Proceedings of the Standing Senate Committee on
Transport and Communications
Issue 2 - Evidence - November 26, 2002
OTTAWA, Tuesday, November 26, 2002
The Standing Senate Committee on Transport and Communications met this day at 9:35 a.m. to examine issues facing the intercity busing industry.
Senator Joan Fraser (Chairman) in the Chair.
[English]
The Chairman: Good morning. We will continue our examination of Canada's intercity busing industry.
[Translation]
Today, we welcome Mr. Sylvain Langis. Mr. Langis appeared before this committee in February on behalf of the Canadian Bus Association. He is here today on behalf of Groupe Orléans Express, of which he is the President and Chief Executive Officer.
Mr. Langis had been scheduled to appear in September, but unfortunately the prorogation of Parliament interrupted this plan. Thank you very much for coming before us today, Mr. Langis; we apologize for the delay.
[English]
We will begin with an introductory presentation from Mr. Sylvain Langis.
Mr. Sylvain Langis, President and Chief Executive Officer, Groupe Orléans Express: Good morning, ladies and gentlemen, and thank you. It is true that I have been trying to appear before this committee for some time now, so I thank you for inviting me to appear before you today on the intercity busing issues currently before your committee. Besides being the chief executive officer of Orléans Express, I own 25 per cent of the company. As you know, the Paris- based mass transit conglomerate Keolis recently purchased the other 75 per cent interest in Orléans Express.
My presentation will provide you with a brief description of our company, as well as some specific comments on the bus policy issues currently before you. Thereafter, I will be pleased to address your questions.
[Translation]
Orléans Express is the largest intercity bus carrier in Quebec and the second largest scheduled intercity bus carrier in Canada. We operate approximately 100 buses and provide employment to approximately 500 individuals on a full-time basis. We also operate a substantial bus parcel network as well as providing tour, charter and bus sightseeing services.
As you look at the map next to me, you will see that some of the elements I am going to refer to are a part of it. The largest scheduled route in our network is Montreal/Quebec City, in terms of volume. This route, along with the Montreal/Trois-Rivières route that runs north of the St. Lawrence River, and the Montreal/Quebec City/Rimouski portion of our network, are profitable.
Unfortunately, we cannot say as much for the remaining portions of our network. For instance, the network spur serving communities north of Trois-Rivières, i.e. between Trois-Rivières and LaTuque, the Quebec/Trois-Rivières portion and the Gaspé portion of our network east of Rimouski are not profitable.
In total, we estimate that the cross-subsidy burden that is assumed in order to operate these unprofitable portions of our network is equivalent to some 10 per cent of our total scheduled passenger revenues on the profitable routes. In other words, passenger fares would notionally be some 10 per cent lower on the profitable portions of our network if we were not required to cross-subsidize the unprofitable portions of our network.
In describing our company, certain key attributes deserve mention. The total cost of our passenger welcoming infrastructure which includes sales and marketing, telephone inquiry services, ticketing costs and baggage handling as well as depot infrastructure, consume some 25 per cent of our total passenger revenues. Moving people between cities from notional point A to notional point B requires much more network effort than a simple expenditure on linehaul operations. A responsible public carrier must also provide an organized service infrastructure to assist and consolidate passenger embarkation and disembarkation in an effective and safe manner.
On the other hand, our average fleet age is of 2.5 years, which is unquestionably the lowest within the Canadian bus industry. We are in the business of transporting people, not in the business of repairing buses. Our fleet replacement policy stipulates that all of our buses must be replaced after five years of use. Moreover, our buses offer passengers ergonomically designed seats with reclining back rests, work tables and power outlets. This passenger-friendly seating encourages Orleans' ridership to repeat their trip experience and, indeed, our business is on the increase.
Our scheduled passenger ridership is not in decline, contrary to the suggestions that have been made by Transport Canada. Our passenger ridership is at its highest level since Orléans was founded in 1990; more specifically, over the past five years, our scheduled ridership has grown some 30 per cent. In fact, all of our business product lines are growing.
[English]
Transport Canada has known since at least 1994, to our certain knowledge and probably much earlier, that scheduled bus ridership data is non-comparable between 1970 and today because of changing definitions and changing measurement standards. Yet, they chose to submit this deeply flawed data to this committee without even a warning note in the orientation document. We find it instructive that, in consequence, Statistics Canada has once again issued another warning on the problems that arise with such historical data comparisons.
The so-called industry ridership decline is largely illusory. The total intercity bus industry is certainly growing. There may have been a modest decline in scheduled passenger activity during the past 30 years but this has been largely caused by government policy that encourage private car usage — as the royal commission has already found — and by the shift of short-haul bus intercity passenger ridership, which is now being reported as subsidized local transit elsewhere in the bus industry statistics.
We have several comments to make concerning the bus policy issues being examined by your committee. First, the importance of your committee's role in addressing these issues is paramount. There has never been a public examination of such depth in the history of the industry. It is a groundbreaking opportunity for both the public and the industry.
Second, federal knowledge in the intercity bus arena is minimal. Since the federal responsibility has always been delegated to the provinces, they have never had hands-on experience. That is normal, since delegation was elsewhere. Moreover, there has been virtually no research on these bus issues performed by the federal government. As a case in point, the KPMG impact study performed in 1998 was entirely financed by the bus industry because the federal government rejected our offer to participate in a cost-sharing arrangement.
Federal passenger policy is in disarray, and has been for many years. The minister's current initiative to develop a national transportation blueprint may correct some of the past biases. Why, for example, is the federal government currently providing a rail subsidy of $80 per passenger when Via Rail users are predominantly wealthy and predominantly travelling within the already well-served Quebec City-Windsor corridor? Would this money not be better spent on the lower income segment? I will skip that for the moment.
Given the recent contemplations by the minister and others to inject more than $3 billion additional dollars in capital grants to increase VIA Rail's train speeds and frequency in the corridor, we believe that this money would be better spent on real social priorities.
The preoccupation with the policy issue of economic regulation or deregulation is misplaced. It places the cart before the horse. Until long-term strategic decisions have been reached on what will be the role of the intercity bus mode within a national framework, and how much, if any, subsidies will be made available in pursuit of this role, it is impossible to decide what is the best economic regulatory system under which the mode should operate. The simple truth is that uneconomic bus routes must be subsidized if they are to continue to exist. The ultimate choice will be either to continue with the current imperfect system of cross subsidies or to fund a complicated procurement system based on least-cost bidding in order to ensure the continuance of connecting public services for small town Canada.
Passenger vans are not the answer, and never will be, without substantial tariff hikes. We strongly recommend that the government perform some basic empirical research on this topic. They will find that the cost differential of operating a 15-seater passenger van, including capital and financing costs, maintenance costs and fuel costs is only about 25 cents less per kilometre than operating a 51-seater bus.
Passenger vans only make economic sense when they are carrying premium traffic at tariff rates substantially above those charged by scheduled intercity bus operators. Moreover, it is our strong suspicious that many current passenger van operators, even then, only manage to survive by operating illegally: by not charging GST, by paying employees under the table, by avoiding the payment of many statutory employment premiums and by failing to operate and maintain their van equipment according to stipulated regulatory safety standards.
[Translation]
To place the known operating cost differential of some 25 cents per kilometre in context, it is roughly equivalent to the passenger revenues earned from transporting two additional scheduled passengers. In other words, a bus carrier is better off using a full-sized 51-seat bus so long as it can average two additional passengers more than it would otherwise be possible to carry with a 15-seat van. Anyone familiar with the peaks and valleys of scheduled passenger traffic within a day, within a week, and within a year quickly arrives at the realization that legally operated passenger vans cannot compete economically with buses when providing scheduled bus services. The 15-seat limitation prevents vans from carrying sufficient excess passenger loads on ``peak'' trips to help offset the loss incurred on the many other ``valley'' trips that are unavoidable in a scheduled service.
Moreover, the whole issue of buses versus vans is moot if this scheduled carrier generates a net parcel contribution of more than 25 cents per kilometre. In our case, all of our uneconomic bus routes exceed this minimum level of parcel activity. Since vans do not have practical cargo capacity, we are automatically better off to use full-sized buses on these losing routes, before even taking into account the upside leverage of being able to carry 36 more passengers at peak times.
As far as deregulation is concerned, Orléans Express has not taken any chances. It has been preparing for the possible advent of bus deregulation since the federal government first announced its intention in 1994. We have consciously structured our operations to maximize our future competitive advantages in this regard.
In the event of deregulation, we will compete to the full extent of the latitude provided under the Competition Act. We are confident that our superior service record, the exercise of control over our passenger welcoming infrastructure, our strong position in the already deregulated parcel business, and our intimate knowledge of local passenger markets will allow Orléans to continue to prosper under the regulation. The losers will not be Orléans, per se, but rather, most of the communities that will be disconnected on our uneconomic routes unless government establishes a system of direct service subsidies.
That being said, we strongly urge the government of Canada to perform the basic research that has yet to be done. A forthright research effort will, among other things, reveal that economic deregulation in small or otherwise imperfect markets is of dubious worth in terms of the public interest.
The plain truth is that deregulation only succeeds in maximizing the public economic benefit when there is enduring competition. The sad truth is that most scheduled bus routes in Canada service local markets which are simply too ``thin'' to sustain enduring competition.
Given the Canadian experience with deregulation in our much larger air markets, this should come as no surprise. Given the ``one bus route — one bus carrier'' outcome that unfolded after both U.S. and U.K. bus deregulation, why would the outcome be any different in our much smaller Canadian bus markets? For the most part, economic bus deregulation in Canada would mean that the current regime of regulated service providers — now typically subject to provincial board scrutiny — would be replaced by a regime of unregulated monopolies, no longer subject to regulatory oversight, but occasionally disturbed by intermittent attempts at market entry by new operators whose efforts invariably fail, because of the market dominance of the incumbents.
This need to develop a transportation strategy based on sound research is particularly pressing in the light of the government's commitment to ratify Kyoto in the short term.
Canada's commitment to Kyoto, which we support, requires a major rethink of how we transport goods and people in this country. Moreover, the Kyoto question is largely moot if we extend the planning horizon to 25 years, because the world economy is running out of cheap oil. The resulting change in relative prices of modal travel options will favour those modes which have the highest fuel efficiency. The bus mode will inevitably become increasingly important to passenger transportation as a result.
[English]
While my personal commitment to, and passion for, the bus policy issues before this committee has only been touched upon, time prevents me from monopolizing the committee's attention. In closing, I would like to summarize our views.
The policy question surrounding economic bus regulation cannot be addressed in isolation. An informed decision in this regard can only be made within the context of an overall strategic plan for passenger travel in this country, both local and intercity, and for all modes, not just for the bus mode. Moreover, any such strategic framework cannot be effectively established until fundamental research has informed the process.
In the case of the bus industry, we specifically believe that the federal government has not yet done the necessary background research. Transport Canada's suggestion to this committee that economic bus deregulation may be the preferred course because of an ongoing passenger decline and because of supposed regulatory fragmentation is not borne out by the facts. It is our strong view that they still have not properly researched the implications of a bus deregulation policy.
While your committee can offer guidance in this regard, with all the respect that we have for you, we do not believe that you have had either sufficient time or sufficient resources to fully correct this research deficiency. Indeed, we do not believe that it is, or should be, your job to do this basic homework.
Presuming that this research gap is eventually corrected, that a coherent strategic framework is established for all passenger modes, and further presuming that federal resolve in support of bus deregulation then still remains undiminished, Orléans is quite prepared to compete under a deregulated framework. That being said, we offer three cautionary notes: One, the bus safety framework must be upgraded prior to any bus deregulation; second, government must publicly decide either to abandon small town Canada, or it must put into place a program of direct subsidies to ensure continuing service to communities on unprofitable routes before any bus deregulation can occur; third, after bus deregulation, government must be prepared to accept the reality that almost all bus routes in Canada will only be served by a single bus carrier, and that instances of ongoing competition in scheduled bus passenger markets will be rare.
On this note, I would like to thank you for your kind attention, and now invite your questions, if you have any.
The Chairman: Of course, we have questions.
Senator Graham: Thank you for your presentation. I thought it was very important, very enlightened and well thought out. I congratulate you on that. You have raised many points that should be of interest, not just to people who live and work in that part of the country but to people who live and work all over the country and who may face similar conditions.
I am interested in the profitable/non-profitable routes. You call them uneconomic. Do you carry on service in the uneconomic routes because that is part of your licence, or is it in the hope that things will get better, or do you do it out of a sense of duty or to keep out competition, or a combination of all of those things?
Mr. Langis: My answer would be a combination of all those. This being said, I operate essentially in the Province of Quebec, except one small link that crosses into New Brunswick on a daily basis. Therefore, the most important set of regulations comes from Quebec, in our case.
Essentially, the regulations set different elements that we must follow. It is not openly said that I have to serve a non-profitable route within my permits. I have some permits, for example, between Montreal and Quebec. I have other permits between Montreal and Three Rivers. In fact, the permits are on the different segments of routes. It is by linking all of those permits together that we can create a network.
However, there is a silent obligation by the transport commissions or the transport boards that says if a carrier decides to play a certain social role by serving some areas that are non-profitable in their system, we will give them a break on the most interesting routes. When you can create a network that is balanced between profitable and non- profitable routes and manage to be profitable at the end of the year, this is how the authority boards regulate the system.
In our case, it is not written. It could be an obligation in other provinces, but I am not the best person to answer your question elsewhere than in the Province of Quebec. However, in our case, it is not written down, black on white, except that there is a silent element that asks us — for example, if I want to remain alone between Montreal and Quebec City in serving this area, I have an obligation, in the government's eyes, to serve some markets that are unprofitable. If I do not do that, they will issue more competitive licences on the most profitable routes.
Senator Graham: Which government are we talking about?
Mr. Langis: In this case, I am talking about the Government of Quebec.
Senator Graham: Do you get your licence from the Government of Quebec?
Mr. Langis: Definitely.
Senator Graham: Are you regulated by the Government of Canada?
Mr. Langis: No. In terms of regulation, the regulation that applies is a provincial regulation. The federal government transferred its jurisdiction to the provinces in the 1950s, following the Winner case, which was a case in the trucking industry.
Senator Graham: That raises the question of the role of the Government of Canada in this committee, and in all of this.
Mr. Langis: As the Government of Canada has conceded — and I want to choose the right word here. It has not given away the jurisdiction; it has let the provinces apply their jurisdiction on the territory on its behalf to avoid federal-provincial problems and discussions. However, they still have jurisdiction on all interprovincial movements. It is elementary here because all of our companies, although we operate on an intercity basis in the territory of only one province, we all also operate charter operations. Under our charter operations, we cross provincial and territorial boundaries on a regular basis.
We are all federal by definition, if you want, but the regulation that applies to our permits is provincial.
Senator Graham: I just wanted you to clarify that point.
Senator LaPierre: Did you say you had a little line in New Brunswick?
Mr. Langis: In fact, it is not a line. We go to the Gaspé on a regular basis on this side of the peninsula, and cross the bridge in Campbellton to serve Campbellton as well. We interconnect with SMT and Acadian bus lines, which serve the Maritimes. We have an interconnecting point, as we have one in Rivière-du-Loup.
Senator LaPierre: Are you not subject to New Brunswick regulations to cross the bridge?
Mr. Langis: In order to cross the bridge, I need a New Brunswick authority, even though I probably travel only one kilometre into New Brunswick.
Senator LaPierre: They have to give you a licence?
Mr. Langis: Yes.
Senator Eyton: I have an observation, really. In your excellent presentation, you asked for a chance to obtain more honest, accurate and representative research, so that we can understand the overall transportation problems and the various ways in which people can be transported from point A to point B.
Then, your three conclusions at the end were all bus or intercity bus-centric. You ask for an upgraded safety framework, which I presume is because you have new buses and you have met the highest standards.
You say small towns will require some sort of subsidy in the bus world, or else service would simply stop. You also note that, in that deregulated world, the competition would, in fact, evaporate, and you would left with only large bus companies. All of those are bus-centric solutions, although you have asked for an overall view.
Mr. Langis: We would like to know what, in the point of view of the government, the role of the bus industry is within the global transportation system of passengers in Canada. We have never done any strategic planning over our passenger transportation system in Canada. We have knit together some elements based on the development of the bus industry, passenger rail and air transportation. We did things for planes and for the trains, but we did not do very much for buses, although those buses carry more people domestically than trains and planes put together.
Senator Eyton: That is the direction I was headed in.
Mr. Langis: We only have a short portion of a map within Canada here, but if you look at Canada as a whole and the number of airports that we have, you have roughly 30 or 35 airports that are being served by the commercial lines in Canada. You have about 300 points being served by passenger rail and you have 3,000 points being served by the bus industry. The flexibility of the bus allows it to go everywhere where there is a road system.
Communities that are not served by rail or air, as well as people who cannot afford to take a plane or a train, normally use the bus as being the most economical mode of transportation.
We cannot put too much pressure on the bus system, which already needs to cross-subsidize the lower density segments of the system in order to provide services. We still need those high-volume corridors in order to generate enough revenues to keep the whole system in place. The moment you deregulate, everyone will run into that corridor. You will have about five or six times more buses between Quebec and Windsor, but you will not have six times more buses going down between Rimouski and Gaspé. There are not enough people on that route, anyway. There is already plenty of space in our bus to carry three times more people on a daily basis.
You will find that out elsewhere on the network. What will happen is that those people who serve the unprofitable routes under a deregulated system will leave those routes behind and concentrate their efforts where the big markets are located. For a very short while, some people may try to serve those secondary or tertiary markets, but they will not do it for very long because we know for sure that there is no money to be made there. What will happen is that they will start with a bus, and instead of having it for an average of eight years, they might go 12 years or 15 years with the same bus. If you do not provide a good service to people who are used to getting a better service now, they will try to find an alternative solution to move themselves. The car will probably be the solution, and if they do that, I do not think we will meet the Kyoto objectives that we are trying to set.
Senator Eyton: As a supplementary to that, so that I may understand better, I think I understand the difficulty of servicing small centres and small traffic.
Mr. Langis: There is no magic.
Senator Eyton: That is a problem, and it has to be addressed one way or another. I would like to pin this down, and the best way I can represent it to you is in this fashion: I am in Montreal, and I want to get to Quebec City. That route is highly embedded, and I do have some real choices there. Can you help me in making that decision? I am talking about cost, convenience and travel time. I would like to look at air. I presume that the options are air, train or bus.
Mr. Langis: Or car.
Senator Eyton: Let us assume I do not have a car, and will be paying someone to move me. How does that stack up? What are the relative costs and convenience of bus versus train versus plane?
Mr. Langis: In terms of cost, flying would cost you approximately $250 or $260 to go from Montreal to Quebec direct. I do not have the right prices with me, but rail would probably cost you around $60, and the bus would cost you $37. That is a one-way trip. If you decide to make a return trip, the price is not doubled. The price would be in the range of $54 return.
Senator Graham: Was the price you quoted Senator Eyton for air travel one way?
Mr. Langis: Yes.
Senator Eyton: The train would be two trains per day or something. May I assume the bus would give me more choice?
Mr. Langis: The train will offer you four daily departures in each direction for a total of eight. We offer a minimum of 18 departures daily in each direction, but the average shows us that we make it about 25 times in each direction daily for a total of 50, compared to the air routes, which are about 16 times daily. In fact, that is eight times daily in each direction, for a total of 16.
Senator Eyton: Even at the rates you have talked about for bus fare, you say that those are profitable routes. Do you make money on those routes?
Mr. Langis: Definitely.
Senator Eyton: Beyond that, on the train example, they do not, in fact, make money. Do they not require a mass system subsidy?
Mr. Langis: Based on the information that I have for the routes between Montreal and Quebec, the train makes not even 45 per cent of its costs from selling tickets. They need the rest in subsidies in order to maintain the system in place.
Senator Eyton: What would be the experience in the air segment? Do you know enough to comment?
Mr. Langis: I do not know whether or not flying that route is profitable for Air Canada, for example.
I believe that for a segment like Montreal-Quebec, they would not operate it with jet engines. They operate it with smaller planes. It is most likely a profitable route for them.
Senator Callbeck: Thank you very much for your presentation. On page 2, you talk about profitable and non- profitable routes. Do you know whether some of these routes that are now unprofitable were profitable at one time?
Mr. Langis: Profitable and non-profitable?
Senator Callbeck: Yes. Are there some routes that were profitable five years ago but that are not profitable today?
Mr. Langis: No. If we compare it to five years ago, there was a route going from Montreal into the heart of the Prime Minister's riding in Shawinigan and Grand-Mère. That was an excellent route at the time, because we used to cut across in order to make a quick trip on Fridays and Sundays. For some reason, ridership on that route started to decline, a fact that we attributed to the diminution in the number of young people going to universities and colleges. In the baby boom years, it was an excellent route. Nowadays, it is a non-profitable route. However, it was more than five years ago that that happened. It probably happened about 12 years ago.
The rest of the routes are essentially always the same. We live with demography. One of the main factors that we live with is a dense and not-so-dense centre of population. Therefore, Montreal-Quebec is one of the biggest revenue- generating bus routes in Canada because you have, on one end, the capital and at the other end the economic centre. You will find the same between Montreal and Ottawa, and Edmonton-Calgary are like that as well.
However, I would refer you to Rimouski, which is a community that we serve on a regular basis with at least two trips eastbound and two trips westbound. We travel over 1,500 kilometres on a daily basis on that route. We lose between $800,000 to $1 million on a yearly basis in operating to the Gaspé. Those passengers usually travel long-haul trips, as they want to go not only to Rimouski but also to Quebec City and Montreal. Those passengers, to a certain extent, will feed the rest of the system.
If we decide to cut the route off in Rimouski, someone might be interested in operating the system, but at different hours than we do. Interconnecting will not be as great as it is now. Someone may have to wait four or five hours before taking another bus. Right now, it is the same bus that leaves Gaspé that will go to Quebec City, or even to Montreal. It is always the same bus. We just change drivers on the route to make sure we have a transparent, steady system.
Senator Callbeck: Your scheduled ridership has grown 30 per cent in the last five years, so it must have had tremendous increases down around Quebec.
Mr. Langis: In 1994 we brought in our policy of not having a bus that is more than five years old in our fleet. We developed a program of renewing our bus fleet on a steady basis. For example, we have one new bus coming in every month and the oldest one going out. We change at least 12 buses a year under that system.
By having new buses, as well as putting more comfortable seats, tables and electricity into them, we have realized that people are using the bus more frequently. There is not necessarily more people using the bus, but they use it more frequently. That is where we have realized our passenger increases.
Senator Callbeck: You offered three cautionary notes at the end of your presentation, and number one was that the bus safety framework must be upgraded prior to any bus deregulation. Are the provisions in the National Safety Code not adequate, as they currently exist?
Mr. Langis: It could be better at different levels. The National Safety Code is not necessarily applied in the same way in each of the provinces. We do not have a standardized manner in which to apply the National Safety Code from one province to another. At the federal level, if we wish to move forward in order to deregulate the industry, we would need a standard system. For example, in New Brunswick or in P.E.I. we would need to have the same standards that we find in Ontario or in Alberta.
Senator Callbeck: You want it to be the same all across Canada?
Mr. Langis: We need that. In a deregulation situation, you will see people coming from everywhere, trying to get into those big markets.
Senator Callbeck: If we had deregulation and there was a program to subsidize the rural areas, then would you be happy? Your overriding concern is that there is not enough research into this aspect.
Mr. Langis: It is not a question of being happy or not being happy. I am very happy today. I will be very happy tomorrow. It has nothing to do with that.
Even though private operators are operating our industry, it is still a public service that we give. We can do it better than any public organization, because we control salaries and productivity better. It is better to let private operators manage this type of operation in order to keep the prices down, which benefits the public.
If we want a system that functions in an orderly manner throughout Canada, and if we want to change the economic system that we live in right now, I believe that we need to analyze the impact that deregulation would have, mainly on those regions that cannot count on any other type of public mode of transportation other than the bus. If we do not do that, as a society we will not have done our job right. This is what we have been screaming about for years. We do not have a problem in changing the system. We have a problem in changing the system without taking time to analyze what the impact will be on Canadians who do not live in the corridor between Windsor and Quebec City. More than half of the Canadian population lives in that corridor, and all the rest live all over the place. That is the Canadian reality.
We can look at all the models we want through the U.K., through the U.S., or through any other European country. However, we do not demographically have the density of population that those countries have. Our reality is different. Instead of looking at what are neighbours have done, we need to develop a system that applies to our home. That is my personal opinion. We have not done that. We have not taken time to analyze it.
It is not the fault of the minister or the department. It is the fault of changing governments on a regular basis. Directions change, and that is normal. However, we never have the time to do the job correctly.
Senator Callbeck: You mentioned the parcel business.
Mr. Langis: Yes.
Senator Callbeck: Is that increasing for you in the Gaspé area?
Mr. Langis: It is interesting that you ask that question. The business is steady. We are working right now to try to increase it, because we have many competitors going around us and trying to carry those parcels.
The parcel business is something that increases approximately 5 per cent a year throughout Canada. If you exclude Canada Post, it is about a $4 billion business in Canada, increasing at a rate of 5 per cent on a yearly basis.
Senator LaPierre: Delivering parcels?
Mr. Langis: Yes.
Senator LaPierre: I am in the wrong job!
Mr. Langis: You would spend too much time at the door, speaking with people.
Senator LaPierre: I would lose money. I had better stay here.
Mr. Langis: That is not because you speak too much, but because you are too well-known.
Businesses do not keep big inventories when they operate in remote areas. The best example I can give is someone who has a BMW or a Mercedes car in Gaspé. No one will keep any spare parts for those models in their garages. Whenever something is needed, they will call Quebec City or Montreal, the part will be put on the bus and the next morning it is delivered. The big bundles of packages leave Montreal and Quebec City to go to the regions, and when we come back there are always fewer parcels, but it is a good portion of our revenues and if we did not have that, we would lose much more money in operating in the Gaspé Peninsula.
Senator Phalen: I wish to get back to something Senator Callbeck touched on. In your report you state that Transport Canada is incorrect in their statistics about bus ridership. We have been told by individuals from across the country that there has been a decrease in passenger ridership. The chart that I have here shows that in 1980 there were 32 million passengers using the bus service, and it bottomed out in 1993 to 10 million. Since that time, it has increased to something close to 15 million, and that is the period that you are talking about. However, there has been a definite decline in ridership over those years.
Mr. Langis: Based on the numbers given to you and the numbers gathered by the federal government through the years through Statistics Canada, we are saying that the federal government, after giving away its competency in the field of bus transportation, was less interested in following the right information. What happened is that today we carry five times more passengers than we did in the 1970s, but things have changed. People left the regions; they left the Maritimes, the Gaspé, and went to Toronto, Montreal, Quebec City, Ottawa, and other big centres. I will give you the Quebec example.
In Montreal, some 15 years ago, you could take a bus and go from Saint-Hyacinthe, which is located between Drummondville and Montreal. You could take an intercity bus from Saint-Hyacinthe to Montreal. You could take an intercity bus from Joliette to Montreal. You could take an intercity bus from Saint-Jérôme to Montreal. You could take an intercity bus from Rigaud to Montreal. Now, from Saint-Jérôme, from Rigaud, from Saint-Hyacinthe, from Joliette and all those places in between, you take a transit bus, because so many people have moved to the suburbs, thus creating new suburbs, and you have created a new reality in terms of transportation.
People who used to pay an intercity ticket to go from Saint-Jérôme to Montreal to work in the morning now buy a monthly pass with a private bus operator who operates it for one, two or three municipalities that got together and created a new transit system to go from Saint-Jérôme and Saint-Thérèse to Montreal and come back every evening.
These passengers are now reported, and have been reported for the past 10, 12 years, as urban passengers. They were intercity passengers and they are still carried by private companies that operate their business under contract with the different municipalities that they work with. Only in the Montreal area do you find about 12 or 13 organizations of that type, through which, for example, two or three municipalities got together and created their own transportation system between the city and the suburbs.
That type of example exists in Montreal, but it also happens in Toronto. Toronto is probably a greater example. The GO buses, for Government of Ontario, now operate on routes that have always been covered by private companies in the past. Now, if you want to go from Toronto to Hamilton, I believe you take a GO bus. You do not take a Greyhound bus. Many passengers are being carried by those buses on a daily basis, but they are reported as being urban passengers, transit system passengers, and no longer as intercity passengers.
Looking at all the numbers, and taking into account all those changes, we went from 30 million passengers in the early 1980s to probably about 100 million passengers today. That, again, would need to be researched properly.
Senator Phalen: You talk about vans, 15-passenger vans, and you do not think that they are an option. In Nova Scotia there is a situation where they are using seven-passenger vans. They are user friendly, picking up passengers at their doors, driving them to Halifax, which is about 260 miles away, and they charge each passenger about $30.
Do you think that that type of a situation would work in these rural areas, as opposed to a 15-passenger van?
Mr. Langis: I do not know the situation in Nova Scotia well. If we want to increase the number of passengers who are being carried in a common way in order to meet our Kyoto obligations, if we start using seven-passenger vans in trying to attract passengers to a system, yes, you will fit those passengers who like to be with people they know to travel between, for example, Halifax and somewhere else in Nova Scotia that is not too far away. A seven-passenger van is not bad, but I can tell you that I operate in my tourist system 15-passenger vans. They are never as comfortable as a big bus, and it depends on where you are going. If you go just a few miles away, it is not bad, but a 15-passenger van or a seven-passenger van is a vehicle that can only make 200,000, 250,000 kilometres, after which you have major problems.
We put over 1.2 kilometres on our buses in five years. We put all those kilometres on the buses and after five years we still get a little more than 50 per cent of the purchase price of the equipment when we sell the used buses. That could never be done in our case because I know from experience with the 15-passenger vans, from the moment you hit about three years of operation, even within the city because they are essentially on the sightseeing business, after three years they all scream at me in order to change the vans because they are starting to have problems, although we have planned to change them only after five years. You never know when the small piece of equipment will be able to make the day or the job because you might have transmission problems, you might have all sorts of problems coming out after you reach a certain number of kilometres.
The same types of problems should occur on smaller pieces of equipment. I am not saying that it is non-convivial. It is probably much more convivial than a big bus, except I do not think you have any interconnecting agreement between those carriers. I do not believe there is any interlining agreement between those carriers, and every time someone has to change operators, they have to buy a new ticket. It is not something that is very user-friendly.
Senator Phalen: To continue along this line, in Alberta we were told that they were able to use large buses in rural areas because of their parcel service. That is what was financing it. Is that your experience?
Mr. Langis: In Alberta, they do that. In Alberta, they have gotten into agreements with communities where they operate smaller pieces of equipment in some places. Our experience is that with a bigger bus, you can generate more revenue on those less profitable routes in carrying those parcels, definitely.
Senator LaPierre: Do you operate in the Province of Quebec except for that kilometre over the bridge into New Brunswick? Therefore, your permit to operate and the conditions of exercising that permit is from the Province of Quebec?
Mr. Langis: Yes.
Senator LaPierre: You have no contact whatsoever with the federal government in any way, shape or form?
Mr. Langis: In terms of permits, no. We do have some permits that we hold from the Province of Ontario for our charter operations.
Senator LaPierre: I see. It is the Province of Ontario, however, that gives you the permission to charter from Montreal to Toronto.
Mr. Langis: That is it.
Senator LaPierre: If you went to Calgary, God forbid, you would have an Alberta permit and a Manitoba permit and a Saskatchewan permit?
Mr. Langis: And from all of the provinces that I would have to cross to get there, yes.
Senator LaPierre: Then, sir, what are we doing here? If the federal government has nothing to do with you, surely your battle of deregulation and subsidies to the local communities, and so on, is a matter to be taken up with the provincial government, not with the federal government which, although they may have a constitutional power, in their stupidity have transferred it to the provinces. Consequently, we are left having spent months studying this thing without any jurisdiction whatsoever, unless we take that jurisdiction back. We do not have the power to deregulate you.
Mr. Langis: The federal government has the power to deregulate all of the extra-provincial movements.
Senator LaPierre: But you are doing one kilometre, for heaven's sake.
Mr. Langis: Yes, but I am still extra-provincial because I do that.
Senator LaPierre: Would it not be better to recommend to the federal government in one page, ``Federal government, you have given up the bus transport regulation; give up the interprovincial one.'' It gets you nowhere because you still must have a permit to enter any province in any event. Let the provinces deal with it. You are left with the rural areas. The only important thing in all of this is the rural areas. Nothing else is important. It is the rural areas. Canadians have the inalienable right to have the same transportation from place to place as does a person who lives in the city. That is a fundamental right of mobility.
Consequently, you are right. If you do not have money to transport people from Montreal to Shawinigan, that will change because Shawinigan will become a great centre eventually of everything on the planet. In the meantime, you should be able to be assisted on this. I am not too sure whether that is the responsibility of the federal government or of the provincial government. More and more, I tend to the idea that the federal government, having given it up, should give it up entirely and completely and wash its hands of the whole mess. What do you say to that?
Mr. Langis: You take the words out of my mouth, Senator LaPierre. No, I am saying that as a joke here. I do not think the solution to the problem is as easy as that. The jurisdiction for extra-provincial movements will still be a federal question in terms of mobility throughout Canada. I do not think the federal government has to get rid of all of that, except that the federal government, in the 1950s, left the jurisdiction to the provinces because it was much closer to the problems. Instead of going the way it is going right now, I think there would be a strong interest, at least, in sitting down with all the provinces to see how we can — and I want to choose my words carefully here — agree on a way of standardizing some elements throughout the provinces.
I am not saying that the actual system is perfect. However, if you demolish the actual system, we may end up with much bigger problems than we thought we had now. We must take time to sit down with the provinces, analyze the situation and try to find some solutions towards standardization. I am using ``standardization'' and not ``harmonization'' as other people have used in the past, because ``harmonization'' is often to try to find the smallest common denominator. Here the smallest common denominator, in order not to have any battle with anyone, is to deregulate the whole thing and see what happens in five years.
Socially, however, this is not the right way to go. As a society, we have an obligation to make things happen for those people who still live in the different regions of this country, because I do not think we all have an obligation to live in Montreal, Toronto or Ottawa. Some people want to live in those regions. However, the people who have been leaving those regions where they were born to go to work in bigger centres might go back slowly to retire in those regions. and these people, who will be a little older, will need mobility and transportation. We are probably a good solution for these people. We must take time to analyze what the impact will be for all those regions of Canada.
Senator LaPierre: At the end of the day, however, the federal government must act. I do not believe in harmonization with the provinces. Since 1887, we have had a horrible time with the provinces, and we see the same thing happening with Kyoto. Never mind them. The federal government will have to do it.
Senator Adams: In your brief, you stated that the federal government subsidized VIA Rail and that it has cost $3 billion since the beginning to promote passenger service. Your competition is VIA Rail. That is why I ask this question. They get $3 billion in subsidies and you get nothing. If the federal government did not subsidize VIA Rail, I think you would be able to attract more passengers. You could take them away from VIA Rail.
Mr. Langis: It is not a question of what our fear is with the subsidies. I referred to the $3 billion which has been asked for because it has appeared in different articles, for example, Maclean's and the business report of The Globe and Mail. Different newspaper articles have appeared concerning the intentions of VIA Rail to present a project to the Minister of Transport in order to get $3 billion to increase the frequencies of travel in the corridor, and to increase the speed of those trains in the corridor without any social role for any other regions of the country. This is where we are worried, because we also need the revenues that we can generate on the corridor routes in order to serve the regions of Canada in those areas where there are no trains and where there are no planes. If the subsidies are being used to reduce the fares of the train in order to attract more passengers to those trains, then we have a problem.
We have had experience in the past where, by reducing their fares, VIA Rail have been able to attract many of our passengers, because that is normal. People who use the bus are used to taking a common mode of transportation. Whenever they reduce rail fairs, they are not attracting people out of their cars or out of planes; the are attracting people out of buses. The more they hurt us in the corridor, the more we will be hurting the services in the different regions of Canada.
Your question is a very interesting one.
Senator Adams: You own all your stations. They are not subsidized by governments, are they?
Mr. Langis: It is all privately owned.
Senator Adams: Every time I go to the North, I pay the hidden taxes. We have security taxes and everything. Since September 11, however, your bus fares have not increased.
Mr. Langis: It is all privately operated.
Senator Adams: Those extra taxes are for the government. I fly on Air Canada, First Air and Canadian North. For security, you have to pay the extra $12.
Mr. Langis: Definitely.
[Translation]
The Chairman: Mr. Langis, we thank you for you presentation. You are a very eloquent spokesperson.
Mr. Langis: Madam Chair, I am convinced that in your great wisdom and given the role you have to play, you will make the proper recommendations to the Minister of Transport.
[English]
We will take a five-minute break and then resume in camera.
The committee continued in camera.