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Appendix H 

Estimated Ticket Price Increase for Ferry/Excursion Businesses 

Air Resources Board (ARB) staff estimated the ticket price increase for typical 

ferry and excursion vessel businesses assuming that the new equipment costs 

associated with compliance with the Commercial Harbor Craft Regulation are 

passed on to the passengers. The estimated new equipment costs associated 

with implementation of the regulation for these typical ferry and excursion boats 

are presented in this appendix along with the expected increase in ticket price. 

New equipment costs are the estimated out-of-pocket costs for purchasing and 

installing a new engine (engine replacement cost), new ferry costs associated 

with adding after-treatment technology, recordkeeping, and reporting. The 

compliance costs for a ferry or excursion business will vary depending on the 

number and type of commercial harbor craft in their fleet and the compliance 

options chosen. Options include replacing the existing engine with a new engine, 

demonstrating that the existing engine meets the applicable emission limits, 

equipping the commercial harbor craft with a diesel emission control system, or 

implementing an alternative compliance plan that could include a combination of 

the above options. If engine replacement is chosen, a large portion of these 

costs are an existing cost of doing business that would occur with or without the 

regulation when an engine reaches the end of its service life. Engine 

replacement was assumed to be the chosen compliance option for this estimated 

ticket price increase analysis. This is the most expensive option and so 

represents a worst case. 

The ticket price increase was estimated in two different ways. The first estimate 

was based on data obtained from the 2004 Statewide Commercial Harbor Craft 

Survey, documented in Appendix D. The other estimate was based on a 

hypothetical excursion company owning a single vessel and having to replace 

the propulsion and auxiliary engines at the same time. Based on these two 

estimates, the ticket price increase is expected to be between 5 to 10% of the 

annual sales. 

Estimate Based on 2004 Survey Data 

ARB staff conducted a survey in 2004 of California harbor craft owners and 

operators to gather data on vessel use and engine information. Staff was able to 

obtain Dun & Bradstreet credit and business report information on only three of 

the ferry/excursion companies which responded to the survey. These three 

businesses represent the range of business sizes, including a large, medium, 

and small ferry/excursion company. Estimated new equipment costs were based 

on the fleet description provided in the survey responses for these companies. 

An average annual new equipment cost was estimated for the years over which 

compliance would be required. The average new equipment cost ranged from 
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between three to five percent of the average annual sales for these three 

companies. These costs are presented in Table H-1 below. 

Table H-1: Potential Increase in Ferry/Excursion Vessel Ticket Prices 

Company Sales 

(3 Yr. Avg.) 

($) 

Average Annual 

New Equipment Cost 

($) 

Ticket Price 

Increase 

(%) 

A: Large $ 30,226,850 $1,024,563 3.4%

B: Medium $ 6,300,000 $ 289,009 4.6%

C: Small $ 2,700,000 $ 108,000 4.0%

Estimate Based on Hypothetical Ferry or Excursion Business

A worst case hypothetical example was generated to confirm this estimated 

range of ticket price increase. ARB staff estimated the costs to a small excursion 

company with a single older vessel. This vessel was assumed to have two 

400 horsepower propulsion engines and a single 50 horsepower auxiliary engine. 

It was assumed that all the engines would need to be replaced at the same time. 

Also, staff assumed that this replacement would be a more difficult installation 

with a cost at the high end of the expected range. The cost for replacement for 

the propulsion engines was assumed to be $300 per horsepower and the 

auxiliary engine replacement cost was assumed to be $240 per horsepower. 

This resulted in a total new equipment (engine replacement) cost of $252,000. 

The resulting new equipment cost was assumed to be amortized over 10 years at 

an interest rate of 5%. This results in an annualized cost of $32,635, as shown in 

Table H-2 below. 

Table H-2: Hypothetical Excursion Business Costs 

Engine 

Type 

# 

Engines 

Hp/ 

Engine 

Total 

Hp 

New 

Equipment 

Cost 

($) 

Annualized New 

Equipment Cost 

10 yr. Amortization 

($) 

Main 2 400 800 $240,000 $31,081 

Auxiliary 1 50 50 $12,000 $1,554 

Total 3 850 $252,000 $32,635 

A hypothetical annual sales estimate was calculated. The following assumptions 

were made to determine this estimate; 

o $40 per ticket, 

o maximum capacity of 40 passengers, 

o average passenger fill rate of 50%, 

o 3 trips per day, 

o 5 days per week for 26 weeks per year. 

Using these assumptions, the annual ticket sales would be $312,000. If the 

annualized cost of $32,635 was passed on to the passengers through a ticket 
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price increase, the resulting increase in ticket price would be 10.5%, or an 

increased ticket price of $44, as shown in Table H-3. 

Table H-3: Hypothetical Excursion Business Ticket Sales 

$40 Ticket price 

40 Max passenger per trip

50% Average passenger fill 

3 trips per day 

5 days per week 

Assumptions: 

26 weeks per year 

$312,000 Sales per year 

10.5% Increase in ticket price 

Sales and Ticket Price Increase:

$44 New ticket price