The economic fallout of the pandemic may force a vital carrier of food and medicine to Newfoundland and Labrador to tie up its fleet of ships and stop delivering as much as half of the island’s food supply.
Oceanex Inc. — which runs weekly trips from Montreal and Halifax to St. John’s — says it is losing millions a week due to a drop in volumes caused by the COVID-19 pandemic.
It is asking the federal government to offset its losses so it can keep running supplies to St. John’s.
“We just can’t continue,” said Sid Hynes, the company’s executive chairman. “It’s costing us $5 million a week to operate and we are about $2 million short.”
Hynes said the company almost certainly will have to cancel one of its weekly trips from Montreal, tie up that boat and lay people off.
He said the other Montreal trip and the weekly Halifax-to-St. John’s run also may have to stop if Oceanex can’t get federal financial support.
“It’s getting progressively worse. It’s not getting better,” Hyne said. “This past week was worse than the previous week.”
If Oceanex shuts down, it would create an immediate food security and public safety crisis in the province.
Oceanex said it delivers 50 per cent of all freight to Newfoundland — and 75 per cent of all goods to the more heavily populated St. John’s area on the northeast Avalon Peninsula.
It’s the major supplier for Costco, Walmart and other major grocery stores in Newfoundland and Labrador and it delivers a significant amount of medicine and medical supplies to the province.
“It would be a catastrophe, there is no doubt about it. You would have an immediate problem with food supply,” said a senior provincial government official. “On average, there is only about a five-day supply of food in the province.”
So this critical supply line is looking for a lifeline from the federal government. Oceanex was struggling financially before the pandemic. It carries significant debt and most of its costs — such as fuel — can’t be offset by government pandemic aid programs such as the wage subsidy.
Those problems have been compounded by a drop in shipping volumes that is flattening the company’s revenue stream. Delivering new cars to Newfoundland dealerships makes up significant portion of Oceanex’s business in normal times — and it’s hard to sell cars when people are barely driving.
Like almost every other company in Canada, Oceanex reached out to the federal government several weeks ago. It shared financial data with Transport Canada and the federal Department of Finance just before the holiday weekend.
Sources say Oceanex has asked for a subsidy to offset its $2 million weekly losses until at least September. Federal government officials were said to have spent the weekend working on the file.
“Ultimately, this is a different situation because this is about food security and public safety,” said a federal source speaking on background.
Marine Atlantic is the other major supplier of food and supplies to the island of Newfoundland. The senior provincial source said the province has gotten some assurance that Marine Atlantic can fill the gap if Oceanex stops deliveries.
But the provincial source argues that would mean securing extra trucking and marine capacity and re-routing existing supply lines — a complex task that would take time and would not guarantee that an already fragile food supply wouldn’t be interrupted.
One of the big risks involved in trying to supply the island without Oceanex is availability of protein and fresh produce. Newfoundland and Labrador has a domestic dairy and poultry supply. But fresh vegetables, beef and pork are largely brought in by shipping container or truck — and Oceanex is a core part of that delivery system.