TNAG-0859-FCO40-1069-Legislation-for-ferry-services-in-Hong-Kong-1979 — Page 3

alterations. These proposals are being considered within Government but, even if implemented in full, will not make any major difference to the Company's overall financial performance.

9

Despite the various financial measures described above, the rate of return on net fixed assets for ferry operations has remained very low. In 1974, when royalties and fees were first waived and a fare increase was approved, it was forecast that the return on net fixed assets from ferry operations over the five years from 1974 would be about 8% per annum. In fact, profits have been in the order of 1% to 6% for the years 1975 to 1978 despite the additional measures adopted since 1974. Full details of the Company's performace for these years are included in Annex A.

G.S. 166

10

Against this background, and on the basis of recent dramatic in- creases in the price of fuel, traffic/revenue forecasts for the future, and the likely loss of passengers to the MTR, HYF submitted in May 1979 an application for an increase in fares and in freight rates to take effect on 1st July 1979.

General Review of HYF Traffic and Revenue

11

HYF operates three types of services inaddition to supplementary activities such as launch hiring, night club water tours and excursion services. These are:

12

(a) cross harbour vehicular services;

(b) cross harbour passenger services (including the

Central/Tsuen Wan Service); and

(c)

outlying district ferry services.

With regard to paragraph 11(a), vehicular ferry use has been badly hit by increased patronage of the Cross Harbour Tunnel. however, patronage has now evened out and may be expected to recover slowly as usage of the Cross Harbour Tunnel reaches saturation point. HYF does not propose at present to increase the charges on vehiclular ferries for two reasons, namely first, to maintain a reasonable differential below Cross Harbour Tunnel tolls and, secondly, because of increased revenue result- ing from the ban on Category 2 and 5 Dangerous Goods Vehicles using the Tunnel. If 50 extra Dangerous Goods Vehicles a day use the ferries, this will result in an additional annual income of about $3.0 million.

CONFIDENTIAL

機密