It is also apparent from examination of the tables
that the Cross Harbour Services; which account for over 85% of all passengers carried and which utilise over 60% of the Company's vessels, do not, in real terms, make a profit.
28
Similarly, there is a large element of cross subsidisation
by the Vehicular Ferries.
Future Increases
29
It if the forecasts are correct it is possible that a further fare increase may be required in mid-1980. As may be seen from Table (1) and paragraph 27, it seems likely that any such increase should be limited to Cross Harbour Routes. Depending on the volume of traffic lost to the MTR, and the routes affected, consideration may also have to be given to the withdrawal of certain unprofitable Cross Harbour Routes.
30
However, in examining the forecasts, it must be pointed out that there are three unknown factors which could entirely alter the picture namely:
(a) Fuel Prices
There is no way of knowing whether the estimates are reasonable or note
(b) MTR
It is possible that MTR may take either more or less passengers from the company than is assumed in the forecast.
(c) Passenger Figures
It is quite possible that passenger volumes may be greater than those forecast; in particular, the company suggest that more trips could be generated by immi- grants and by Vietnamese refugees, particularly if the number of refugees increases significantly and the y are actively encouraged to seek employment. Any increase in passengers, or reduction in forecast fuel prices, would,
of course, increase profits by the gross fares collected or the amount of the savings.
Cash Flow
31
The cash flow situation has been discussed with the Company; HYF is satisfied that its cash flow (including that generated by deprecia- tion and non-ferry activities) will be sufficient, in the next two years, to ensure the continued viability of the Company, even, if profits for 1979 and 1980 are lower than those forecast: It should be pointed out, how-- ever, that the Company considers that the profit forecasts in this memo- randum may be over-optimistic.
CONFIDENTIAL Z