XN000022-1974-07-17 — Page 20

WEDNESDAY, JULY 17, 1974

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+THESE FORECAST RATES OF RETURN ARE BASED ON A NUMBER OF OPTIMISTIC ASSUMPTIONS, THE MOST IMPORTANT OF WHICH IS THAT THERE WILL BE LITTLE OR NO CHANGE IN THE AMOUNT OF PASSENGER AND VEHICULAR TRAFFIC OR THE VOLUME OF FREIGHT CARRIED, AS A RESULT OF THE PROPOSED AMENDMENTS TO THE SCHEDULE OF FARES AND FREIGHT CHARGES.

+THE ESTIMATED RATES OF RETURN ARE MODEST, PARTICULARLY IN RELATION TO THE 15 PER CENT RETURN WHICH HAS NORMALLY BEEN REGARDED AS A FAIR RATE FOR EFFICIENTLY RUN TRANSPORT COMPANIES. THEY REPRESENT ONLY A RELATIVELY SMALL

IMPROVEMENT IN THE PROFITABILITY OF THE COMPANY AND ARE, THEREFORE, APPROPRIATE TO THE SITUATION AND NO MORE THAN THAT,+ HE SAID.

THE FINANCIAL SECRETARY EXPLAINED THE TWO MAJOR FACTORS WHICH HAVE LED TO THE DETERIORATION OF THE COMPANY'S FINANCIAL POSITION.

IN THE FIRST PLACE, HE SAID, TOTAL OPERATING EXPENSES HAD STEADILY INCREASED AND CONTINUE TO DO SO. BY WAY OF ILLUSTRATION, THE ESTIMATED INCREASE IN THESE EXPENSES, COMPARING 1973 WITH 1974 AND 1975 AND EXCLUDING PAYMENT OF ROYALTY AND MONTHLY FEES, IS APPROXIMATELY $17 MILLION (35%) AND $23 MILLION (48%) RESPECTIVELY.

THE ELEMENT REPRESENTING THE COST OF FUEL OIL IN THE COMPANY'S TOTAL OPERATING EXPENSES HAD ALSO RISEN BY ABOUT 180 PER CENT BETWEEN JANUARY 1973 AND MARCH 1974. SECONDLY, HE WENT ON, TOTAL REVENUE IN 1973 FELL BY SOME $9 MILLION (14%) FROM THAT OBTAINED IN 1972 AND, SIGNIFICANTLY, CROSS HARBOUR REVENUE, WITH THE OPENING OF THE CROSS HARBOUR TUNNEL IN 1972, DROPPED BY SOME $11 MILLION (22%) IN 1973 COMPARED WITH 1972. THIS PARTICULAR REDUCTION WAS PARTIALLY OFFSET BY INCREASED REVENUE ON OTHER SERVICES.

MR. HADDON-CAVE SAID IT WAS PERTINENT THAT, PRIOR TO 1972, THE COMPANY'S VEHICULAR SERVICES WERE THE MOST PROFITABLE ELEMENT OF ITS OPERATIONS AND MUCH OF THAT PROFIT SERVED TO SUBSIDISE THE FARES ON THE PASSENGER SERVICES.

+THAT SUBSIDISATION, IN EFFECT, DELAYED THE INTRODUCTION OF A PROPER LEVEL OF VIABLE PASSENGER FARES, BUT THE LOSS OF REVENUE SINCE THE OPENING

OF THE CROSS HARBOUR TUNNEL IN 1972 NO LONGER ALLOWED SUCH A SUBSIDY TO BE CONTINUED.

1¦

/+IN THESE

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