STANDISH – For decades, the ferry between Maine and Nova Scotia was a staple of the city’s waterfront.

But the familiar blast of a horn and the majestic sight of the Scotia Prince or the CAT ferry steaming out of Portland harbor on a beautiful summer day are gone, as is getting to Nova Scotia with a vehicle but without a grueling drive.

Will ferry service ever be resumed? During the spring semester, the International Finance class at Saint Joseph’s College tried to answer that question by conducting a study and making recommendations for business leaders and policymakers interested in reviving ferry service.

Many economic, political and tourism-related events conspired to doom the ferry service. Here are what we believe to be key factors:

1. Elimination of Nova Scotia government subsidy: In December 2009, the government of Nova Scotia announced that it was withdrawing its planned $6 million subsidy for the CAT ferry service in 2010.

The subsidy, which started at $1.3 million in 2006, increased steadily each year until peaking at $12 million in 2009.

Overall, the CAT consumed an estimated $18.9 million in government subsidies. Withdrawal of the 2010 subsidy left a devastating hole in the service’s cash flow.

2. The 2008 stock market crash and recession: The market crash of 2008 and subsequent recession played a major role in the decision of Bay Ferries, Ltd. to discontinue the CAT ferry service. But other economic factors were at work well before the 2008 crash.

3. Unfavorable exchange rates: Since 2000, the Canadian dollar appreciated almost 32 percent when paired against the U.S. dollar. This increased the cost of Canadian goods and services by almost 32 percent for American tourists.

Moreover, we found that Canadian currency appreciation was more extreme during the “tourist season.” The impact is startling: Between the late 1990s and early 2000s, 100,000 to 150,000 people used the ferry each year. 2008, that number had fallen to 85,000 and it decreased to 77,000 in 2009.

4. Travel restrictions: Post-9/11 customs delays and confusion over passport rules, as well as fears about SARS, mad cow disease and swine flu combined to dampen enthusiasm for international travel.

5. Strained relationships: Scotia Prince Cruises believed that the steady decline in passengers was due to a mediocre gateway facility in Portland, and, ultimately, due to a mold problem at the terminal.

The city of Portland made an effort to clean up the mold, but a dispute over mold remediation led Scotia Prince Cruises to cancel its 2005 season, which led to the city evicting the firm.

Litigation followed and, by then, the relationship between Portland and the Scotia Prince was destroyed.

Bay Ferries, Ltd, had its own set of relationship issues, such as bad publicity from complaints about noise, environmental issues with the vessel’s high speed and large wakes from the CAT’s engines.

6. Route volatility: With essentially one service route, the ferry’s income was very volatile because there were no alternate income streams to compensate for decreased travel in the primary route.

7. Recommendations: We believe, and traffic patterns suggest, that the more relaxed model of the Scotia Prince is preferable to that offered by the CAT. For people who want faster service, Twin City Air offers a 90-minute direct flight to Nova Scotia.

But essential conditions policymakers should consider include the following:

• Alternative streams of revenue: Efforts to re-establish a ferry service should consider the following as supplemental revenue streams: freight; expanded bookings of passenger cars; imports and exports; casinos; and co-marketing arrangements. Co-marketing and strategic partnerships with hotels, railroads, airlines, car rental agencies, restaurants and shopping hold great potential.

• An excellent working relationship between the city of Portland and the ferry line: Both should establish relationship managers to promptly address any problems that arise.

• Targeted subsidies: We cannot expect the government of Nova Scotia to subsidize a ferry service to the extent it did in the past. Nevertheless, we believe there is a role for targeted subsidies for things such as technical assistance and marketing programs.

• Finally, although outside the scope of our study, the authors believe it is important to consider case studies of ferry lines that have demonstrated sustained profitability.

Although there are some indications that investors want to resume ferry service, policymakers and business leaders need to be aware of the complicated array of issues they face if they want to avoid repeating history’s mistakes.

 

– Special to the Press Herald