Tuesday, October 09, 2007


Superferry could be outrageously profitable, if it runs

by Larry Geller

The hot news is that Judge Joseph Cardoza ruled just now that the Hawaii Superferry cannot sail to Maui while an environmental assessment is being conducted.

As I understand it, this doesn't affect Kauai. What will happen next? Will the ferry try to break through public opposition and force itself into Kauai? Will the Legislature hold a special session and try to overrule the judge? Will any protestors be arrested, will children be taken from their parents, will anyone be hurt by Lingle's "unified command?"

Now that the judge's ruling is out, I can almost hear the phones ringing at the Legislature and Governor's office. Special session? Special session? Reporters want to know.

There's sure to be a lot of pressure for the lege to let the ferry sail. The ferry is big enough business that its PR wheels will grind and the lobbyists will lobby. Hint to legislators: everyone will be looking for contributions related to the Superferry, you can bet on it.

I don't feel sorry for the Superferry, which says it is losing $650,000 in operating expenses each week. Too bad it didn't complete an environmental assessment, which would have protected its investment. When (if) it runs, it appears that it could be an exceptionally profitable operation.

If so, perhaps it should just take a long vacation in the Bahamas or somewhere and come back when the EA is finally completed. If there is money to be made here, why wouldn't it come back? And when it does, perhaps its management would be more careful to obey all the laws in Hawaii, especially those that we have put in place to protect our land, sea and environment.

The rest of this article is pure speculation. I have no more information than you do about the potential profitability of this venture.

It's not clear what the $650,000 expense claim represents. Probably it is mostly the cost of salaries, keeping the ship clean and maintained while it sits idle in Honolulu Harbor, insurance and so forth. Probably it doesn't include running expenses, mainly fuel. Probably, I'm all wrong on this, but I'm willing to continue a bit.

Let's do some math. There are too many unknowns for this to be very meaningful, but I happen to have an old envelope handy and have in fact done these calculations on the back of it.

On peak days, which include a list of holidays (implying that it will be stuffed with sightseers eager to overrun the Neighbor Isles), the fare, including surcharge, is listed as $79.55 per passenger. The ferry can hold 866 passengers. Let's arbitrarily assume that 1/4 of the passengers are children 2-12, retired military, or seniors, who get a reduced fare, so that the average fare paid may be closer to $76. So if the ferry is full, it would collect $65,816 per run. Sure, I know that all seats wouldn't be sold. And my 1/4 figure may not be real. Times four runs per day is $263,264 per day for passengers.

Vehicles are charged $69 peak, and the ferry holds 282 cars. That's $19,458 per run for vehicles max. The total revenue per run then (absolute max for the ferry) would be $85,274 and per day $351,096.

Now, each week has three off-peak and four peak days, and the absolute max for an off-peak day could be about 10% less. The ferry might be less full on an off-peak day, who knows.

Continuing to speculate like this is silly, because the ship wouldn't be full and there are too many other variables. I make no claims that the back of my envelope is accurate. Far from it. It's an uneducated guesstimate.

But compare this with the $650,000/week operating expenses quoted. It's clear that the Superferry is capable of bringing in real money. Real big money. It could make up that $650,000 in just a couple of days, then profit begins.

If the ferry doesn't make money, guess what—the fare goes up. They are not a philanthropic organization, and the state has chosen to privatize a service it might have run itself. So the profit is assured, unless for some reason people choose not to ride it (or Maui streams run out of imu rocks).

If there is a good calculation somewhere I'd love to learn about it. Until then, I'm going to stick with my envelope's opinion that this deal is very good for the ferry corporation and its investors.

And I am not going to feel sorry for them in the least.


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