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A Tsawwassen-bound BC Ferry passes a Swartz Bay-bound ferry December 9, 2013, unnoticed by a passenger intent on using his mobile devices.John Lehmann/The Globe and Mail

A money-losing ferry route scheduled to be eliminated this year as part of BC Ferries service cuts actually makes money when tax revenues from passenger spending are taken into account, says a report commissioned by the Tourism Industry Association of B.C.

And cutting the route – a seasonal service known as Route 40, or the Discovery Coast route, that runs between Port Hardy on Vancouver Island and Bella Coola on the mainland – will hurt tourism not only in communities directly served by the service but in the province as a whole, the tourism group maintains.

"If you take into consideration the provincial taxes generated by Route 40, [they] offset the deficit that BC Ferries claims that route is incurring," TIABC executive director Ian Robertson said on Monday.

Given those findings, and the anticipated blow that tourism-related businesses will take from losing the service, the province should at least postpone the decision, he added.

"Many of the overseas tour operators have already begun to sell based on BC Ferries 2014 schedule, Mr. Robertson said. "The main contention that we make was the impact on tourism wasn't considered at all in this process. Because if it was … they would have given the industry some time to respond."

The pending cancellation of Route 40, scheduled to take effect this summer, was among numerous changes announced in November as part of an overhaul designed to bolster profits at BC Ferries.

Those changes included cutting a seniors' discount on mid-week sailing from 100 to 50 per cent and reducing the number of sailings on certain routes.

The service cuts also included axing Route 40 to save $1.5-million by 2016.

Tourism groups panned the decision, saying it would drive coastal tourism operators out of business and jeopardize a $10-million tourism sector in the Cariboo Chilcotin, where many vacationers head on the "Circle Route" after taking the Route 40 ferry from Vancouver Island to the mainland.

According to the new TIABC report, an annual operating deficit of $725,000 for the route becomes a $58,000 surplus when provincial tax revenues of nearly $800,000 are taken into account.

BC Ferries has been grappling with declining ridership and rising fuel costs since at least 2008 and hit a 22-year low in passenger and vehicle numbers in the year ended March 31, 2013. Over the same period, fares have been going up.

In fiscal 2013, B.C. Ferries reported a profit of $15.5-million on sales of $786.4-million, compared with a loss of $9-million on sales of $753.8-million the previous year.

A group calling itself the BC Ferry Coalition plans to hold a rally on Saturday on the Sunshine Coast to protest against service cuts, saying ferries should be treated as "marine highways" and that B.C. Ferries should be put under increased government control.

The service was partly privatized in 2003. The province owns the ferries and subsidizes ferry service, but BC Ferries has its own board of directors. That system has resulted in controversies over executives' salaries and bonuses, which were tweaked last year after a public outcry.

The provincial transportation ministry did not immediately return a request for comment on the TIABC report.

On its website, the province says it conducted extensive public consultation on ferry service in 2011 and 2012, including public open houses in coastal communities.

The TIABC says it has forwarded a copy of its study to provincial Transport Minister Todd Stone in the hopes that the 2014 season can be preserved, Mr. Robertson said.

"We believe [cutting the route] sends a very negative schedule about tourism in this province – that a schedule can't be taken into consideration because you never know what changes are going to be made."