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Good grief, even in Canada they get it wrong

March 20th, 2013

By J. Bruce Richardson

The Toronto Star newspaper published a commentary by Nick Mulder on March 20, 2013. Mr. Mulder is a former deputy minister for transport in Canada; the equivalent of an assistance secretary of the Department of Transportation in the United States.

Mr. Mulder mostly gets it wrong, for many of  the wrong reasons.

Below is his commentary, with comments interspersed.

Smaller is better for Via Rail

Passenger rail service ought to focus on what it can do best and get out of the rest.

By: Nick Mulder Published on Wednesday, March 20, 2013

You have to feel sorry for Via Rail. The Crown corporation might be trying its best, but it just can’t win. It is a large Canada-wide operation but it carries few passengers who are not increasing despite billions of dollars from the federal government and improved management and services.

Here are a few facts. Over the last six years, Via has been handed $2.3 billion from taxpayers in operating subsidies and capital grants. Yet, even with high operating subsidies and major investments in service, track, equipment and stations, its annual ridership of about 4 million people hasn’t budged much over the past decade. Its improved trains are on average still half empty. And at the end of the day, for every dollar Via makes, it needs another dollar from the federal government to make ends meet.

Comment: VIA Rail Canada is much more dependent on tourism than Amtrak in the United States. Amtrak’s business plan is to provide basic transportation plus haul vacationers; VIA, outside of its corridor between Montreal and Toronto primarily carries tourists, and the tourism market has taken a huge hit in the past four years because of a bad economy in many affluent places in the world.

There is also a question of scheduling; ALL of VIA’s long distance trains operate on less than daily schedules outside of the Montreal-Toronto corridor. Passengers are expected to travel when it is convenient for VIA to operate trains, not when it is convenient for passengers to travel according to their available vacation schedules or personal needs. When Amtrak cut back in the 1990s to less than daily service, ridership and revenue plummeted, while costs stayed nearly the same. VIA will not grow its business significantly until it increases frequencies on its outstanding long distance trains.

Interesting comparisons can be made when looking at other competing passenger transportation modes in Canada. For instance, WestJet and Air Canada make money with planes that are on average 85-per-cent full and they receive no government subsidies. Indeed, they or their passengers pay about $85 million annually for special jet fuel taxes and more than $600 million for burdensome, slow airport security services.

To take the comparison even further, Pearson International Airport in Toronto handles 34 million passengers per year and its counterpart in Vancouver, 18 million. From those two entities alone, Canadian taxpayers will receive about $185 million this year in ground rent payments. Yes, we make money off of them!

Comment: This is the usual irrelevant apples and oranges comparison between passenger rail and air travel. The only thing they have in common is they are both common carriers and have beginning and ending terminals. Everything else is different, and not a viable comparison.

Scheduled privately owned intercity buses compete with Via, too, and receive no subsidies for transporting about 18 million passengers per year; nor do chartered intercity tour buses. In other words, heavily subsidized Via competes unfairly with non-subsidized competitors and still can’t make headway.

Comment: Another silly comparison. Busses do not have the same terminal and maintenance costs as trains, and while they do usually pay some sort of highway fee when purchasing license plates, they do not pay a per mile cost for moving a bus over a highway as a VIA Rail Canada train pays a train-mile cost for moving a passenger train over a mile of track owned by Canadian National or Canadian Pacific railways.

“So what?” you ask? What should Via do? Well, for starters, it ought to focus on what it can do best and get out of the rest. Its best performance is on the Central Canada corridor service that generates 80 per cent of its business and where its per-passenger operating losses are half of those on its transcontinental services. Indeed, for Via’s Ocean service from Montreal to Halifax the losses per passenger are three times higher than for its Quebec City-Windsor routes.

Comment: Actually, what VIA does best is operate its long distance trains, such as the Canadian from Toronto to Vancouver, considered one of the best passenger trains in the world. The only reason the author thinks VIA does better on the corridor trains is because there are more corridor trains, all running on a daily basis, than long distance trains, operating part of the year on a tri-weekly schedule, and part of the year on a twice-a-week schedule, which is the usual recipe for financial disaster. The traveling public demands and expects daily service on most forms of common carriers; usually, only passenger rail operated by governments denies this and insists on running trains on inconvenient schedules the public disdains.

As another example, Via loses $475 per passenger on its Canadian route from Toronto to Vancouver. The majority of those losses are incurred to carry foreign tourists whom Via attracts through subsidized marketing efforts with below-cost fares. It amounts to predatory competition with private rail and bus operators in the Rockies and elsewhere in Western Canada.

Comment: Predatory competition? Predatory to whom/what? While the majority of the passengers on the Canadian are foreign tourists, the train also serves as a travel lifeline for some residents of the provinces it travels through, including British Columbia, Alberta, Saskatchewan, Manitoba, and Ontario. The current fares on the Canadian are high; while they may be below-cost, it’s doubtful you could charge high enough fares to cover the operations of this single train on a less than daily basis. If the train was daily, it would have a chance at breaking even, or, perhaps make some money.

It is the Canadian federal government, which makes the decision whether or not this train is tri-weekly or daily. In the recent past few years when VIA Rail Canada managers have attempted to increase the frequency of this train to four departures a week in each direction, the private owners of the Rocky Mountaineer, which considers itself in competition with the Canadian (which is a stretch of the imagination because it does not offer overnight service, nor local transportation) has screamed bloody murder saying VIA is unfair, etc. to a private business.

What everyone has failed to notice is if both VIA Rail Canada and the Rocky Mountaineer had more robust service, the marketplace would quickly fill both services because there would be greater travel choices for travelers. More choices always mean more success which leads to greater financial success.

Via should be told to stop this unfair marketing and the subsidization of non-Canadian tourists on its Trans-Continental. Those routes ought to be left to private tour operators.

Comment: Is the former member of the Canadian federal government complaining about foreign tourists coming to Canada and leaving money in places like hotels, restaurants, national parks, souvenir shops, etc.?

Via Rail should spend its scarce resources and management efforts on improved point-to-point service where it is needed most and where there is a large population base to support it; that is, to and from Montreal, Ottawa and Toronto, given their shorter distances and combined metropolitan population of about 12 million, and to a lesser extent to smaller Windsor and Quebec City. It should also further its recent steps to make better links with urban transit services and airports in those major metropolitan areas.

If the federal government and Canadians want more effective rail passenger services, a proactive new strategy for Via Rail ought to be pursued. By breaking out the major business units into key sections — tourism, remote and intercity — the government can then assess and plan how the private sector can play the lead role in operating the highest money-losing units, particularly the more tourist-friendly long-haul transcontinental services.

Comment: Apparently, the author wants VIA split into parts, and this does make sense. The remote services, which are social services going to places where it is highly unlikely, even in the 21st Century, roads will ever be built, will always require some sort of government help. Recognizing VIA’s long distance trains have potential under a private operator is very good, as long as the private operator would be able to run the trains on reasonable schedules – read that as daily – and with decent contracts with the host freight railroads, where both the host railroads and the passenger operators have a true agreement on train-mile costs for passenger trains. Usually, government entities pay too little; host railroads must be able to recover a fair price for use of private infrastructure.

Via in turn can focus completely on its best business unit — the Central Canada corridor — where it could partner more with the private sector, the Ontario and Quebec provincial governments, and urban transit operators to upgrade all of its corridor services, much as the U.S. has done over the past two decades on the now highly successful Boston-N.Y.-Washington rail route.

Comment: This is a bit laughable; Amtrak has focused on the Northeast Corridor between Boston and New York and Washington almost exclusively to the detriment on Amtrak’s long distance system. It’s the American long distance system which keeps the NEC alive in more ways than one, not the other way around. If VIA Rail Canada did become a solely Ontario/Quebec corridor service, it could run the possibility of losing feeder services into the corridor from long distance trains without proper coordination.

This approach would deliver real benefits and results for Canadian rail passengers, Via Rail management and, particularly, the public purse. In fact, Canadians who do rely on Via as a passenger rail service should be asking government why they aren’t more of a key driver of Via’s services. At the end of the day, Via should stay true to its mandate to move Canadians — and not spend public money on subsidizing foreign tourists. Let others who are more effective at providing tourist services and pay into the Canadian economy do so — and let Via put its focus where it belongs, on its passenger services in most demand by Canadians, in the corridor.

 Nick Mulder is a former federal deputy minister of transport.


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