Proceedings of the Standing Senate Committee on
Transport and Communications
Issue 21 - Evidence for Tuesday, February 12, 2002
OTTAWA, Tuesday, February 12, 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 Lise Bacon (Chairman) in the Chair.
[English]
The Chairman: Our first witness this morning is Mr. Harry Gow, president of Transport 2000. Welcome to our committee.
[Translation]
Mr. Harry Gow, President, Transport 2000: Madam Chair, it is my honour to represent an association with chapters in most Canadian provinces whose mission is to represent users of public transportation by advocating policies, programs, services and actions which are compatible with sustainable development in transport. Our mission is often portrayed in the media as being focussed on air safety, railway matters and city transit matters, but we also represent bus users.
[English]
Our association aims for sustainable development in transport. We represent users, and while we are often involved in air safety matters, railway matters and city transit matters, we also represent users of public bus transport. That said, our credentials in that area are perhaps a little thinner than those in some other modes but, at times, we have been very active. For example, our former president, Guy Chartrand, was a member of the Quebec special task force that determined ways of assisting the intercity bus industry in Quebec, and this led to a reasonably significant diminution in fuel taxes for intercity and rural bus carriers, as well as other bus carriers.
[Translation]
Presently, I am working as a young retired academic on the issue of rural depopulation. That depopulation has been experienced in various ways: lines have been abandoned, post offices closed, bus schedules have been reduced or cancelled. In the Ottawa area, we could mention the cancellation of the local bus line to Wakefield or the reduced Voyageur bus service to Maniwaki. We tried our best on those issues, but it was not enough. Rural areas tend to loose all kinds of services and unfortunately, federal services are often the first to go. Provinces tend to provide some remote compensation. Eventually, some local service fills part of the gap. However, some gaps cannot be filled. Take the case of the decrease of VIA Rail services. On this graph, the line shows what happened in Western Canada, mostly in rural areas where half the services were cancelled. Western Canada and the Maritimes have lost more than 50 per cent of their services. Some areas have a shortage of services. We could talk about Maplecreek, a rural community with no train service anymore, but of course we could mention a hundred other places too.
You have probably heard about Canadian and American studies on this issue, so I will refer to a British study. The French summary was written by the researcher, Mr. B.J. Simpson, who wrote Deregulation and Privatization: the British Local Bus Industry Following the Transport Act 1985. I will not even try to translate the text, but it deals with deregulation and privatization of the local bus industry. Mr. Simpson explains that the 1985 Act in the United Kingdom brought about three basic changes in local bus services: deregulation, privatization of public transit companies and an open bidding process for subsidized services where necessary.
Mr. Simpson says that those three reforms have had an adverse impact on local bus transport services. Those services are less likely than in the past to help achieve the desired modal split as people turn to less polluting vehicles such as buses instead of private automobiles. Mr. Simpson also suggests changes in the legislation to reflect the actual context and its impact on the desired modal transfer.
Finally, we may note that in the United Kingdom, the number of railways users went up 15 per cent after the number of bus users dropped by about 20 per cent. Deregulation in Britain was followed by a modal transfer from bus to train transportation. Before that, every rural bus service disappeared immediately following deregulation. Transport 2000 has very deep concerns about deregulation.
[English]
In the opinion of Transport 2000, current deregulation allows cross-subsidy of local runs. For example, the Ottawa- Montreal Voyageur bus run pays for the Ottawa-Maniwaki run and beyond, all the way to Val-d'Or. Transport 2000 fears deregulation will lead to erosion or elimination of local bus services, and in this respect I mentioned Florida and the British legislation, the Transport Act, 1985, which I have already covered. The 1985 act imposed deregulation, the transfer to the private sector of publicly-owned bus companies, and competitive tendering for runs subsidized by local authorities.
According to Modern Railways, a magazine that reviewed this issue in 1986, rail passenger numbers went up 15 per cent on routes parallel to bus routes that had been privatized. According to Simpson, these changes have had a number of negative effects, which he relates in his study, ``Deregulation and privatization.'' The study was published in ``Transport Reviews, 1996,'' Vol. 16, No. 3, 213-223.
He states that one of the main purposes of deregulation in competitive tendering was to eliminate cross-subsidy of services because it led to higher fares on profitable routes. I refer you back to the context. Those were the days of all- out privatization in Great Britain.
The deregulation continued under the leadership of former Prime Minister John Major with the privatization of British Rail. That privatization turned into an absolute shambles because of the poor way in which the network was cut up, as well as by the avariciousness of the infrastructure provider, Railtrack. These nostrums are often sold as the solution to everything. According to Mr. Simpson, it did not solve the problems of the bus industry.
Mr. Simpson says that deregulation has not achieved its main objective. Few routes can support more than one operator. Where there is more than one operator, the emptiness of many buses is conspicuous. Mr. Simpson believes that it has not achieved the main objective, as summed up by Mr. Nicholas Ridley, Secretary of State for Transport in 1985, which was to halt the decline that has afflicted the bus industry for more than 20 years.
Mr. Simpson states that there is not much evidence of competition between large operators. Allow me to add: compare this with the Canadian deregulated airline industry. The Canadian Bus Association, in a brief some time ago, noted that the American airline industry has been deregulated with similar effects.
According to Simpson, there are a number of particular effects that should be noted in Britain. Competition in small towns and rural areas has been limited. The bus companies like to compete for the big runs, such as Montreal-Ottawa and Calgary-Edmonton, but not for the milk-runs such as Stettler-Didsbury-Olds, and Wakefield-Hull.
Lack of cooperation between operators has resulted in poor connections between services. This has been apparent in the British Rail network. One can show up at a station expecting to catch the so-called connecting train only to find that it left a minute ago, because a different company runs the connector and does not care about the needs of the customer. At the bus stops, customers are still waiting for a reliable, understandable and stable service.
More old, shabby vehicles have been retained. This has shown up in a number of transport journals as one of the biggest problems of British deregulation. The bus fleet has aged and is very downmarket. Middle class people will not use that aging bus fleet if they can find an alternative, such as the train, which they view as more upmarket. This has harmful effects on the bus industry.
Deregulation has had consequences that are widely accepted within the bus industry and amongst bus users and the general public as being mistakes. As you are aware, the media in Britain are merciless about government mistakes. Competition en route has proven to be wasteful of resources and damaging to the environment. A plethora of buses, many half empty, are on routes that are over served, and there are insufficient buses on other routes.
Honourable senators may recall the situation where an Air Canada red plane would take off a few minutes before a Canadian Airlines blue plane. They would both have a 50 per cent load factor. Both flights were going from Halifax to Sydney but they left five minutes apart. They were eating each other alive. The same thing can happen to buses.
According to Simpson, there is a strong case for route monopolies in order to reduce the likelihood of service instability and to eliminate the duplication of buses and routes.
Finally, according to Simpson, deregulation and privatization have not helped to achieve a change in the modal split and did not reduce automobile use or increase bus use.
These are fairly merciless. Why are we here today? Frankly, at Transport 2000, we are still looking for the answer. However, we suspect that the dogma of privatization and commercialization is not dead in Canada and that this menace will continue to threaten bus passengers over the next few years unless this committee and other decision makers take a distinctly opposite trend.
I am currently working on a grant from Health Canada for the regional health board of western Quebec.
[Translation]
This is a two-year research project. The goal is to fill the gap left by the cancellation of train services and the erosion of bus services. We are going to combine the services of bus lines such as Voyageur and Thom Transport with those of school buses, taxi operators and disabled adapted buses. This joint transportation project is carried out in cooperation with the Quebec Transportation Department.
If you deregulate buses, you will derail our project. For inter-city routes, between Maniwaki and Ottawa for instance, we are presently relying on Voyageur buses. If that run, serviced by Voyageur, or other runs like Hull- Lachute, were to be cancelled, serious problems would arise. With this publicly-funded innovative project, we would like to help our regional buses survive for a few more years.
[English]
The Chairman: In the annual report entitled ``Transportation in Canada 2000,'' it is noted that, over the years, the scheduled intercity bus service has faced an almost uninterrupted decline in passenger trips, from a peak of 30 million in 1982 to 10.3 million, in 1996. What is the reason or the cause for that decline? Do you believe that the intercity bus industry is facing some difficulties in meeting users' demands? Have you conducted any market forecast or potential study based upon the analysis of the reasons for decline? Do you have a strategy on how to ameliorate the problem of declining ridership based on the needs of the users?
Mr. Gow: As everyone else, we have studied the matter, but not so much directly as through participating in such things as hearings and studies by the then Canadian Transport Commission and its successor. We have read the academic literature as well as the industry literature on the subject. Though we have not done our own original studies, we have participated in other people's work.
Based on these readings and our participation in various committees, we have come to the conclusion that the major cause for the disappearance of many of the services, and behind that the reduction in the number of passengers, is the automobile. I do not want to flog a dead horse, but many of us consider that the automobile has taken away passengers from local train and bus services, and that is the real villain. This is true for Canada, the United States and the United Kingdom.
The bus companies thought for a while that a decline in numbers noted in particular in the corridor might be due to VIA Rail Canada competition. A Canadian Transportation Agency study demonstrated the contrary. The CTA study found that there must be some other factor because VIA Rail was too expensive to compete with the buses for the same passengers. We did our own empirical work, that is, on-the-ground discussions with passengers, and we determined that of the passengers who had not gone to the automobile, many of them had gone to illegal vanpool operations. We participated with Trentway-Wager and Voyageur over a year in shutting down one of the worst, which was called Easy Ride which, every day, carried hundreds of people between Toronto and Montreal in overcrowded vans, at times with two passengers too many, with 18-year-old drivers without a commercial licence. There were crashes into ditches that were filmed by an inquiring Global television reporter.
Our understanding of the matter was that the decline in bus ridership was due to in part to automobile usage. The Ontario and Quebec transportation agencies determined that illegal van operators were also siphoning off many passengers. This siphoning has been slowed, but I note that in Nova Scotia illegal or unlicensed van pool businesses are still in operation. Most of these outfits masquerade under the title ``van pool.'' They are not pools; they are commercial operators. They are illegal, unsafe and dangerous at any speed and should be removed from the road. If deregulation allows these people to operate legally, we should all go home, stay home and not use the bus.
The Chairman: Many studies suggest that further deregulation of bus service would allow new entrants into the market and that the resulting competition would benefit users. What does your organization think of such a deregulatory approach?
Mr. Gow: According to a study by KPMG and according to Simpson, what happens is there is new entry to the market, initially, particularly on the runs where there are many passengers to be creamed off, Montreal-Ottawa, Montreal-Quebec, Montreal-Toronto, and Calgary-Edmonton being good examples. That would be great for them.
What one sees, however, is that these operations do not flourish for long. Six months or a year later, many of these new entrants disappear, just as many new entrants in the airline industry have disappeared for the same reason: Too many seats chasing too few bums. That leads to bankruptcy or commercial failure for the weaker operator. In the meantime, according to the best estimates from Britain, from KPMG and from American studies, 30 per cent of rural bus service will be lost as buses are put on to the expensive runs, such as Montreal-Toronto. Approximately 30 per cent of the rural lines are diminished in frequency and 30 per cent do not improve. The big cities get too much service, and the smaller or more remote places get poor service or no service at all.
To answer your question, the net effect is to allow new entrants into the market, but most of them do not stay very long or they cannibalize existing operators and replace them.
In Britain, Stagecoach moved in, ran a heavy service, destroyed the local enterprise and then reduced service. That is common of what the Transport 2000 members in Britain call the highwaymen. Honourable senators will remember the highwayman from Victorian literature. Highwaymen are not respectable bus operators.
The Chairman: Do you believe competition needs to be restricted on money-making, high density routes to generate money to cross-subsidize low-density routes?
Another approach would be for the government to allow competition on the high-density routes and to directly subsidize operations on the low-density routes. I believe this is the U.S. approach. Could this work in Canada?
Mr. Gow: The Canadian Bus Association estimates that it would cost the federal treasury $50 million of subsidies for rural bus routes and another $25 million to compensate VIA Rail for lost passengers between the big cities in the eastern corridor. It is a model but, if the government wants to maintain service at the same level, I estimate that it will cost them somewhere in excess of of $75 million a year to provide something like the same level of service. Frankly, I do not think it would be the same level. Certain routes would be picked and certain ones would not. Why does Sudbury-White River have a train and Montreal- Mont-Laurier not have a train? They are both isolated, northerly areas, but one has a train and one does not. What is going on here? It may be something political, who knows? Perhaps Mont-Laurier was being punished for voting ``Bloquiste'' or Péquiste or something. Spare the thought. I do not wish to be too political here.
The Chairman: You should not.
Mr. Gow: No, but there may be political criteria, and that scares us. We would like to see commercial and public service criteria respected rather than political criteria. I could name many other rail lines that were removed for political reasons, but I do not want to breach the etiquette of the Senate.
The Chairman: In your rural public transport project, you described a serious lack of intercity public transportation in the Pontiac just northeast of Ottawa. Although you just mentioned problems with minivans, do you see benefits in a more open regulatory regime that would allow their use in smaller markets such as the Pontiac, as opposed to large conventional intercity buses?
Mr. Gow: I can see a future for that. There is a danger of these people moving in and cannibalizing the main bus routes. That is why, for our project, the first company we saw, before seeing local taxi companies or van operators, was Voyageur Colonial. We wanted to ensure we had the intercity carrier on side. We want to feed them passengers, not steal them.
With that restriction, our association is quite happy to envisage the prospect of increased services on routes that are not now served. There would, however, be training issues, vehicle standards issues and hours of service issues before this could be fully implemented. We are working on this in cooperation with the Ministry of Transport of Quebec. They have found two loopholes to allow this to happen. The first is allowing taxis to use vans rather than passenger cars and to carry more people. They are licensed, have permits and must meet standards. The other is opening up transport for the handicapped to non-handicapped citizens who are in need of transport for health, social or educational needs. Using those two methods, I think we can solve that problem without cannibalizing the major routes.
Senator Callbeck: In your brief you mention a few areas that have deregulated, Florida being one. In what year was that done?
Mr. Gow: It was shortly before the British deregulated in 1985.
Senator Callbeck: What has happened? Has the private sector moved in there?
Mr. Gow: No. Places like Pensacola and Miami still have lots of bus service. Miserable little places like Clear Springs do not have bus service, unless large numbers of people are coming in for a folk festival or something, in which case there will be chartered buses.
Rural Florida has not got much back, unless there is something happening down there that I have not heard of. I read the transit magazines from cover to cover every month and I have never seen a mention of rebuilding rural bus services on a state-wide basis. Some local authorities, such as Dade County around Miami, have done something, but in purely rural areas there is not much going on.
Senator Callbeck: You mentioned that after British deregulation rail passenger numbers went up 15 per cent and bus passenger numbers went down 20 per cent. What factor caused that? Was it fares or time?
Mr. Gow: It was not fares. Fares did tend to go down on the bus routes, because they were competing. They could not compete on quality so they competed on price. People got tired of buses that did not connect with the next bus. Since there was a plethora of buses from different companies, they did not always advertise their schedules adequately. Buses were not maintained properly. They were getting older and older. People just fled the bus system for the trains on the lines where the buses were parallel to railway lines. Where there was no railway line, not much happened in terms of a modal shift because there was no train to go do. They may have gone to the car; we do not know.
In big markets like Glasgow-London, the bus companies tried to grab passengers from the railway, but Stagecoach eventually gave up on it and chartered coaches on the trains. The trains in Britain are about half again as fast as they are here and the buses could not maintain the time over the distance from Glasgow to London, which is well in excess of 350 miles.
Senator Callbeck: You mentioned the lack of cooperation between operators. One would think cooperation would be advantageous.
Mr. Gow: There was a perverse provision in the British law that said they were not to cooperate because that would constitute a combine under the British equivalent of the Combines Investigation Act. That is ridiculous. That is pushing dogmatism pretty far, but we all know what Maggie could do on her bad days, and that was one of her bad days.
Senator Callbeck: Have you conducted a study comparing fares between the buses and the trains in Canada?
Mr. Gow: Yes. The National Transportation Agency spent about a year looking at them and concluded that train fares are so much higher than bus fares on most corridors that we have market segmentation and not competition. VIA Rail has deliberately set its fares high, partly to protect the bus operators who had been complaining about bargain fares. After 1990, VIA Rail increased their fares to the point where people like myself now think twice before taking the train.
Senator Callbeck: Does that apply all across Canada?
Mr. Gow: Pretty well. There are a few places where, for social reasons, the fares may be kept reasonable. For instance, fares are much less expensive between Halifax and Vancouver than between Toronto and Vancouver. Between Toronto and Vancouver the service is called Silver and Blue service. It is meant for international travellers with money and time to spend, whereas the Maritime service is a practical overnight service. Sleeping cars are heavily used by the upmarket segment, but they do not pay as much as the people travelling to Winnipeg or Vancouver.
Senator LaPierre: Is your association a governmental agency or an independent agency? Who pays for it?
Mr. Gow: It used to be less independent than it is now. For the first several years, after an approach by Warren Allmand, we were asked to submit a brief to request annual funding. For the first 13 or 14 years of our existence —
[Translation]
We received between $18,000 and $50,000 per year. Another similar association in Montreal, Transport 2000 Québec, has been receiving a $40,000 grant every year from Transport Quebec.
However, in 1990, Mr. Valcourt cancelled our subsidy because he resented the fact that an association opposed a government policy. The goal of that policy, which was established in the days of Mr. Brian Mulroney, was to reduce the number of passenger trains in Canada by 50 per cent. Our association fought that policy and Michel Vastel wrote in the newspaper Le Droit that we had been punished because we opposed that policy.
Since then, our funding has come from our members and a few corporate donations.
[English]
Senator LaPierre: Like a bus company?
Mr. Gow: Bus companies do not contribute much. We have some bus members, but it is no secret that most of our funding is from railways, airlines and companies in the general field that feel like giving us a few hundred or a few thousand dollars. About 20 per cent of our budget comes from corporate donations and 80 per cent from private individual donations.
Senator LaPierre: Who owns the bus terminals?
Mr. Gow: Around here, it is the remnants of Voyageur. In other parts of the country they are owned variously by the Saskatchewan Transportation Company, the descendents of the Scotia Bus Lines and the Irving lines in New Brunswick, or Greyhound. I would say that the biggest owner is Greyhound. A few are owned by the public.
Senator LaPierre: Am I correct in saying that very few are owned by the public?
Mr. Gow: Yes, the Vancouver Intermodal Terminal belongs to the Government of Canada, but most are privately owned and funded by the operators.
Senator LaPierre: We have been told that certain provinces regulate and others do not.
Mr. Gow: There are provinces that regulate less.
Senator LaPierre: Do you see any great advantage to either one or the other —
[Translation]
— to serve rural areas?
Mr. Gow: Transport 2000 is clearly in favour of regulating.
Senator LaPierre: Do you see any differences?
Mr. Gow: Comparisons are difficult. We compare ourselves with Britain and the United States and we are delighted. However, when we compare Quebec with Alberta, we feel sorry.
Senator LaPierre: Is the industry regulated in Alberta?
Mr. Gow: It is deregulated.
Senator LaPierre: And in Quebec, it is regulated, is it not?
Mr. Gow: Absolutely.
Senator LaPierre: Is rural service better in Quebec because it is regulated or is the result the same in Alberta in a deregulated context?
Mr. Gow: It is always difficult to compare situations, but I would say that I personally prefer the Quebec model. The network serves more villages and services are not as concentrated as they are between the airport and Banff in Alberta and on the Calgary-Edmonton route. In the case of Alberta, forget Wataskewin because if you look at Banff, which is on the same route, there is no comparison at all.
In Québec, most of the network has been preserved. There are many operators in Quebec. In Alberta, of course, population density is lower, but distances are similar and in my opinion, Quebec has managed to do a better job.
[English]
Senator LaPierre: Bearing in mind that the overall purpose is to ensure service to Canadians, whether they live in the cities or in rural areas, is the price of deregulation, subsidization by either the federal government or provincial governments to those persons or companies that run buses in these rural areas that are not now being served or are in danger of not being served?
Mr. Gow: In an ideal world, sir, that would be the price. If the government were really concerned about the well- being of Canadians, I would suggest that that would be what they would do. However, according to what I have read in, for instance, the Canadian Bus Association's brief and the KPMG study, the priority of the current federal government is the big cities. Most of the subsidy to VIA Rail goes to serve big cities. Very little of it goes to small towns, and fewer and fewer small towns have service.
Just this year, Maxwell, Prescott and two other places in the general area lost their railway stop. That means the rural areas are getting less service and places like Montreal and Ottawa get more. I would suspect that, while in an ideal world the federal government would give $50 million to rural bus operators and compensate VIA Rail another $20 or $25 million for their loss of passengers under deregulation, in fact, no such thing will happen. Canadians, as often happens in the rural areas, will be left out on the washing line to dry.
Senator LaPierre: If I understood you correctly, the federal government has jurisdiction over the worst players.
Mr. Gow: Yes, in our experience. For example, the Quebec government at least reduced fuel taxes on buses and did other things to encourage the intercity motor coach industry. I have not seen any similar generosity lately on the part of the federal government.
Senator LaPierre: After September 11, people did not fly. Instead, they chose to ride the train. Then VIA Rail said it wanted to compete directly with the bus system by developing fast trains so that it would take an hour and a half to get to Montreal, for instance, at roughly the same price charged by a bus company, or perhaps even a bit lower, in order to get more and more of that market. It realized how important that market is to them after the great debacle of September 11. Have you noticed that?
Mr. Gow: I have heard that rumour. I have heard it 25 times. I have heard it regularly every year since 1976. It has never happened. September 11 has brought VIA Rail enough new customers, largely through fear of flying and fear of waiting an hour or two in a lineup, that it does not need to compete with the buses. I do not think, with VIA Rail 's prices, except on a few rare segments, it is able to compete with the buses, and I do not think that is its intent. I meet fairly frequently with VIA Rail's executives. VIA Rail may lower prices once it gets its capacity up. It has purchased 139 new passenger cars and it intends to use 120 of those within the next two years, increasing its fleet size by almost one-third, and there will inevitably be some price adjustment downwards. VIA Rail is so far above bus pricing currently that it is unlikely it will compete with the bus companies. It will compete with the private car and the airplane. I think that is what VIA Rail is aiming at.
Senator LaPierre: Given the mindset that you have described, that no one really gives a damn about rural people and the people in our society who are poorer — most bus terminals are dirty compared to airline terminals — do you think we are wasting our time? Nobody will change anything, regardless of how long we spend studying this. Their minds are already made up. They just don't care.
Mr. Gow: I know people in the federal government whose minds are made up. I sometimes talk with them. I would say that there are competing views within the government, within the Ministry of Transport. You can encourage the view that rural Canadians are worth something; encourage the view that the poor and the needy also require services; encourage the view the state has a duty in loco parentis, almost, to see to the needs of those who are dependent and have no resources to fall back on. The Senate can play a useful role in strengthening the hand of those who do not agree with the all-out ...
[Translation]
— liberal economy, free market, deregulation —
[English]
— downloading philosophy. That is the role this committee could play. We have noted that this deregulation of buses was supposed to happen quite a while ago and it was put on hold, because of reservations of people like yourselves.
Senator LaPierre: I have none. Thank you.
Senator Atkins: Thank you. Welcome. Actually, I am a bus fan.
Mr. Gow: So am I.
Senator Atkins: With regard to the Montreal-Ottawa route, what is the economy fare on VIA Rail compared to the bus?
Mr. Gow: The economy fare is over $50. My brother-in-law got on at Dorval, so he saved a few dollars, to go to Ottawa to do the marathon from Buckingham to Lachute on Friday. As he did not book in advance, he did not get the five-day advance-booking reduction. The fare was over $50, as I recall.
Senator Atkins: That was on the train?
Mr. Gow: That was on VIA Rail. With the bus, depending on the return, I do not remember the exact fare, but Montreal-Ottawa is in the $30 bracket at the most, and it can be cheaper if you do the one-day return.
Senator Atkins: I am a senior. I got it for $29.
Mr. Gow: My $30 is not far off.
Senator Atkins: I remember that bus companies used to promote their service. You knew that there was an hourly scheduled bus service between, say, Montreal and Ottawa. I get the feeling that the bus companies have given up on promotion.
Just to follow along on Senator LaPierre's point, I also get the feeling that the bus companies have not really adjusted to modern market realities, whether you talk about terminals or the configuration of buses.
My experience has been that when you compare a tour bus to the colonial bus that runs between here and Montreal, the standard of luxury is not quite the same. but perhaps I am wrong. There is no glamour attached to travelling by bus. In fact, it seems there is an opportunity for promotion to appeal to a certain segment of the market to make that possible.
I remember travelling between Toronto and Hamilton on the Grey Coach line. I know Go Transit has attracted many of the customers the bus line used to get. I believe that the Grey Coach line route was along the lakeshore and it was convenient for passengers who lived in the smaller towns between Toronto and Hamilton.
It is also a fact that the bus terminal in Toronto is not up to the same standard of the railroad station. However, it is in the centre of town.
It seems to me the bus companies are missing out on an opportunity to promote their services.
Bus transportation is a good way of transporting a parcel, but are the bus companies pricing themselves out of business? What is happening, in your opinion?
Mr. Gow: Many things are happening. I cannot speak for the bus companies, but I can speak about them. One problem appears to be investment. The American bus industry, in particular, went through a difficult period after deregulation, but it has found its feet again because of investment by a Canadian company, Laidlaw, which bought Greyhound, which now owns the American company. If you think things are bad up here, go south of the border.
There has been a reduction of advertising and so on, but in a time of scarce resources, the companies have to put their money where it will get the most effect. Some of the older buses have been replaced. With the federal government's assistance, they have purchased a number of buses which have been adapted to accommodate wheelchairs. As well, a passenger can call the dispatcher. That service is available. There have been some improvements.
Generally, the charter bus tends to be more luxurious, probably because it gets less hard use and more of a select clientele, for example, retired people travelling to see Cap-de-la-Madelaine or Sainte-Anne-de-Beaupré. They are genteel, older and well-behaved.
In the back of an average Voyageur or Trentway-Wagar bus, you might find a fellow with a ghetto blaster plugged into his ears, but you can hear it. He might have his big boots up on the seat. He will monopolize three spots. All the girls will have moved up to the front to avoid this monster. The seniors are all shaking their heads. There might be gum on the seat and so on. This kind of usage by a segment of the passengers is hard on a bus. That said, however, the bus companies have, within a rather tight financial environment over the last few years, invested where they can. However, I agree that more could be done.
Where people in the United States complained about bus terminals, the federal and state governments built intermodal terminals. I have no complaints about the Montreal Voyageur terminal or about the Ottawa terminal. I go though those a great deal on my various missions to Montreal, and I find both terminals to be of the same standard as a good railway station.
Where they were not up to standard, as in Quebec City, the city and the federal government spearheaded a move to get the Palais station recycled, under the leadership of then mayor Jean Pelletier, and they now have a magnificent bus station. However, it is supplied cooperatively between the railway, the bus company, the transit commission, the city, the federal government and the province. That is the way ahead. They also do that in Vancouver.
With respect to Toronto, there will be a new bus station attached to the VIA Rail station. That will improve matters. That is the way ahead.
As to parcels, I have no comment.
Senator Atkins: It seems that the fare is where the competition lies. For instance, a fare from Halifax to Fredericton is $120 return. My first reaction when I heard that was that it seems like a great deal.
Mr. Gow: That is what it costs. It is problematic. Airlines are big enough to afford a loss leader. I have seen a trip from Montreal to Halifax advertised for $79. The airline that started that is no longer with us. If the bus companies went into airline-type pricing, they would be as unprofitable as the airlines. A pundit in the United States recently said that, if one added up all the profits made by airlines since the Wright Brothers flew at Kitty Hawk, one would come up with a negative sum. Bus companies cannot afford to do that kind of thing.
Airlines are vanity products. Rich people who want their image improved would like to own, for example, ``Persian Royal Airlines'' — I am inventing a title — or ``B.C. Tourist Prestige Air.'' They feel their masculine identity would be enhanced by the ownership of a wonderful airline.
Bus companies have to be a little more practical. Bus companies are not like airlines. They cannot afford to throw away other people's money or their own. They must find ways to try to make a little money by serving the public honestly, and they usually charge what it costs, not much more. The airlines, with their $79 fares, are throwing away money. Personally do not like to see companies in bankruptcy court, so I do not recommend that.
Senator Atkins: Are minibuses and vans taking away from the scheduled services?
Mr. Gow: Yes, they are. We have studied how people travel in Nova Scotia. Since rail services were cancelled over most of the province, except Halifax, Truro and up towards Moncton, people are resorting to desperate expedients such as van services. Fortunately, in Nova Scotia, the drivers have some sense of community responsibility. They know the people they are driving. However, in Quebec and Ontario, these services steal thousands of people from bus lines every day. The people who operate them do not seem to have much professional consciousness. I would hesitate to say they have no conscience.
Senator Atkins: Are they operating under the same regulations?
Mr. Gow: They do not bother with the regulations. They do not hire qualified drivers. They do not respect driver hour limits. When I was teaching at the University of Ottawa, my students would report these fellows falling asleep behind the wheel. A student would reach over and grab the steering wheel to get it back on the road. That kind of operation was damped-down after the OHTB intervened, and, finally, the Ministry of Transport in Quebec showed some interest in this. They knew about it, but they had done nothing. When a number of people were killed — here is the headline: ``Horrific 401 van crash kills five,'' Ottawa Citizen, July 18, 2000 — that brought the whole thing to a screeching halt. Before that, Easy Ride had been kicked out. After that, even Allo Stop was told to get out of Ontario, because, I guess, the OHTB felt it was stealing passengers from the bus line. Therefore, the answer is yes to the question about whether these van pools are stealing passengers from bus lines.
Senator Atkins: Is that not because they can provide the service at a cheaper rate?
Mr. Gow: I have worked with adolescents all my life. There is something in their mentality called ``magic thinking.'' I am speaking as a professional social worker. Why do so many16-year-old young women get pregnant? ''It will never happen to me. I only did it once with my own boyfriend.'' Why do you think so many kids smoke? Why do you think so many young people kill themselves? They believe that, somehow, there will be no effect other than their problems will be solved. They do not think of the fact that their grieving families will carry that burden for the next half century. Most of the people in those vans are young people. ``Magic thinking'' means that they do not consider the consequences of a dangerous act. That type of thinking changes only as people graduate from college or university and begin to realize the enormity of their responsibilities to their family, to their own new spouse and to their kids. It is remarkable that our society would allow 18 year olds, who have no real experience with the public or driving, to drive a van down highway 401 at 120 kilometres an hour, and not stop them from doing that until there were all those deaths. To go back to your question, sure, people will risk their lives to save money because they do not understand the potential consequences. However, when it happens, it is too late.
Senator Atkins: That sounds like a good advertising campaign.
The Chairman: Is it not correct that you support minivan service with proper licensing and safety regulation?
Mr. Gow: When they reach the standards of intercity motor coach operators, they then become virtual motor coaches, and I would say yes. I would not support them in open competition over the highway with a regulated bus. If they want to serve new routes, yes, but even that should be regulated somewhat. In Quebec, we are experimenting with this. Since we are dealing with licensed taxi companies and licensed van operators, we think we have found a way to keep this under control. We will start getting scared, however, when Joe Manouk from Gracefield fills up a bus with 10 people when the capacity is only seven and hurdles down highway 105 at 110 kilometres a hour. There are limits to this.
Senator LaPierre: Regarding the incident with the van in July, I thought it involved immigrants — that is, new arrivals to Canada who were going to Toronto to visit their families.
Mr. Gow: Some of the people were very young, including some who were killed. Some were immigrant people. I did not mention that. Getting into these matters, even as a social worker, one sometimes feels one is in danger of making discriminatory remarks.
Senator LaPierre: Following our chairman's question, surely, if it is not profitable for the big buses to go to a little place such as Lac Mégantic, then a smaller van or medium-size van, very well regulated, could do that more often than a large bus. Therefore, people from Lac Mégantic who have relatives in Sherbrooke could visit them. That would be more possible and, socially, it would be acceptable.
Mr. Gow: That is the kind of scheme we are working on. There is a limit to the financial viability of this. A driver moving 40 people will earn more than he will if he were moving only 10. One of the limits to the vanpool operation is that driver wages, maintenance and fuel costs are not much different from one size of bus to the other. Voyageur is experimenting with a smaller bus on its Ottawa-Maniwaki route, for example. We will certainly experiment with that in our rural transport project in western Quebec.
Senator LaPierre: The 18-year-old who drove that bus was given the keys by an adult. In the final analysis, it is adults who are taking advantage of the dream world of young people in order to make money off their backs. It is the fault also of the government and of society who did not regulated this earlier. I make this plea for us to understand that young people may dream, but in many instances they become the victims of the greed of the adults who surround them. I have no doubt that, as an eminent social worker, you will agree with me.
Mr. Gow: Sir, you said it. To go back to your question about immigrants, I could not respond because I did not know how to answer without sounding discriminatory. In both cases, you have hit upon something. When certain population groups are either new to this life or new to this country, the state has a duty of some protection against the avarice of adults who would make a profit off the backs of gullible teenagers or gullible new entrants to the country. As a country, we have a duty to protect our less advantaged citizens or newcomers.
Senator Jaffer: We were told that there was an increase of immigrants to this country and I believe that the assumption was made that, perhaps, they earn lower incomes because they are new to this country. Do you foresee more use of buses by people who earn lower incomes? Since our immigrant population will increase, I should like to know your views on that.
Mr. Gow: That is an excellent point. In my travels, I have noted that on certain public transport, minority group members tend to account for a larger portion of the ridership than people whose ancestors have been here for 300 years. One need only take bus route 95 here to note that many of the young people, for example, are of Somalian origin, of Antillean origin or of east European origin, judging from the languages being spoken. This bodes well for public transport. When people are new to the country, their priority may not be to purchase a car. It tends to be to try to get any upgrading they need to get their papers in order to get a job or a good apartment. Currently, I am helping a young man from central Africa. He uses public transport and walks unless I give him a ride or a friend does. He says that he does not see a car on his horizon for the next two or three years. That is realistic, and it applies to many new entrants to the country, but not all. Certainly, that is the case outside of, perhaps, the banana belt on the B.C. Lower Mainland. I come from B.C. Some patterns might be different there, but countrywide, yes, there is a clientele that the public transport operators have welcomed. Perhaps more could be done.
The fare is a big problem. When I see people from visible minorities using Easy Ride, I feel for them. My office is just down the hall from Easy Ride people from Ethiopia, Somalia, and various other African and Asian republics ask me for advice on how to deal with Easy Ride, which had somehow gypped them or mistreated them or done something unsafe. They told me they could not afford to take many trips with the regular carriers. Perhaps there should be some kind of program to assist new entrants with their transport needs. Perhaps they could be issued a pass for the first few years, as is done sometimes in Ottawa-Carleton for the unemployed. As for seniors, there should be a reduction in price to help people get around and look for jobs, and so on, in their first few years in the country.
Senator Jaffer: You touched on this issue earlier, but I would be interested to hear about the state of the bus system for people with disabilities. Can you comment on that?
Mr. Gow: I spent a lot of time on this issue. I have met many times with officials and operators to discuss this, particularly recently with our western Quebec project. The bus companies and VIA rail have been making a major attempt to serve people with disabilities more, whether it is more visible signage, special seating, lifts for wheelchairs or, in the case of urban buses, low-floor buses and level boarding, for example, on Ottawa's light rail system or, for that matter, Calgary's or Edmonton's. My view is optimistic. I think the disabled community will be served better as time goes on, but there are still barriers. A recent tiff between VIA Rail and the Council of Canadians with Disabilities illustrates the problem.
With respect to over-the-road motorcoach operators, my view is that with the increasing number of disabled- adapted buses we may already be seeing some light at the end of the tunnel.
Senator Callbeck: We have been talking about fares and the fact that VIA Rail's prices are much higher than those of the bus lines. Two primary users of buses are students and seniors. My understanding is that those two groups receive special deals. Does that not bring the pricing for those two groups more in line, overall?
Mr. Gow: Buses do the same thing. Everybody has specials for seniors and students, whether it is OC Transpo, the railway or whatever. It reduces the discrepancy, but it does not eliminate it.
A student can buy a strip of tickets or receive a 40 per cent reduction, or whatever it is, from an operator. There is always something to attract the student, to give him or her a bargain. We have to remember that for the operator the students are good customers because they may be travelling at off-peak times. Hence, by filling empty seats, VIA Rail and the bus companies can avoid unused capacity. It is good for both groups. I do not see VIA Rail doing anything more for the student or senior than any other operator. I use all these carriers a lot and, now that I am 63 years old, I am entitled to these reductions. Frankly, the bus is still cheaper, even with the VIA Rail reduction fare.
Senator Callbeck: You mentioned that you prefer the bus service in Quebec to the one in Alberta. Do you prefer the Quebec system to that in any other province?
Mr. Gow: Ontario is pretty close. They have a form of deregulation, in a sense, where the bus companies participate in the regulation. It is self-regulation up to a point. It works pretty well. For the moment, Ontario and Quebec are fairly comparable, but I cite Quebec because I live there and I use the system there more. I tend to travel to Montreal and Quebec City more than I do to Toronto. That is not a bias. Those are the cities my career takes me to.
Senator Callbeck: The Quebec bus system is subsidized, is it not?
Mr. Gow: Only the urban transit and certain rural handicap transport is subsidized. The intercity bus service is not; it is simply protected by regulation. The operator on the Ottawa-Montreal route makes big bucks, but he has to spend some of that on servicing the Ottawa-Maniwaki route. There is no direct subsidy. There is a reduction in fuel price, but that is about it.
Senator LaPierre: It is a quid pro quo.
Mr. Gow: That is right. It is sort of: ``You scratch my back and I'll scratch yours.''
Senator Callbeck: What about subsidies in other provinces?
Mr. Gow: There are not many. There is some consideration in Newfoundland where the bus service is subsidized because it replaced the VIA Rail service, which replaced the CN service. Generally, however, intercity motor coach operators receive very little subsidy. I believe there is some assistance in Saskatchewan where I think it is a Crown corporation. The Saskatchewan Transportation Company is probably running at a loss, although I have not seen the last annual report. I believe that company gets some assistance from government, but most of the assistance is in the form of such things as some obligation for civil servants to travel between say Regina and Saskatoon on the STC rather than driving their cars. However, that is common practice elsewhere.
Senator Atkins: I am interested in your reaction to the notion of the configuration of an intercity bus. What if there were three seats abreast rather than four? North Americans like their space. One of the problems with many of these buses is that they provide a cramped environment. Are bus companies thinking of those kinds of things?
Mr. Gow: Sir, I have noticed an improvement in what we call the seat pitch between seats on, for instance, Voyageur's Montreal-Ottawa buses. That may be just my impression, but I do not think so. I am a six-footer, and I have trouble with a lot of aircraft and intercity buses, but I have noticed an improvement in the newer models of buses.
My view is that Prevost, Motor Coach Industries and all those good people are responding to requests by bus companies to provide a bit more comfort.
As to the two-and-one seating, there was a parlour-car type bus, which I think had a one-and-one configuration, that ran between Ottawa and Montreal and Montreal and Quebec City. I used it a lot, as did my friends. It eventually failed because the economics were not as good as they were for the regular 40-odd seat buses. I regret that. Perhaps, by going up-market, they attracted the VIA Rail segment of the population. That is one instance where they actually competed head-to-head with VIA Rail, and it did not work out. On runs that VIA Rail does not service, such as Edmonton and Calgary, there have been experiments with better buses. Generally, they have tended to be pretty good.
Senator Atkins: Are the busses that are scheduled to run every hour running at full capacity?
Mr. Gow: No, not outside rush hours. Rush hours for buses might be from 6 a.m. to 8 a.m. and then in the afternoon from 3 p.m. to 6 p.m. Outside rush hour, generally, they are not full. The problem is removing seats in between those hours. People tend to spread out on the seat, monopolizing three or four seats. Up to a point, people create their own space when the bus is empty.
Senator Atkins: American Airlines is talking a lot more about space.
Mr. Gow: AA has increased their seat pitches by something like two inches. They have earned the respect, and loyalty, of many consumers for that reason.
The Chairman: Thank you, Mr. Gow, for your presentation.
I would welcome our next witnesses from Pacific Western Transportation, Mr. Michael Colborne and Mark Hannah.
Mr. Michael J. Colborne, Chief Operating Officer, Pacific Western Transportation: The Pacific Western group of companies is one of Canada's largest privately owned and operated transportation networks with operations in British Columbia, Alberta, and Ontario. My father started the business in 1957, and we have over 40 years of expertise in the people transportation business. We are North America's eighth largest bus fleet with 1,880 units employing well over 2,000 employees.
We truly believe in rating our industry as leader in innovation and service enhancements. We were the first company in the motorcoach industry to introduce TV and VCRs in motorcoaches. Our Red Arrow motor coach service allows for reserved seat selection. We are the winner of the NTAC's National Award of Excellence for Innovation in Customer Service.
Our vision and commitment is to provide the finest service in North America, to exceed our customers' expectations and to lead our industry in technology and new product design. One of the most important things is to participate and contribute to the success of the communities we serve.
Our passenger transportation services include intercity and commuter scheduled service, charter, employee transportation, contract, shuttle, tour, sightseeing, school, and destination travel services.
The following are statistics with respect to our services: Our airport shuttle services carry 3.8 million passengers per year; our transit operations over 6 million passengers per year; our charter and tour operations travel well over 5.8 million kilometres a year; our industrial employee transportation contracts carry 2.1 million passengers a year; our school buses carry 33,000 students per day; and our intercity and commuter services carry 200,000 passengers.
Mr. Mark Hannah, General Manager, Pacific Western Transportation: We are changing the perception of bus travel through innovative solutions focused on customer demands and experiences, through our dedication and commitment to the industry, and by appealing to existing markets and relentlessly pursuing new markets.
Today's equipment is comfortable, convenient, safe and reliable. Pacific Western operates the nation's largest fleet of fully accessible motorcoaches. We will detail what you will find in the various services of Pacific Western.
Mr. Colborne: In 1979, after 70 days in transport public hearings, we were permitted to initiate the Calgary- Edmonton Red Arrow service, and today it is recognized as the finest intercity service in North America bar none.
Our whole fleet is two-in-one seating, which has one privacy side and two seats on the other side. Our newest coach, displayed here, cost $650,000. The coach has full leather seating. There is the opportunity to reserve a specific seat. We have a galley with self-serve refreshments at the back. All our seats have laptop plug-ins and there are fax machines on board. We also have movies which may be listened to by using private headsets.
We are extremely proud of our service. We have been operating since 1979. We continually market the service, and we believe that there is not an equivalent service in North America.
Mr. Hannah: Pacific Western operates an exclusive motor coach link between Pearson International Airport and downtown Toronto. On a daily basis, we operate 42 trips each way, 365 days of the year. It is non-subsidized. We pay the airport authority for the privilege.
The existing capacity is 1.5 million passengers per year, and we have the ability to increase that by adding additional vehicles.
A coach corridor proposal was put to the government of the day dealing with the link between Pearson International Airport and downtown Toronto. Presently, Minister Collenette is calling for rail service on that link. We have countered with accepting that, although we say that it should be rubber-tired without rail.
We have ``themed'' motorcoaches to help create new riders, greater awareness and thus, increased revenues. The vehicle you see in the presentation material was done in connection with Mirvish Productions, and the interior and exterior of the coach are themed to The Lion King. This Toronto-Pearson ``Airport Express'' has increased revenues and ridership.
Mr. Colborne: Since 1963, we have been providing employee transportation contracts in the Fort McMurray, Alberta area. We currently transport the employees of Syncrude, Suncor and Albion Oil Sands, which is the Shell Group of Companies. We move 25,000 people to work each day, 365 days per year, using 255 highway motorcoaches. The information package before you indicates that our convoy covers well over 27,000 kilometres of highway. The operating conditions in that area are tough, but every day we transport people safely to work. We are extremely proud of that contract.
Mr. Hannah: Pacific Western serves airline and airport employees at Pearson International Airport. As well, retail- parking operations are serviced. In total, the service operates 24 hours per day, seven days per week and realizes more than 1,150 trips per day, carrying 10,000 passengers. This is carried out through the utilization of 17 vehicles and 49 drivers.
Mr. Colborne: We move 33,600 students with our student transportation services. In addition, we handle 3,400 special needs students, covering 19 million kilometres per year. We have locations in Calgary, Red Deer, Edmonton and Fort McMurray, Alberta, as well as in Fort Nelson, Maple Ridge and Chetwynd, British Columbia.
Our municipal transit service contracts have been operating in Prince George since the early 1960s, Whistler since 1992, Fort McMurray since the 1970s and Strathcona County since the 1980s. Richmond Hill, Ontario is our newest contract and it is three years old. We carry 6.2 million passengers per year.
Mr. Hannah: In the year 2000, travellers on package trips spent $9.5 billion for transportation to destinations in Canada. Those trips usually entail motorcoach travel for all or some segments. Examples of this type of work are: touring, casinos, visiting friends and relatives, business meetings, events and conventions.
Directly, this business employs 169,000 Canadians. At Pacific Western Transportation, we travel 5.8 million kilometres per year to service to any point in North America in state-of-the-art coaches. While we believe branding is important, we also believe that our first responsibility lies in promoting the use of motorcoaches. As seen in the material we have provided, this client markets to student groups and educational tour groups. We use the exterior of the coach to appeal to that market segment.
We have extensive contracts with tour operators, educational institutes, sports teams, and leisure and corporate groups.
Pacific Western recognizes the potential for the meeting and convention business as it exists in Canada. Through that realization, we have developed a full-service destination management company to laterally integrate with our transportation entities. That organization delivers conference, meeting, event and incentive services. Those services include the provision of high-quality conference and event transportation. As a national destination management company, Pacific Western has been strategic in developing this brand separately, and our commitment has been immense. We currently have staff located in Britain to capture that particular market so that we are able to bring people from the U.K. to Canada as an incentive destination to reward their employees.
Mr. Colborne: It is easy to understand our views on economic regulation. We believe economic regulation is a product of the 1920s — a relic of the past. Economic regulation stifles innovation, adds cost to business operations and thwarts growth within the passenger transportation industry. Economic regulation runs against the grain of business and market principles in today's global economy. Economic regulation counters government direction and policy. Subsection 5(b) of the Canada Transportation Act states:
... competition and market forces are, whenever possible, the prime agents in providing viable and effective transportation services,
Mr. Hannah: Despite economic regulation, many Canadian communities have lost scheduled services that were unprofitable. The cross-subsidy economics principle has eroded over time with the granting of charter licences that are independent of scheduled services. Government policy and legislation need to keep pace with changing demographics, economics, technology and travellers' preferences. Communities and markets will benefit from new, innovative and expanded services in a deregulated environment.
The Chairman: Thank you, gentlemen.
In examining the documentation submitted to this committee today, it is clear that the committee is faced with some contrasting opinions. While some reports produced by government institutions seem to indicate that the scheduled intercity bus industry is on a steady path of decline, other studies seem to indicate the opposite.
A key characteristic of a free market system is reliance on the profit mode as an incentive for people to contribute capital and human resources. What is your position on non-profitable routes? We have not heard your comments on remote and rural areas that need servicing.
Mr. Colborne: We truly believe, and we have seen cases of it in Canada where rural services are important, that the bottom line is: If there is a market, someone will provide the service. That service may utilize small shuttle vans or it may a service run by the local school bus operator. Upon deregulating the intercity business, the major carriers will drop the rural routes. Yes, we believe that a shake-out will happen within the industry. However, we also believe that the market will respond, whether it be with the small van or with the local school bus operator, whose overhead would be less than one half that of a Laidlaw or a Greyhound size of company. If there is a market, someone will fill the need. If there is no market, there will be no service.
The Chairman: Do you believe there is a market in remote and rural areas?
Mr. Colborne: I believe that in certain rural areas there is a market and in other areas there is no market.
The Chairman: Most of the industry agreed that charter services could be deregulated. Do you agree with that?
Mr. Hannah: I agree, absolutely, but they cannot deregulate the charter services only. Economic deregulation has to occur in the scheduled segment sector and in the charter sector simultaneously.
The Chairman: How important is it in your view to have consistent regulation across the country?
Mr. Hannah: Currently, our industry is not healthy. Part of that came from the security blanket that we were surrounded by with regulation. To deregulate across the country would allow the industry, hopefully, to tackle the issues with which we are faced. It is important that this occur equally.
The Chairman: What are your views on allowing greater competition into scheduled services? Is there room for more?
Mr. Colborne: Absolutely. The big problem in Canada today is that there is no competition. Why is there no marketing or innovative service? A bankrupt company is running our intercity scheduled services in Canada. They do not have the money, the marketing ability nor do they want to promote the service. That is why ridership is declining. They have no competition. It is a straight monopoly. People are refusing to ride on dirty buses that do not arrive on time.
Senator Callbeck: You mentioned that you operate in three provinces now and one of your visions is to provide the finest service in North America. What is your 5-year or 10-year plan?
Mr. Hannah: We very much want to come east. The problem is, to obtain our first licence we had a lawyer on our payroll for 100 days. We have to weigh whether the risk and reward is worth coming up with those dollars in order to enter the market, that is, stifling smaller, creative and regional carriers to enter scheduled service markets.
Senator Callbeck: You do not have any concrete plans at present; is that correct?
Mr. Colborne: As a company, we truly have a vision. Mr. Hannah runs our Ontario operation and he has a vision. I know where I want to take the overall company.
Senator Callbeck: Do you know whether you will press ahead? You mentioned having to get a lawyer on the payroll.
Mr. Hannah: It is very discouraging that we must spend all this money only to see if we can participate further in the market. As an example, to bring the Red Arrow service from Toronto to Ottawa or Toronto to Montreal, to spend a 100 days to try and get a licence and with transport board hearings, you basically lay your soul on the line, your business plans, and your financing. You must testify and lay out your information in front of your competitors. The process is not inspiring.
Senator Callbeck: If the industry were deregulated, where would you hope to be in 10 years?
Mr. Hannah: We would be a strong intercity player across Canada.
Senator Callbeck: Would that include the United States?
Mr. Hannah: Possibly.
Senator LaPierre: In Charlottetown?
Senator Callbeck: I hope so.
What is the cost of your service as compared to rail or air?
Mr. Colborne: The only intercity service we do operate is the Calgary-Red Deer-Edmonton-Fort McMurray corridor. Other than that, we are involved in municipal, school bus and charter tours. Are you talking about an intercity route?
Senator Callbeck: Yes.
Mr. Colborne: In the Alberta corridor, there is no VIA Rail service. The WestJet fares, if you can get them, are comparable to our fare structure. We are approximately $4 more, one way, than Greyhound. WestJet would be the same as the scheduled bus.
Our company has been growing consecutively, month over month over the previous year. Our ridership on our coach service has never been higher.
Senator Callbeck: What is the answer for rural areas? You mentioned that deregulation would see the private sector step in. The former witness told us that the private sector did not step in in Florida or in England.
Mr. Hannah: Greyhound has built their company since 1930 in a monopolistic environment. Their labour unions are aware of that and their cost infrastructure is higher than more localized players. What may not be economical for them to operate may be economical for a smaller, localized carrier. There are examples in Uxbridge, Ontario, where transportation was being subsidized by GO Transit. They dropped the service and Trentway-Wager, a private enterprise, picked it up.
Senator Callbeck: I would think that would happen. In Prince Edward Island, the private sector has stepped in to cover, not 100 per cent of the service, but certainly much of it. Why did that not happen in Florida or Great Britain?
Mr. Hannah: Great Britain is not a good example to compare deregulation because of privatization. That brought a new parameter to the table. I cannot speak to the Florida situation. We spent a significant amount of time with American carriers, studying deregulation, because we were preparing for it in Ontario. We have seen some good companies get stronger and some bad companies fold.
Senator Callbeck: Do you think with deregulation there is a great future for the bus industry in Canada?
Mr. Hannah: The future does not seem to lie in the present system. Passenger statistics are on the decline. A couple of companies in the U.S. are in bankruptcy protection. It is not a healthy picture. Something must change. We need to create new markets, to go to the market in a different way and to take more risk with our creativity.
Senator Callbeck: You mentioned that you spend time and money marketing. That is something that the bus service does not do around this area or my own area. Do you market your product in the newspaper or on television?
Mr. Hannah: We are becoming involved with theme coaches, going specifically to markets and using direct-mail campaigns. In fact, we have staff on our payroll who live in Britain. They knock on doors, look at specific market segments and figure out how we can penetrate those segments. In the old days, marketing promotion would consist of putting an ad in the Yellow Pages. That does not cut it today.
Mr. Colborne: Our Red Arrow intercity service uses radio ads, TV ads and billboards. We put ads in student handbooks. We have posters in the seniors' centres and we have mail-outs.
Senator Callbeck: What percentage of your revenue do you devote to promotion?
Mr. Colborne: On the Red Arrow, our intercity service, the figure is 4 per cent.
Senator Atkins: Are you profitable?
Mr. Hannah: Yes.
Mr. Colborne: Absolutely.
Senator Atkins: What percentage of your profits would you put back into equipment?
Mr. Colborne: Virtually every single dollar that we make goes back into the company. As a company, we have been growing. In the last five years, we have increased our top-line revenues by well over 50 per cent. Our industry is very capital intensive. A new coach costs $650,000. As a result, we are constantly buying new equipment and rolling stock and improving our facilities.
Part of our whole philosophy of doing business is that, as owners of the company, we want to be proud of the business we operate. As a result, we do take less profit out of the company because we want to be proud of the presentation of the people, our equipment and facilities. That is a big part of our operation in Ontario. Our drivers of the airport express are the finest in the industry. They are well dressed. Our equipment is spotless. That is important to us.
Senator Atkins: Did you hear some of my questions during the previous presentation?
Mr. Colborne: Yes.
Senator Atkins: Is it true that if the equipment is top quality and spotless, anyone who gets in your bus will not put gum on the seats and cause a lot of the deterioration that is over and above normal wear and tear?
Mr. Hannah: That is a very good question. You have to look at what market segment you are pursuing. We do not have any gum on our seats, but we do a lot of charter work with educational groups or student groups. That is to be expected. We buy these motor coaches to use them. If that happens, you simply fix the problem. You clean the bus. You stay on top of it. You have your entire staff committed to it, whether it is drivers, mechanics, cleaners, managers or dispatchers. You have to be committed.
Senator Atkins: Mr. Hannah, if you were to take over the run from Toronto to Hamilton, what would you do?
Mr. Hannah: Are you asking what we would do as a company?
Senator Atkins: Yes.
Mr. Hannah: The first thing I would do is ensure there was no government-subsidized competitors, such as GO transit. We consider the market. Obviously many business people come into the city of Toronto. You have to do a market survey to find out if they want a one-seater, a two-seater, or an executive-style coach. You must determine if your primary focus is price. You must determine the product that the market wants to buy. You have to go to the market and let them tell you what they want.
Senator Atkins: Would configuration have something to do with it? The GO train goes to a GO train station, but a bus goes into town, and that may suit a businessman who lives in Oakville.
Mr. Hannah: As a further point, we may not stop at the bus terminal because that particular market segment may not want to stop there. They might want to stop at First Canadian Place where their offices are. We must appeal to them and be convenient for them. We have to get them out of their cars.
Senator Atkins: If you are to be successful, you must adjust to the contemporary market and environment.
Mr. Hannah: Absolutely, the client demands.
Senator Atkins: I congratulate you on what you are doing. I think it is incredible.
Mr. Hannah: Thank you.
Senator LaPierre: Do you operate an intercity route in British Columbia like you do between Calgary and Edmonton?
Mr. Colborne: The industry is regulated in B.C. In fact, the intercity business is regulated right across Canada. There is some misunderstanding in the background paper that suggests that Alberta, Ontario and some provinces on the East Coast are deregulated. They might be in the charter end, but if we wanted to compete with Greyhound and expand our Red Arrow service or do something in B.C., we could not. We would not be allowed to do that. We would have to go through the public hearing process.
Senator LaPierre: You do not operate east of Alberta except through your specialized services.
Mr. Colborne: That is correct. We have regional operations, but not in between, nor would we do that even if it were open to us to do that. As a company, we believe that in markets 230 miles and longer, the airlines will make the bus operators uneconomical and ineffective. As an intercity motorcoach carrier, we believe that we can compete most successfully in the corridors where the distance is 220 miles and under.
Senator LaPierre: I still think that you could compete with GO Transit. I think they are the most uncomfortable vehicles ever built. I know that the people in Oakville have lots of money and that they would enjoy travelling in your beautiful buses.
Mr. Hannah: We think there is a market there.
Senator LaPierre: You believe that, despite the subsidies GO Transit may get.
Mr. Hannah: Again, we would have to look for a different market, a different value offering which brings about different clientele.
Senator LaPierre: Surely total deregulation is not possible. There would have to be regulations governing licences and the condition of your buses. The public must be protected.
I did a lot of work in television. When we created the violence code, the government and all the people knew exactly what was needed, but the regulations were the responsibility of the broadcaster before the CRTC. Would the system be easier for you if you had a self-regulatory process within a charter of some sort?
Mr. Hannah: First, we do advocate economic deregulation. We believe that safety can never be toyed with. We cannot allow van operators to come in and compete, or individuals who do not maintain a rigorous standard of vehicle maintenance and driver training and full compliance. I think that the best system is some sort of periodic facility audit to ensure that operators are in full compliance on the issue of safety.
Senator LaPierre: What does economic deregulation consist of, sir?
Mr. Hannah: The actual licensing, going before a public tribunal and proving that there is a public need and convenience for the service.
Senator LaPierre: Toronto cannot allow some western cowboys to come in and run its intercity buses without at least knowing who they are.
Mr. Hannah: It has happened. That is how Pacific Western came to Toronto. It involved the purchase of a licence. It was a very expensive purchase.
Senator LaPierre: You want economic deregulation and you want to be able to enter the market wherever you choose; is that right?
Mr. Colborne: That is right.
Senator LaPierre: You do not want to go through a lengthy and expensive process. You would have to go before the board and guarantee that you would do certain things.
Mr. Hannah: That would only relate to safety.
Senator Biron: Do you serve any rural areas or small towns?
Mr. Colborne: Yes, we do. We provide many commuter-type services such as from Okotoks to Calgary and Cochrane to Calgary. Where we have seen a market demand within the region in which we operate, we have operated a commuter-type service from the rural community to the city.
Senator Biron: It is more of a commuter service rather than between small areas such as Gaspé to Rimouski?
Mr. Colborne: That is right.
Senator Biron: Would it cost too much for any bus service to provide that service?
Mr. Colborne: It is not necessarily the cost factor that is the issue; it is the lack of revenue from those communities.
Senator Biron: Do you think the government should subsidize rural areas?
Mr. Colborne: No, we do not. We truly believe in the free market system. In a rural community, there may be a taxicab operator and a person who operates a vehicle repair shop. There are many different businesses in rural communities and, where there is a market, someone will provide the service.
The Chairman: Are there any issues in your industry with respect to vehicle weights and dimensions with these very large and heavy coaches? Are highways departments concerned?
Mr. Hannah: British Columbia had a blitz approximately three years ago when they pulled vehicles off the road, weighed them and checked axle weights. However, that is the only jurisdiction of which I am personally aware in North America that did that.
Senator Callbeck: Did you say that, as far as scheduled bus service is concerned, all provinces are still regulated?
Mr. Colborne: That is correct.
Senator Callbeck: When you say that some provinces are deregulated, is that for charter services?
Mr. Colborne: That is charter only.
Senator Callbeck: Does that means a chartered vehicle can go into that province without applying to any authority?
Mr. Colborne: There is an administrative process you must go through to get a licence. Basically, you must prove that you have a facility, a maintenance program and some equipment registered to your company. It is an administrative process rather than a public hearing process whereby you must prove public need and convenience.
Senator Callbeck: I thought they were deregulated across the board.
Mr. Colborne: No, although the background paper does suggest that if you read between the lines. That is not true.
Senator Atkins: Is your company unionized?
Mr. Colborne: Yes. We have six different unions in our company.
Senator Atkins: Therefore, am I correct in saying that you are competing with other unionized transportation organizations?
Mr. Colborne: Yes, but we have many advantages because our people are truly part of our team and we work well with our unions. As a result, we are more responsive to our customers and do a better job, which is to our advantage.
The Chairman: Mr. Colborne and Mr. Hannah, thank you very much for appearing before our committee.
The committee adjourned.