make the expansion possible, and when the subsidy ended in 2009, the company discontinued both Portland and Bar Harbor service.
A number of other factors contributed to that decision, MacDonald said, including the economic crisis, high fuel prices (the run to Portland is longer and requires more fuel) and a 2008 U.S. law requiring passports for travel to Canada.
Another concern has been well-publicized difficulty with the ferry service in Portland, which operates alongside berthed cruise ships and other uses at the Ocean Gateway facility there.
Another company, Nova Star Cruises, operated the Portland ferry service from 2013-2015. In November of 2015, a federal court ordered the Nova Star ferry to be seized for money owed to vendors.
In June of 2016, Bay Ferries returned to Portland, beginning a 10-year contract with the province. They still operate with an annual subsidy on the order of CA$10 million ($7.5 million), but the company has met its financial projections in the first two seasons.
The government subsidy also varies depending on the financial results of the service.
“Our mandate is to run the service as we would a business that had no government involvement,” MacDonald said. The subsidy formula, he said, includes an incentive for the ferry operator to reduce reliance on the government contribution.
The route carried 35,000-36,000 passengers in 2015. In 2016, that was up to 42,000, despite 20 percent fewer voyages due to an engine failure on one of the boats. (A figure of 60,000 was included in the province’s request for proposals for a new operator so competing proposals could be compared, but no target ridership has been set.)
If Bay Ferries were to return to Bar Harbor, MacDonald said, it would be on a different schedule than in the past, with only one trip per day. That means the ferry would sit at the dock for about three hours on a sailing day. Passengers would not be loaded and unloaded at the same time, reducing the amount of physical space the operation needs.
“If we were to make the move, it’s likely that we would move the service fully to Bar Harbor” and discontinue the Portland route, he said. “We believe that we can provide important assistance to the town and its citizens, while rebuilding a stable long-term ferry business,” he said.