Fixed Income Quarterly—Infrastructure
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includes the elimination of 6,900 underutilized roundtrips over 15 routes.
On a segmented basis, vehicle traffic on BC Ferries’ Major Routes expanded 1.7% to 1 million, while Other Routes declined 0.4% to 698,666 and Northern Routes rose by 6.1% to 4,676. With regard to passenger traffic, the Major Routes experienced an increase of 1.8% to 2.7 million, with Other Routes declining 0.6% to 1.5 million, and Northern Routes growing by 6% to 12,268. The company noted that vehicle traffic on its Major Routes was helped by growth in com- mercial traffic, with drop trailer traffic on two of its Major Routes expanding 15%.
We view BC Ferries’ fiscal Q3/14 traffic performance as neu- tral. We acknowledge the improvement in the third quarter compared to traffic declines in the first two quarters of fiscal 2014 and thus are hopeful the company has resumed the posi- tive momentum that was starting to build at the end of fiscal 2013. At the same time, we remain cautious as the ongoing, albeit improving, weak employment situation in the U.S. and other challenging economic conditions will continue to weigh on tourism to the region. We also believe challenged economic conditions in Canada and the U.S. over the near to medium term will likely weigh on commercial traffic, as will relatively high fuel prices.
As we have noted for a while, we expect economic growth in the B.C. region to recover over the longer term, particularly on the Major Routes. Likewise, we believe improving operating performance by BC Ferries will underpin modest traffic growth and that recent capital upgrades, including the launch of a number of new modern vessels and terminal refurbishments, will encourage revenue diversification (e.g., service upgrades, greater concessionary selections).