Debates of May 7th, 2014

Transport—Main Estimates, 2014–15

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

Mr. Chair, I would certainly like to wish the minister the best of greetings on a special day and thank her for being here tonight.

In December last year, Canada Post Corporation released a comprehensive five-point action plan entitled “Ready for the Future”. It was designed to realign how it delivers and prices postal services to meet Canadians' emerging and future needs while substantially reducing costs to the taxpayer.

This is a watershed moment for Canada's national postal service. Letter mail volumes have been declining since 2006, when Canada Post delivered 1.2 billion more letters than it did in 2013. That is a big number. The corporation estimates that for every 1% drop in mail volume, it loses $30 million in revenue. This is placing a huge strain on Canada Post's finances, as witnessed by losses of $129 million, before tax, in the postal segment alone in the third quarter of fiscal year 2013. It is quite clear that the services, as currently provided by Canada Post, are no longer sustainable.

Canada Post must now manage its business as a viable commercial enterprise that competes effectively in every product line. Even its traditional direct marketing business is facing digital rivals that use mobile and smart technologies, and the parcel business operates in a highly competitive environment.

The corporation is well aware that to build on recent successes, it must attract customers in an increasingly complex economic environment. The parcel business, unlike letter mail, is highly competitive, and parcel volumes have been rising worldwide. Postal services in many countries have been aggressively using their extensive sorting and delivery infrastructure to expand in this sector. Globalization has more parcels coming into Canada to be processed to the same high standards, and the highly competitive parcel delivery market means that service providers must modify operations in order to win and retain customers with the quality and reliability of their service. In the business of the customer parcel delivery market, that means providing fast, reliable, and convenient delivery, excellent tracking options, and reasonable prices.

The growth in the parcel industry has also intensified local and global competition. FedEx and UPS, for example, have increased their competitive positions in Canada. Customer patterns have also shifted from premium to less urgent products that cost less. The increased competitive landscape has put increased pressure on Canada Post to manage costs, improve product offerings, and provide a superior customer experience.

With approximately 40% of parcel deliveries to Canada originating internationally, Canada Post has negotiated bilateral agreements, notably with the United States and China, to increase its share of this inbound traffic. The corporation has also made extensive investments in new facilities, including a 700,000 square foot plant at Vancouver International Airport. It has increased real-time tracking through portable scanners for employees and has added to its capacity for motorized delivery to handle growing package volumes.

Canada Post also offered on-demand parcel pickup for small businesses in 2011 and 2012. It provided enhanced web services for online retailers, including seamless management of returns.

I wish to emphasize that the government is committed to ensuring transparency in how Canada Post provides quality postal service to all Canadians, rural and urban, individuals and businesses, in a secure and financially self-sustaining manner. That is why the government established the Canadian postal service charter in 2009, which set out its expectations regarding Canada Post service standards and related activities in providing postal services that meet the needs of Canadians.

An important aspect of the postal service charter is its commitment to universal service that ensures that Canadians in both urban and rural areas can send and receive letter mail and parcels within Canada and between Canada and elsewhere. As part of Canada Post's continued commitment to parcel delivery, parcel services to Canadians living in rural and northern communities not currently serviced by competing parcel delivery companies will have significantly wider access to, and the ability to return products from, Canada and around the world.This is crucial for the many rural and northern communities not currently served by private sector courier companies.

Canada Post's five-point action plan embraces the principle of reform without seeking any change to the Canadian Postal Service Charter. This plan is about giving Canadians the postal service they need in the emerging digital economy. Canada Post is quite aware of the changing face of the postal industry and has been preparing for a future with less mail and more parcels for a number of years.

The corporation has implemented measures to expand its parcel volume both through its postal operations and through its Purolator courier service. For example, changes to internal operations first begun in 2010 have made for a more efficient flow of parcels through the network to the customer. Canada Post has launched an aggressive plan to invest in replacing its aging processing infrastructure and delivery processes with more modern and cost-effective approaches driven by technology. The sorting equipment in place today is much faster and more accurate. From a delivery perspective, it has meant a massive shift toward motorization.

Canada Post will continue to leverage these investments. Doing so will further reduce the cost of processing the mail and will allow the company to better serve the growing parcel market and provide the services Canadians will need in the future.

In many urban areas, Canada Post has moved away from letter carriers delivering mail by foot to carriers who leave their depot every morning with a fuel-efficient van containing the mail and parcels for delivery on their route. Putting mail and parcels in one truck for delivery provides a better end-customer experience, especially in the parcel business, at a much lower cost to the corporation. These improvements will allow Canada Post to compete more effectively in the fast-paced and technology-driven global parcel market. All kinds of parcels are now flowing through Canada Post sorting plants, including items that depend on fast and accurate delivery, from health care products and gourmet food to live bees and baby chicks.

Canada Post realizes that the parcel business is highly competitive and it does not have the exclusive privilege to deliver parcels, as it does for letters. Therefore, the corporation has focused on providing a superior customer experience, recognizing the attachment Canadians have to their parcels. Canada Post has indicated a desire to expand en-route pickups and launch a comprehensive returns solution that will benefit e-commerce merchants and shoppers by improving inventory management, returns processes, and automatic billing.

An important component of Canada Post's proposed strategy is its intention to build upon its current strength in parcel delivery, which has demonstrated growth over the past few years thanks in large measure to the fast-growing market of online shoppers.

It is clear that Canadians have become enthusiastic online consumers. Statistics Canada reported in October 2012 that the value of orders placed online by Canadians reached $18.9 billion in 2012, up 24% from 2010 when the survey was last conducted. That is 24% in two years. More than half of Internet users, 56%, ordered goods or services online in 2012. Perhaps even more encouraging, most Internet shoppers, 82%, had placed an order from a company in Canada.

Canada Post's parcels line of business currently offers a range of domestic and international delivery services and is the largest player in the Canadian parcel market, with more than 50% market share. The corporation sees an unprecedented opportunity for additional growth linked to e-commerce as online business activity increases. Customers for parcel services include businesses, consumers of all sizes, governments, international postal administrations, and other delivery companies.

According to a recent report by the Conference Board of Canada, residential and small business customers indicated that their demand for parcel service will continue to rise with the spread of e-commerce.

Parcels are the fastest-growing line of service in the core Canada Post business. The corporation reports that overall growth in parcel volumes experienced a record-breaking holiday season, which runs between November 11 and January 4. Canada Post delivered 30 million parcels during this period, which was five million more than the holiday season last year. The corporation delivered more than one million parcels in a day, on 10 different days. Weekend delivery was also very successful. Canada Post employees delivered a total of 1.1 million parcels over the six weekends of the holiday season, with the highest number of deliveries occurring on the December 21–22 weekend. That is 317,000 deliveries.

The main reason behind this growth is that parcels are the one postal product that has seen growth driven by the digital revolution. Canada Post advises that its top-25 retail customers are making major e-commerce gains. January parcel volumes from these retailers shot up 35% compared to January of last year. This dramatic increase follows a highly successful holiday season in which year-over-year parcel volumes from this top-performing group grew by 50%.

It is very obvious that things and times change. They have certainly changed at Canada Post, and it has tried to adapt.

I have a question for the minister. The opposition is refusing to see that Canada Post is facing a new digital reality. Can the minister please explain why the status quo was not a possible solution to Canada Post's financial situation?

[Lisa Raitt, Conservative, Halton, ON]

Mr. Chair, I thank my colleague for his insightful remarks, once again, on Canada Post.

I would invite those who have not taken a look at it, incontrovertible facts that are located within the Canada Post Corporation's 2013 annual report about the status-quo approach. Its plan includes how they plan on dealing with some realities. I thought I would quote from Canada Post, since it is an arm's-length Crown corporation that is responsible for its own operations, to give its perspective on why it came up with the five-point plan that we have accepted.

This is what it said:

…households and businesses have moved away from mail as a primary source of communication. They freely use electronic means to send and receive their mail. As a result, in the digital economy, Canada Post's exclusive privilege to deliver letters no longer adequately funds what’s called the universal service obligation.…

Transaction Mail volumes per address have dropped 30 per cent since 2007. Less mail equals less revenue, while the costs of providing postal service are largely fixed.

In 2013, we delivered 1.2 billion fewer pieces of Domestic Lettermail™ than we did in 2006, putting at risk a service to Canadians that has existed for longer than Canada has been independent.

Our challenge was to put forward a plan that balances the needs of all Canadians, while addressing the legacy costs of a system built mainly to process and deliver a large volume of mail. Reducing our cost of operations in many ways has helped, but we had to do much more to reshape the postal system and avoid chronic financial losses.

With that certainty, we announced our Five-Point Action Plan in late 2013 to build the foundation of a new postal system for Canadians. It reflects what we heard from people across the country as we talked about the future of the postal service in towns, cities and online. Canadians want a postal system they can count on to meet their changing needs, but they also expect it to avoid becoming a drain on their tax dollars.

It’s the result of two years of analyzing all options, including those at post offices around the world, to determine what would work best for Canadians. We’re streamlining our operations, addressing the cost of labour, adjusting our pricing to better reflect today's environment, expanding convenience through franchise post offices and moving the remaining five million door-to-door customers to community mail box delivery. This comprehensive five-year plan will return Canada Post to solid financial footing and provide a platform for growth fuelled by the changing needs of the people and businesses we serve.

Clearly, Canada Post has put a lot of thought, effort, study, and insight into what its five-point plan will be as we are dealing with the realities of the digital economy. I appreciate, as I said before, the hon. member bringing this issue to light.

[The Chair, NDP, Joe Comartin]

That concludes this segment. Resuming debate, the hon. member for York South—Weston.

[Mike Sullivan, NDP, York South—Weston, ON]

Mr. Chair, I wish the minister a happy birthday. I did not want to be left out.

Would the minister agree that her primary responsibility is to ensure that Canadians using or affected by the transportation system are kept as safe as possible?

[Lisa Raitt, Conservative, Halton, ON]

Mr. Chair, Transport Canada absolutely believes that the safety and security of Canadians in the transportation infrastructure and in the systems is of utmost importance. I always say that it is my top priority.

[Mike Sullivan, NDP, York South—Weston, ON]

Mr. Chair, the minister would then agree that it is not to protect the profitability of certain companies, not to work with lobbyists or issue press releases to protect the government, but to protect Canadians?

Can the minister tell us how many unsafe DOT-111 rail cars are used in Canada for transporting dangerous goods?

[Lisa Raitt, Conservative, Halton, ON]

Mr. Chair, I can tell the hon. member that the universe of DOT-111s for flammable service in North America is 67,000.

[Mike Sullivan, NDP, York South—Weston, ON]

Mr. Chair, can the member tell us how many of those rail cars are carrying explosive crude oil, like the type contributing to the tragedy at Lac-Mégantic?

[Lisa Raitt, Conservative, Halton, ON]

Mr. Chair, I do not have the specific numbers other than to indicate what the volumes have been. We know that they have been increasing in terms of the volumes of crude oil being shipped through these means.

[Mike Sullivan, NDP, York South—Weston, ON]

Mr. Chair, how is the government ensuring that the most volatile cargo is being transported in the safest cars? Can the minister confirm that the most unsafe cars will be phased out in less than or within the planned three years?

[Lisa Raitt, Conservative, Halton, ON]

Mr. Chair, in our response to the TSB recommendations, we indicated that the most unsafe cars, 5,000 of them specifically, will be phased out shorter than that, within 30 days. With respect to the balance of the DOT-111 cars for use in crude oil or ethanol, that they would be retrofitted or phased out in the next three years.

[Mike Sullivan, NDP, York South—Weston, ON]

Mr. Chair, how fast can the manufacturers in all of North America make new replacements for the DOT-111s?

[Lisa Raitt, Conservative, Halton, ON]

Mr. Chair, my officials have consulted with industry on the matter and they have brought back information. We considered these factors when we set out three years as the appropriate plan. We thought it was a good balance between what industry will be pushed to do and what we needed to do for the safety of Canadians.

[Mike Sullivan, NDP, York South—Weston, ON]

Mr. Chair, we were told in the committee that it was 14,000 per year, and so to replace 67,000 rail cars, it will take four and a half years.

Has the minister explored ways to speed up the manufacturing of new rail cars?

[Lisa Raitt, Conservative, Halton, ON]

Mr. Chair, absolutely. I think it is important to note that under current market conditions, of course without the regulatory piece that we put in place most recently in our announcement of three years, it probably was the amount that they could do.

I have great confidence that the market will respond to this issue, that they will find capacity, and that they will continue to want to do this work. As the parliamentary secretary mentioned, this is an opportunity for construction and jobs as well.

[Mike Sullivan, NDP, York South—Weston, ON]

Mr. Chair, actually we were told that if all of the capacity in North America was converted to building only DOT-111 replacements, it would be 14,000 per year.

The Transportation Safety Board has said that the DOT-111s can break and explode at speeds as low as 20 miles per hour.

What speed does the minister now allow DOT-111s to travel at in cities?

[Lisa Raitt, Conservative, Halton, ON]

Mr. Chair, in a Transportation Safety Board response, we indicated that we would order immediately that key trains carrying crude oil would be reduced to 50 miles per hour. However, risk analysis and assessments would have to be carried out in certain areas, taking into consideration certain factors to see whether that speed would be lowered to 40 miles per hour.

[Mike Sullivan, NDP, York South—Weston, ON]

Then, Mr. Chair, the minister allows them to travel at 40 miles per hour in cities, which is still a speed at which the rail cars can break and explode.

How will the minister be able to enforce this, or any other speed, with continued cuts to inspections at Transport Canada?

[Lisa Raitt, Conservative, Halton, ON]

Mr. Chair, I completely reject the premise of that assertion at the tail end of the question. There is no evidence that we have cut safety inspectors in this country with respect to rail. In fact, we are the ones who increased the amount of funding in it.

With respect to the specific question, let me just say that there is a myriad of issues that come into play. We expect that railway companies will adhere and abide by regulations we put in place; otherwise, they would be prosecuted to the fullest extent of the law.

[Mike Sullivan, NDP, York South—Weston, ON]

Mr. Chair, we understand that the minister is committing now to implementing the Transportation Safety Board's recommendations that key routes be inspected twice a year and sidelines once a year. Is that correct?

[Lisa Raitt, Conservative, Halton, ON]

Mr. Chair, I was very specific in the Transportation Safety Board response we gave on April 23, and I did not refer to any of those matters.

I did indicate that we were making some changes in the protective direction. We would make sure, going forward, in terms of the emergency directive, that we require railway companies to immediately implement key operating practices responding to the recommendation, including reducing the speed of trains transporting dangerous goods.

That is taking place with respect to elements that are already in place in the United States, in a circular regarding operating practices specifically, because they have signed a memorandum of co-operation between the U.S. DOT and the Association of American Railroads as well.

[Mike Sullivan, NDP, York South—Weston, ON]

Mr. Chair, she did not answer that question.

How frequently are Transport Canada officials currently inspecting key routes and side lines?

[Lisa Raitt, Conservative, Halton, ON]

Mr. Chair, I can say that there are approximately 30,000 inspections done per year. This year we are looking at 33,000 inspections, which is the highest number we have ever contemplated and produced.

[Mike Sullivan, NDP, York South—Weston, ON]

Mr. Chair, she still did not answer my question.

Will the minister ensure that the new emergency response assistance plans are made public so that local officials and first responders can plan accordingly?

[Lisa Raitt, Conservative, Halton, ON]

Mr. Chair, one of the recommendations from the Transportation Safety Board was to require emergency response assistance plans. We are doing so for even a single tank car carrying crude oil, gasoline, diesel, aviation fuel, or ethanol.

In developing those, industry will be working together with first responders on these plans. They have 150 days to submit them to Transport Canada, but as well, there will be a key committee that will be working together on this specific matter. This information is for the purposes associated with first responders so that they can have the ability to get the information they need in a timely fashion. How it will be disseminated will be something that the committee will discuss.