Proceedings of the Standing Senate Committee on
Transport and Communications
Issue 30 - Evidence - May 28 sitting
EVIDENCE
OTTAWA, Tuesday, May 28, 2002
The Standing Senate Committee on Transport and Communications met this day at 9:32 a.m. to examine issues facing the intercity busing industry.
Senator Lise Bacon (Chairman) in the Chair.
[Translation]
The Chairman: First of all, I want to thank on your behalf the committee clerk, Mr. Michel Patrice, who will be leaving us in September. We will have an opportunity to thank him more formally another time. I would also like to introduce to you at this time Mr. Richard Maurel who will be replacing Mr. Patrice. Welcome to the committee. Michel, I know we will have an opportunity to say our goodbyes a little later.
[English]
I would welcome you to our special study of the intercity busing industry. As you know, the Minister of Transport, the Honourable David Collenette, asked the committee to undertake this study, which we began at the end of last year. Our public hearings began in February of this year, and we are required to report before the end of 2002. I am confident that we will have sufficient time to adequately study the issues and develop recommendations to the minister.
We have heard from a number of witnesses here in Ottawa, as well as from numerous witnesses in Montreal, Halifax, Vancouver, Calgary and Toronto. Appearing before the committee today is Mr. Ross Ferguson, President of the Airport Ground Transportation Association of Ontario. We look forward to learning more about the operation of this service and how it is regulated and coordinated.
For the benefit of Mr. Ferguson, I will review the purpose of this study. The essence of the problem is that intercity bus ridership has been steadily declining for several decades. This decline is troubling because the bus mode is an important part of the passenger transportation system. The bus mode is inexpensive overall; it can go virtually everywhere; it is environmentally friendly; and it is a relatively inexpensive means of travel for passengers.
There are several possible explanations for the decline. It could be that people are better off than before and are therefore travelling more frequently by automobile; it could be that more people are living in big cities; it could be that there are too many government regulations; or it could be that the regulations vary too greatly from province to province.
I am certain that the information Mr. Ferguson provides today will aid us in understanding the issues. Mr. Ferguson, please proceed.
Mr. Ross Ferguson, President, Airport Ground Transportation Association of Ontario: I would like to tell you a little bit about the Airport Ground Transportation Association of Ontario, which is unique. There is a North American Airport Ground Transportation Association headquartered in St. Louis, Missouri, which basically lobbies on behalf of the industry in the United States and in Canada. It is a North American association that meets twice per year to bring the members together.
Our association in Ontario has a budget that is approximately 10 times greater than the North American association. We have 17 full-time employees, and we staff three terminals at Toronto's Pearson International Airport. Our association represents all the companies that supply airport ground transportation to and from Pearson airport from outside Toronto. We provide transportation to and from Pearson airport to more than 170 different cities, towns and villages in Ontario.
The staff dispatch vehicles, meet and greet passengers and align the drivers and the passengers to create a smooth transition. We are largely an advance reservation type of industry. If anyone has a reservation with one of our companies, even if the plane comes in at 3:00 in the morning, we will be there because we monitor all the flights. This is a unique service. Pearson is the only airport in North America that has such an operation.
Our members utilize everything from buses to mini-coaches to 12-passenger vans. The bulk of our members provide what we call a ``shared-ride, on-demand, door-to-door service,'' in eight-passenger vans. It is unique in that it has the attributes of a taxi service because it is door-to-door — office to home for example — and it is on demand. The service is based on the individual's flight departure time; and that is how the pick-up time is monitored. Conversely, when passengers return to the airport, the service kicks in and they leave the terminal as soon as possible after the plane lands. That is an on-demand, door-to-door service, similar to a taxi. However, it is also similar to a bus service because it is a shared, multi-stop ride. It combines both taxi and bus qualities, which makes it unique.
It is important to understand why the service has been so successful. Partially, it is because the service addresses what the consumer wants. I will speak about our experience in that regard.
The main competition to public carriers in our industry is the automobile. That is compounded by hotels that offer free or reduced parking so that a guest staying one night may receive free parking for one week or so — ``park and fly'' — in facilities offering weekly specials. It is a competitive situation, and it is difficult to convince the majority of people not to drive their cars. We are working on the situation and doing quite well towards combating that competition.
People who drive to the airport tell us they want the convenience of leaving directly from their homes or offices and returning directly to their homes or offices. They want the convenience of leaving based on their flight times and the flexibility to change their plans, especially at the last minute, and have their cars at the airport.
The people who use our service want those same conveniences but they do not want to drive to the airport. There is a good example of the effects of fares versus service. In Hamilton, Ontario, a large bus company continues in operation after providing service for many years. The bus went from the bus depot to three hotels and then out to the airport. One of our members offered a shared-ride van service. It supplied the same service to the same locations, except that it was door-to-door and on-demand. In the shared ride situation, other people were picked up on the way.
At one time, the fare for the bus was about 50 per cent less than the shared-ride service. However, the number of passengers kept declining so they reduced their price to 70 per cent less than the shared ride. The passenger numbers still declined to about one or two on average for a 46-passenger bus.
The point is that it is not necessarily price that is important, it is the level of service the passenger wants to have provided that is important. Primarily, people are prepared to pay for service as long as they believe that they are getting fair value.
Clearly much of the decline in the bus industry has come from many different sources. Over the years, with the evolution and increase of airline routes, people now measure how they use their time, and they are very aware of the fact that time is money. The bus industry suffered from the effects of some rather dramatic new opportunities in travel.
If you want to be successful in this industry, you must keep changing to accommodate what the customer wants. Buses cannot go door-to-door through neighbourhoods. However, if you have two services that are offering basically the same convenience and the same level of service, then price comes in, and that is very important. The airline industry offers seat sales. The reason companies like WestJet or Southwest are so successful is because they provide the same service at a lower price.
We are regulated under the Public Vehicles Act of Ontario.
One of the attributes of our market is that it has not been growing because we cannot get people out of their cars and into our vehicles. Our market is not stagnant, but it is not growing.
Many of our members serve large geographical areas with light population densities. It is extremely difficult for them to succeed in doing what they are doing now. If you introduce new competition in those areas, it will probably be fatal to our operators. Over the years this has been recognized by the Ontario Highway Transport Board. They still recognize it to the extent that, if a new application comes before them, they will intently measure what the effect will be on the public and the existing carrier. If granting the licence will hurt the existing carrier, they must ask how that will benefit the public. In my experience, it does not help the public, and the board has ruled accordingly.
Most of the expenditures of these companies are related to providing an airport service. It is very expensive to deal with airports. Many different fees must be paid. In addition, there is the cost of insurance, which, unfortunately, after 9/11, has sky-rocketed. Many of these expenses are non-discretionary. They are unavoidable. If the carrier has to reduce fares it has to be absorbed from a discretionary source. What they have left is safety, maintenance and labour.
In our industry, drivers are paid, on average, $10.50 an hour. Of course they can also generate tips. For line run services which serve the public, particularly in remote areas, which is largely what we do, it is important to conform to the regulations. We think it is important to at least review the entry requirements to ensure that there is no harm to the public or existing carriers. We must also ensure that these companies are held to a certain degree of performance and safety.
If anyone complains about our service to the board, our licence can be revoked. That is a very persuasive tool, and it ensures that we are on our toes all the time. Our customer is our most important consideration.
Several questions we have seen on the Web site are relevant to our situation. I cannot see any clear and obvious way to reverse the decline of bus usage, certainly not with lower fares. Passengers who switch to airline or rail are willing to pay higher fares because of other considerations, such as convenience and travel times. In our experience, destination, convenience, including frequency, and travel time are what our customers care most about. Then price comes in.
People who apply to the Ontario Highway Transport Board for licences do not understand what they are trying to get into. They will come in and do what we call ``cherry-picking.'' They want to come operate at the busy times, but they do not want to offer service at other times. Their position is, if they cannot accommodate certain passengers, the other carrier will. You should not be able to do that. You make a commitment to serve the public, and you have to carry through on that commitment. That is one of the biggest dangers of deregulation, certainly for the line-run type of industry.
I have provided a list of our members and the areas they serve, as well as a letter that I wrote to the president of the OMCA. That was in response to their proposed definition of a bus, which definition runs counter to our types of operations. They had not realized that when they did it. We are working with them to resolve that issue.
I would be pleased to answer any questions you may have.
The Chairman: Thank you, Mr. Ferguson. Your segment of the transport market, airport ground transportation, appears to be a new phenomenon. On average, how long have the members of your association been in the business, and what kind of business were they engaged in before?
Mr. Ferguson: This is the 25th year for airport ground transportation. The company I own, Airways Transit, is in its 26th year. I know that one of the other companies has been in business for 32 years. Even our newer members have probably been in for six or seven years.
As to what they did before, it is quite a mixed bag. Some of them were running a bus service and decided to try to add airport transportation to it. Airways Transit did nothing before. We just started as airport transportation, as did Red Car, Brantford and a few others. That is all they do. That is their business.
The Chairman: Could you clarify the regulatory authorities under which Ontario airport ground transportation operates? Do would-be operators have to pass a test of what they call public convenience and necessity, and are the applications routinely not opposed?
Mr. Ferguson: There are two levels of regulations. The most important is the regulations under the Ontario Public Vehicles Act. Under that act, any new applicant must prove public necessity. The applicant must prove that no harm will come to an existing carrier and that the public will be served.
We also have to comply with the contractual arrangement we have with the airport authority. We are licensed or permitted by them to pick up passengers at the airport.
The Chairman: Would some airport ground transportation operators be interested in doing more intercity passenger carriage if they were allowed to do so by the regulator, and do you think that there is a demand for the members of your association to offer this service?
Mr. Ferguson: I cannot think of any particular demand for it. Obviously, we all do small charters. We have small equipment, so we run small charters in addition to what we do. Mostly, it is work within the province of Ontario.
I have the largest company in the association, and I am not aware of a demand for any additional intercity service.
The Chairman: How do customers contact an airport ground transportation company? Do they have to reserve in advance? Do some of these companies pick up passengers at their residences, offering door-to-door service?
Mr. Ferguson: Yes, the bulk of our members provide what is called door-to-door, on-demand service. Probably 90 per cent is advance reservation. However, people at the airport, who do not have a reservation, can walk up to our booth and we will take care of them. Most of our customers do make advance reservations. For the most part, a passenger can make a reservation by phone, on the Internet or through a travel agency.
The Chairman: Do intercity bus operators oppose applications by airport ground transportation companies? Do you have problems with them?
Mr. Ferguson: No, but, in effect, we are intercity operators as well. We only get objections where it will infringe on or hurt one of our members. Rarely do we get objections within our industry. Most often it happens when people come from outside.
The Chairman: Our greatest concern relates to the many communities in Canada that currently have no intercity bus service. Under the existing regulatory regime, what can be done to help them? What changes to the regulatory regime are required to improve the likelihood of service to these communities?
Mr. Ferguson: I am not too sure it is a matter of regulatory versus non-regulatory concerns; I think it is a matter of supply and demand. You cannot regulate a company to lose money. If someone wanted to provide a service to a certain community where there obviously was no financial base for it to work, then some kind of subsidy would need to be employed.
Senator Spivak: Do these buses also carry equipment or parcels that people send? Do they take anything other than people to the airports?
Mr. Ferguson: Yes, nearly all of us do parcel express to the airport.
Senator Spivak: That is, not with the passenger but without the passenger?
Mr. Ferguson: We never pick up a parcel with a passenger on board.
Senator Spivak: You are not into the freight end of the business.
Mr. Ferguson: Yes, we are. We put the freight onto the van before we pick up the passengers so the passengers never have to make a stop that has anything to do with freight. The freight is loaded on the van before passengers are picked up, and it is delivered after they are dropped off.
Senator Spivak: The Greyhound bus company is more competitive than any of the other companies in shipping parcels or any other kind of freight intercity. You do not do that. You cannot pick up a parcel and take it to the airport to be shipped somewhere else.
Mr. Ferguson: Yes, we can.
Senator Spivak: I assume you do that only if the passenger accompanies the parcel.
Mr. Ferguson: Perhaps I do not understand the question.
Senator Spivak: If I wanted to ship a parcel, would you pick it up and take it to the transportation section at the airport so that it could be shipped?
Mr. Ferguson: I was not trying to imply that the passenger and the parcel were related. I was saying that we pick up parcels, but we would never inconvenience the passenger.
Senator Spivak: Is that a part of the bus business?
Mr. Ferguson: It is not a big part, but it fits in quite nicely.
Senator Spivak: How do we compare here in Canada with what goes on in Europe, for example, where they have diversified transportation modes? What do you think is the future for bus transportation compared with rail? Is light rail in the future, or will it be bussing with buses powered by fuel cells that are less polluting? What do you see for the future?
Mr. Ferguson: That is a wide question. I am not an expert on the European situation.
The bulk of our equipment runs on propane, which is environmentally friendly.
As to the future, light rail is a great alternative. Again, it is a matter of supply and demand in a viable market. There is no doubt that it will hurt the existing service serving that community. This has certainly been the experience in North America.
In the future, I see everything going towards alternative fuels, fuel cells and far more stringent government regulation of emissions.
Senator Spivak: It seems to me that the growth can be from people staying in hotels and not necessarily from residents. If a bus service is convenient, it is competitive. Are pickups at hotels a great part of your business?
Mr. Ferguson: We are door-to-door, and hotels have doors. Hotels are probably 5 per cent of what we do. You must look at the market we are serving. We are not serving a convention market. We are not serving a market like Miami with such attractions as Disneyland. In those markets, probably 90 per cent of what their carriers do is pick-up at hotels. In Hamilton, Kitchener and Southern Ontario our customers are mostly businesspeople and vacation travellers.
Senator Jaffer: On average, how many stops are made before you get to the airport? I know it varies from place to place, but what is the average?
Mr. Ferguson: We like to promise that there will be no more than two stops after pick- up. Three stops is the maximum. Obviously, in bad weather, heavy traffic or with late flights coming in, you might have to add a fourth stop. The ideal is that there will be no more than three.
Senator Jaffer: I apologize if you have already answered this. Do you use a van for the door-to-door service?
Mr. Ferguson: Yes.
Senator Jaffer: How many seats does it have?
Mr. Ferguson: The majority of our vehicles are eight-seat passenger vans.
Senator Jaffer: Do you normally transport six to eight passengers in your door-to-door service?
Mr. Ferguson: This is the interesting part. With most modes of transportation, the most important factor is to get the load factors up as high as they can be. Our load factors probably average four to five people per round trip, so 2.5 passengers one way.
It is so low because you are providing an on-demand service. You provide it during offpeak times as well. You are ``deadheading'' quite a bit back and forth. That is because people leave in the morning and come back in the evening. Our load factors are very low.
However, if our average rose to six passengers, I would be worried because then we would not be providing good service because we would be making too many stops. Of course, if the number went up because of a convention, then that would be nice.
Senator Adams: I believe you said you provide service to 170 cities, town and villages in Ontario; is that right?
Mr. Ferguson: I think it is just over 170 cities, towns and villages.
Senator Adams: Did you say you have 17 staff members?
Mr. Ferguson: Yes. The 15 companies that make up our association serve those 170 cities, towns and villages, and our association represents those 15 companies.
Senator Adams: Surely those 15 companies do not employ only 17 people? How many people, in total, are employed in your association?
Mr. Ferguson: No, we probably employ 800 people or so.
Senator Adams: My son has used your service from Toronto a few times. He was very happy with the service provided.
Your small vans can seat eight passengers. That would not leave very much room for luggage. How does it work?
Mr. Ferguson: We usually order a vehicle which is just a shell and then we build the van. We start with an extended van and build eight seats into it, which leaves a huge area at the back for luggage.
Senator Adams: Other bus operators have told us that they do not take reservations for ground transportation from airline passengers. How does your system work?
Mr. Ferguson: Just about all our reservations are made with the individual companies. We take business people and vacation travellers from each of the villages and cities that we cover. They probably make the return reservation ahead of time directly. We all have reservation agents on staff.
Some people do come to the airport and, for whatever reason, have not made an advance reservation. We have ground transportation booths in each terminal. They can go up to the booth, give their name and the address of their destination, and from that point on they have a reservation.
Senator Adams: Do you have buses that can accommodate more than eight passengers?
Mr. Ferguson: Some of our members, for instance, Coach Canada, which is Trentway-Wager, have only large coaches. Some of our members have mini-buses that they use as well, but the bulk of the fleet is eight-passenger vehicles.
Senator Adams: Is the fare based on the distance travelled?
Mr. Ferguson: Primarily, our fares are based on location. A fare to Hamilton would be a certain amount of money, as it would be to Burlington, Kitchener, Waterloo or wherever. It depends on the location.
Senator Adams: Some witnesses from the West and Saskatchewan told us that the van-type service is not profitable. Is that true? Perhaps it is different in Ontario.
Mr. Ferguson: It is probably true. It is probably much like the situation that we are dealing with outside of Toronto. I believe at one point the population of Toronto was greater than three of the Western provinces. Toronto is a big, densely populated area, as is Montreal and Vancouver, but there is a large amount of sparse land in between. Even in Ontario we serve some pretty sparse population areas.
Senator Adams: You mentioned that you have a problem with people complaining to the Ontario board. Are they able to shut down a business automatically? Is there a requirement that there must be more than one complaint?
Mr. Ferguson: The Ontario Highway Transport Board conducts a hearing when anyone makes an application. We are all licensed by territory. That makes us unique in North America. The American ports — and I am familiar with most of them — have pretty well open competition, and it is just complete havoc. We each have a licensed territory. Since we are not competing, we can work together and with the Greater Toronto Airport Authority. It is a smooth running operation.
Senator Adams: Some people operate their own buses in Northern Ontario. They deliver mail and parcels to small outposts in Northern Ontario. How does it work in a northern community, where a bus company may need a subsidy to keep operating because there are fewer people travelling?
Mr. Ferguson: As I said before, it is very difficult, particularly in remote areas and particularly as you get further north.
One example of an application that went before the Ontario Highway Transport Board was by Ontario Northland, a northern, publicly funded bus operation that was running a service to Toronto. That company applied to service Pearson Airport as well. One of our members, Northern Airport Services, which is a small company as well, could not have competed. When the board hearing took place, a number of things became obvious, one of which was that the existing service would be harmed. Ontario Northland, could not provide the level of service that the other company was providing. Ontario Northland also stated that may require to cancel trips at any time. That is not acceptable. A company must make a full commitment, and to make that commitment to a small northern community is very difficult.
Senator Adams: Would a subsidy from the province enable a private business to operate in a small northern community?
Mr. Ferguson: If there were a subsidy it would enable a company to at least break even or make a small profit.
Senator Adams: Why would the Province of Ontario go into competition with the private sector? That is my concern.
Mr. Ferguson: I am not aware of any subsidies in our industry.
Senator Phalen: From the outset I would like to say that I support the idea of shuttles. I have used them in Florida. I found it much more convenient to use the shuttle than to rent a car at the airport.
Do any provincial regulations exist respecting vans? Are van services covered by a provincial law that stipulates the requirement for safety inspection, insurance and that type of thing?
Mr. Ferguson: Ten-passenger vehicles and over, which can be vans, are covered under CVOR. Maintenance standards for eight-passenger vehicles are governed under other legislation. As far as the Ontario Public Vehicles Act goes, we are held to standards of performance, licensing and so on.
Senator Phalen: Are there no restrictions with respect to safety inspections or insurances?
Mr. Ferguson: No, other than what is covered by the Motor Vehicle Act.
Senator Phalen: Could you give us your definition of a bus?
Mr. Ferguson: I am in agreement with the present definition of a bus, which is a vehicle holding 10 persons or more, exclusive of the driver, that provides transportation for hire intercity.
Senator Phalen: You mentioned that you guarantee a number of stops. What do you mean by that? When I took the shuttle, if there were six people in the shuttle there had been six stops.
Mr. Ferguson: We are quite different from most of the American type carriers. The American type carriers run perhaps even more like a taxi than we do because they are primarily running from airports to downtown hotels and whatever, like Super Shuttle and those type of companies. What we try to do — and I do not use the word ``guarantee'' — is have no more than three stops, but remember we are have advance reservation. We are not running around picking up people who do not have reservations on the way to the airport. We do not make a stop unless there is a reservation.
Senator Phalen: At Tampa Airport you come out of the airport, go to the depot, and put your name down for a shuttle. A certain number of people would go to a particular area. There could be, say, five stops. Is there any way that you would restrict that?
Mr. Ferguson: The way we operate is that when people come in they have their reservation before their plane lands, therefore, we can set up the trips well in advance because we know how many stops are required.
In the U.S., particularly Tampa, where there is a large volume of vacation traffic, a system does not exist for reservations in advance. You arrive, a trip is billed and a van is sent out. If a van is full, there may be seven or eight stops.
Senator Phalen: Are illegal vans operating in your area?
Mr. Ferguson: There are illegal vans and buses operating everywhere. The answer to this is enforcement, and that requires money. Over the past years, it has been more difficult to have enforcement, I presume because the money is not there. You can enact laws, but if you do not enforce them, they will not be effective.
The Chairman: How do your fares compare with taxi fares?
Mr. Ferguson: It depends upon the location, but our fares in Hamilton are probably between 50 and 60 per cent of the taxi fare, for a single person, for instance.
The Chairman: How do you make money with low fares?
Mr. Ferguson: I will speak about airways because that is the sector I know best. We do probably between 50,000 and 60,000 round trips a year, which is close to 40 million passenger kilometres. If you can maintain a round-trip load factor in the range of four to five, you should be able to make money.
The Chairman: Is that because of the volume?
Mr. Ferguson: Yes.
Senator Callbeck: Many companies enter into an agreement with the Greater Toronto Airports Authority. For example, I understand there is a bus company that operates in Durham that has the rights to come into the Toronto airport. Does the authority license that company?
Mr. Ferguson: Their territory is licensed under the Ontario Public Vehicles Act. They would probably be the only licensee for that particular type of service. Many services are available. This is just one of them.
Senator Callbeck: You have mentioned that they are subject to the regulations under the Motor Vehicle Act.
Mr. Ferguson: Yes.
Senator Callbeck: Does the Toronto authority put any other restrictions on the company, for example, the kind of vehicle that is to be utilized?
Mr. Ferguson: The Greater Toronto Airports Authority, no. Basically, a vehicle cannot be more than 10 model years old and it must meet their inspectors' standards. It has to be in good shape and clean.
Senator Callbeck: Standards, apart from the regulations under the Motor Vehicle Act, are imposed by the Toronto authority; is that right?
Mr. Ferguson: They have standards of what that vehicle should look like. They do not do mechanical checks. That falls under Department of Transport.
Senator Callbeck: What about the price? Let us say a company has the contract in Durham to take people to the airport in Toronto. Can they charge whatever they like, or is the Toronto authority involved in that?
Mr. Ferguson: No. You only have to file your fares with the Greater Toronto Airports Authority. The great equalizer in the marketplace, and it is very, very effective, is the passengers tell you quite clearly when the price is not right for the service you are providing.
Over the last few years, particularly after the Gulf War, people are becoming far more demanding on what they expect for the money they are paying, and we are constantly being challenged to increase the level of service without increasing the fares.
No one tells you you have to do it. Believe me, the customer is very effective.
Senator Phalen: What would be the average fare from Pearson International Airport to downtown Toronto?
Mr. Ferguson: That is outside our bailiwick. The fares are split into approximately 16 areas. Downtown, say, Bay and Bloor, is about $38 by airport limousine.
Senator Phalen: The shuttle that I used was much cheaper than a taxi. The taxi would have cost, to the area I was going, $40 American as opposed to $15 for the shuttle. The shuttle was every bit as comfortable and convenient.
Mr. Ferguson: Of course, the shuttle has four or five fare-paying passengers. They will get $75 for the trip.
The Chairman: Thank you, Mr. Ferguson.
The committee adjourned.