Public Accounts Committee on Oct. 7th, 2009

[Paul Côté]

Of course, once we get the report, if the report indicates an incident or situation that could be problematic, we react right away.

[David Christopherson, NDP, Hamilton Centre, ON]

Thank you.

[The Chair, Liberal, Shawn Murphy]

Thank you, Mr. Christopherson.

Mr. Saxton and Mr. Kramp, I think you were going to share your time.

[Andrew Saxton, Conservative, North Vancouver, BC]

That's right. Thank you, Mr. Chair. I will ask the first question, and then I'll pass the microphone to my colleague.

First, to Mr. Côté, with regard to the economic action plan where the Minister of Finance announced new funding of $407 million for VIA Rail, how will this funding be utilized, and what impact will it have on VIA Rail's long-term objectives?

[Paul Côté]

It will have a significant impact because of the investment programs we're working on.

If I may segregate them this way, first of all and foremost are the locomotives. Our locomotives are 25 to 30 years old and are obviously not as reliable as they were when we purchased them. We're going through a significant modernization program that not only will improve reliability, but also will bring with it a significant improvement in our environmental footprint, with lower fuel consumptions and lower greenhouse gas emissions.

Second is passenger comfort. All of our equipment is going through a major refurbishment program, and that will help us to position our product in a much different way than we can right now.

Third are the stations. It is the same thing. The stations are in need of major repair. The government recognized that through this program. We appreciate it.

Fourth is the program we just discussed on infrastructure, so that we can get additional frequencies, faster trains, and faster trip times that will generate additional ridership and revenue.

It's a great program for us. It was absolutely necessary to do. We did thank the minister repeatedly for that.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you.

[The Chair, Liberal, Shawn Murphy]

Mr. Kramp.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Thank you, Chair.

Good afternoon to all. Maybe I'll give just a couple of kudos before I give you a couple of things to think about.

I'm on your Quebec to Windsor corridor, of course, which is maybe 70% or more of your income status, and I was able to participate in an announcement in Belleville due to your $300 million Kingston subdivision and part of that project, so that's a positive. But there's another positive.

I use the train occasionally and have for a number of years, and let me tell you that the satisfaction from the customer's point of view has dramatically increased over this last year. Your service is far better and your on-time is far better, so I say kudos to VIA. You've definitely made some headway. It's a competitive market out there, and quite frankly you had to do it or you were not going to be there.

[Paul Côté]

Thank you.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

You've made some really good moves and I thank you.

To deal with some of the problems identified by the Auditor General here, I see 13 weaknesses in particular, as well as the major strategic weakness.

I think it would be wise of VIA to seriously consider providing this committee with an action plan on how you plan on dealing with each and every one of these weaknesses, because I don't think they can be overlooked. During this particular time period, we'll address a few of them. A number of them, I believe, should definitely come back to this committee. We'd like that in writing at some point. I expect the committee would probably ask for that anyway, but I do believe that request is warranted and should come in due course.

The other point that is obvious to us during this meeting today is how important this 10-year train services agreement is. It reaches into every area, from your profitability to security to track safety. Can you provide some detail on that to this committee? We understand that there's certain competitive information that should not be made public from this perspective, but I think if you provided this committee with some of the guts of that agreement, it would probably address a number of the concerns we have there, so I would ask you to consider that as well.

There are just a few points that are coming to my mind. Air Canada hedged a lot of their fuel costs and got burned pretty bad. How did VIA do? Did they participate in the market in that perspective, and how is that affecting you?

[Paul Côté]

First of all, let me address your first two points.

Yes, we will do that. In fact, if you like, we can leave behind today a current update that we have on the recommendations and the action plan. We've brought copies.

We can leave that with you, Mr. Chair, and at your request we'll provide--

[The Chair, Liberal, Shawn Murphy]

We'd appreciate that.

[Paul Côté]

Okay. We'll do that.

Similarly, on the train service agreement with CN, other than those issues that are of a confidential nature, that are commercial, we can certainly give you an outline of the highlights, the major changes in this agreement from previous ones. As I said in my remarks, they are significant and they modernize the agreement.

With regard to hedging, we have been hedging fuel for quite a number of years. When the price of a barrel was way up there in the sky, we were geniuses and the board was so complimentary on our foresight and thought we did the right thing. Of course, when it goes the other way around, then it's a different situation.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

So you're carrying a liability with that in your normal operating costs.

[Paul Côté]

We did carry that.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Okay, thank you.

A number of years ago CATSA went before the Auditor General, and there were a number of concerns with security. I have a serious concern with security, identified in a couple of areas here. One says the corporation does not have a risk and threat assessment for information technology. Another one indicates the corporation has no framework for identifying employee security levels. These are issues, quite frankly, that in today's world are much more important than they were 10, 15, or 20 years ago. We have vandalism, we have terrorism, and we have other issues like that.

Do you have a solid plan to deal with this from a security point of view, and could you present that to this committee?

[Paul Côté]

You will see in the report that I will leave behind that we did act on all those recommendations. We have in fact, on the information technology security issue, made some changes already and are working on more changes to protect intrusion and to protect all the information that needs to be protected, which we possess from our customers.

On the security side regarding employees, there are also some remarks in the progress report that I will provide to you, and you'll see that we have made some changes to our practices to improve security protection.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Fine. Thank you very much.

Speaking strictly from a competitive point of view, from a user angle, if I am a student and wish to go from Belleville to Ottawa, it will cost me maybe 20 bucks by bus and 60 bucks by train, give or take a little bit. It is cost prohibitive for a large segment of the Canadian public to use the train on a consistent basis. Do you have any particular plan to somehow find a way to access this vast market out there that simply does not view the train as being financially feasible? Do you have any long-term process or discount for usage that you can anticipate? There is no simple solution, I understand that--

[Paul Côté]

I appreciate that.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

--but do you have even a sense of direction that you need to close that gap somehow?

[Paul Côté]

It's indeed a very difficult task. It's a fine line, you know, between keeping your product competitive with other modes of competition and the responsibility we have as a crown corporation to manage efficiently the resources we have at our disposal. We could fill trains selling tickets at $5, but I don't think I would hold onto my job very long, to be honest with you.

We have a very sophisticated group in marketing who are monitoring market demand, monitoring market movements and competitive prices, and so forth, but who are also cognizant of the fact that there is a line somewhere to have to manage. You cannot underprice all of that simply for the purpose of volume. There are obligations regarding managing resources that are essential, in our opinion, so it's a difficult question.

[The Chair, Liberal, Shawn Murphy]

Thank you, Mr. Kramp.

Thank you, Mr. Côté.

We can go a few more rounds at three minutes.

Mr. Lee, three minutes.

[Derek Lee, Liberal, Scarborough—Rouge River, ON]

I was going to ask you to be a bit more specific. You've addressed part of it...what you were going to do with the $690 million over time, but you've already addressed a lot of that here. Why don't I pursue that? Mr. Christopherson was sort of on the same subject.

If you are sidetracked--no pun intended--by the economic downturn and if it materially impairs your revenues, would you consider deferring some of the capital expenditures simply because they wouldn't match where you wanted your ridership to be?

[Paul Côté]

I think it would be a mistake to do that, to be honest with you, sir. I think we should look somewhere else.

The reason we insisted so much over time on getting this investment was because the assets were in dire need of being improved and significantly modernized. There is no question that although we may have good marketing, good products, good sales people and all, if we can't haul our trains and the locomotives fail all over the place, it's not going to work. If passengers get on cars that are used, that are old, that are dirty, with the carpets that are used and so forth, and if stations are not properly heated and so forth, it simply can't work. It's not sustainable.

My previous answer to your colleague was simply to say that what we've already flagged to the board as a revenue base has been significantly impacted by the recession. Our cost base is such that it requires now that we pay attention to it. We will raise this issue and ask if there is a way we can perhaps amend our mandate to better reflect the market conditions and better reflect our capabilities to meet the market demand. And in that regard I would strongly object--well, make a point of objection--to stopping the investment program. I don't think that would be the right thing to do.

[Derek Lee, Liberal, Scarborough—Rouge River, ON]

There was an announcement during the last year about a third rail being constructed in the Toronto-Montreal corridor. Is that a CN investment or is it a CN investment with government support?