Transport Committee on May 28th, 2009

[The Chair, Conservative, Merv Tweed]

Thank you, and good afternoon, everyone.

Welcome to the Standing Committee on Transport, Infrastructure and Communities, meeting number 21.

Our orders of the day are pursuant to Standing Order 108(2), a study of high-speed rail in Canada.

Joining us today from Transport 2000 Canada is Mr. David Jeanes, president. From the National Airlines Council of Canada, we have Joseph Galimberti, representative; and Mike McNaney, representative. And from the Canadian Bus Association, we have Sylvain Langis.

Am I saying that correctly?

[Sylvain Langis, President, Canadian Bus Association]

You can say it that way, sir.

[The Chair, Conservative, Merv Tweed]

Okay. Thank you.

And we have Stuart Kendrick.

Welcome.

We'll start with Mr. Jeanes and go down the table, if that's okay.

Please begin.

[David Jeanes, President, Transport 2000 Canada]

Thank you very much, Chair.

My name is David Jeanes. I'm the president of Transport 2000. I have provided a brief.

I apologize for the poor quality of the French version. It is complete, but it is not accurate.

I am going to start by summarizing what Transport 2000 is. Then I'll talk about the renewed interest in high-speed rail in Canada, some comparisons to other countries, incremental approaches that have been followed elsewhere, opportunities that we have missed in Canada, the relationship between high-speed rail and existing rail networks and urban public transit, and airlines and airports. If I have time, which I probably won't, there are some additional items included in the brief at the end.

First of all, Transport 2000 is a volunteer-based national research and advocacy organization. We've been around since 1976. We were founded in response to the government call for public input into the redesign of Canada's transcontinental passenger trains. Since 1976 we've broadened our scope to cover all public transport modes, particularly urban public transit and also airline passenger safety and consumer issues.

We're a federally incorporated non-profit registered charity. We have a board of directors across the country, from our regional organizations.

We've published research and participated in many conferences and studies on passenger rail, most of which you have seen in the mountain of paper during your inquiries here, and we've made submissions at most of the consultations over about a 30-year period. We have good working relationships with many of the organizations and witnesses you've heard from already in this hearing.

There is definitely a renewed interest in high-speed rail. People feel that finally the time is now. We've had a hiatus. Nothing has happened, really, since 1995, but there is an urgent need for us to join the rest of the developed world to exploit high-speed rail to meet our regional and national objectives.

From a position of leadership, with great potential and advanced technologies back in the 1970s, we have fallen so far behind that our passenger trains have, at best, half the world standard speed, and our industry is also missing opportunities. We're missing opportunities for the environmental and economic benefits of increasing the use of passenger train service to a level comparable to that in other industrialized countries.

We're overly dependent on a fossil fuel based transportation system with automobiles, trucks, and aviation, while other countries have heavily invested in electricity and renewable energies for transportation through their rail transportation networks.

A lot of people say we can't emulate other countries. When we compare Canada to other countries, it's often said that our distances are too great and our population density is too low for high-speed rail. I think this is not true, and there are some examples that are worth looking at.

Japan's first Shinkansen bullet train line in 1964 was 552 kilometres long. That's the same distance as Toronto to Montreal. By 1975 they had extended their Shinkansen line west from Tokyo to Akita, to 1,175 kilometres, which is five kilometres longer than the entire Quebec-Windsor rail distance. You have heard before that high-speed rail is being studied mainly for the 500-mile or 800-kilometre distances, but that's definitely not the case in the rest of the world. High-speed rail is proven at well over those distances.

People also think that high-speed rail stops only in the largest metropolises. This is also not the case. The Japanese bullet train, on that 552-kilometre Tokyo-Osaka route, had two important stops--Kyoto and Nagoya--but second-tier trains on the same double-track line served an additional 12 towns an average of only 48 kilometres apart. So you can build high-speed infrastructure, and you can have express trains serving the largest cities at very high speeds, but you can also design the network so that intermediate stops are possible. The Japanese did it, and other countries have done it.

In addition to that, the networks in Japan and France are not constrained to the new high-speed infrastructure. The trains actually branch out onto the conventional rail network to serve other cities. I mention two here--Yamagata and Akita in Japan. Also, these high-speed rail lines, although they are restricted to passenger trains, can accommodate trains of varying speeds. The Japanese, for example, were able to run trains of 210-kilometre-per-hour technology and of 300-kilometre-per-hour technology on the same line for a period of time while they were transitioning to higher-speed trains.

Likewise, even commuter trains can run on high-speed infrastructure. The MAX bi-level trains north of Tokyo are commuter trains just like GO Transit, except that they operate at 240 kilometres an hour or more.

Similarly, Britain is using Japanese commuter trains on its new High Speed 1 line out of St. Pancras station to provide commuter service extending out onto conventional lines in suburban Kent.

So we are talking, when we look at the rest of the world, about a very broad range of applications.

As regards the incremental approach, most countries have not started by building an entire system. They've built only the critical component of it. As I said, Japan started with 552 kilometres. France started with only 427 kilometres, which is just about the same as Ottawa to Toronto; but the TGV trains on that initial high-speed line actually covered 4,000 kilometres of route, serving many other cities, because the trains were designed so that they could get the time advantage out of Paris for a two-hour time saving on the high-speed segment but then continue to many other cities. This has been the case throughout the expansion of high-speed rail service.

Sweden was able to implement high-speed rail on existing tracks on a distance almost identical to Ottawa to Toronto. They even tried to sell the train to Canada. The X2000 train came over here and had a demonstration run here in Ottawa. We didn't buy it because it wasn't good enough to meet Canadian standards, but today in Sweden you can take 17 high-speed trains a day between Gothenburg and Stockholm. That technology was sold to China, where it became the genesis of China's high-speed rail network, which is now leading the world.

We've missed a number of technology opportunities. We were positioned in the 1960s with some of the best technology, manufacturing, research at the National Research Council, and speed records to lead the world in high-speed rail. We actually invented here the first really successful active-tilting train: our LRC. That's a technology that is now widely used in other countries for high-speed trains that perform on existing tracks, and yet we were the first with it. However, we failed to modernize our own rail network and we failed to exploit our advances. Therefore, when we buy high-speed rail, we're going to be constrained to buying foreign technology, even if we choose to buy it from a Canadian company.

You already heard from Ms. Borges of Transport Canada about the importance of integrating with existing rail networks. I won't go into detail on that, but the existing rail network and existing urban public transit must work well with high-speed rail. So must airports, because we see high-speed rail as a way of changing the balance of traffic so that short-haul air traffic shifts to rail, but rail also brings more long-haul traffic to the airports in an efficient way. It's a symbiotic relationship.

We see it working in Europe. Air France is considering running trains, in competition with Eurostar, to Britain. The airlines are issuing rail tickets for journeys such as Paris–Geneva or Paris–Brussels, because that's a more efficient way to move people on those components of their journeys.

Now is the time to move forward in updating the 1995 studies. This is the best opportunity for us to move forward to make the kind of strategic investment that really only the participation of government can bring to fruition. The rest of the world has shown the importance of doing this. France is buying its way out of recession with high-speed trains, according to the cover of this month's International Railway Journal, and we should be doing the same.

Thank you.

[The Chair, Conservative, Merv Tweed]

Please continue. When we get close to the last minute, I will give you a one-minute sign.

[Joseph Galimberti, Representative, National Airlines Council of Canada]

Good afternoon, ladies and gentlemen. Thank you for giving me the opportunity to address the committee on such an important issue.

I am here today representing the National Airlines Council of Canada, but I also work for one of that organization's members, Air Canada, and so some of my comments will relate to that experience in particular.

Let me at the outset commend the committee for taking the initiative to conduct this study. Certainly Canada's transportation infrastructure can and should be viewed as a powerful engine for economic development, and as such, some consideration of using public funds to build or support that infrastructure isn't inappropriate. So from the start, let me say that I'm not here to condemn high-speed rail or to oppose any idea simply for the sake of opposing it.

However, since a transportation mode that is developed and paid for out of public funds is not in itself a viable transportation industry, we believe we must find a balance among the various modes of transportation. We also believe that commercial air carriers' employees and passengers must be taken into consideration as well.

Consider the following. In 2008, Air Canada alone paid over $130 million to Nav Canada for their services. Excluding Jazz, we paid over $320 million in landing fees. Excluding Jazz again, we paid another $185 million in terminal assessments, and we collected directly from our passengers over $134 million to pay the air travellers security charge. We should also consider the over $300 million the Government of Canada collects in airport rent, for which no value is returned to the transport system, and the airport improvement fees passengers pay at Canadian facilities, which range from $7 to $40, with most being between $15 and $25, depending on the facility.

As you can see, the direction of aviation policy in Canada has enthusiastically embraced the user-pay model for air travel, so enthusiastically that the World Economic Forum ranks Canada a disappointing 122 out of 130 countries in terms of competitiveness on aviation fees and taxes. So we in aviation, who are firmly stuck in a user-pay model, become, I think understandably, concerned as an industry when we hear talk of a need for billions of dollars in public funds to be allocated to guarantee a reasonable return for the operator of a service like high-speed rail, against which we would be called to compete directly in several key markets.

Bluntly, we can't compete with an entity backed by the crown, and no private enterprise or business should be asked to do so. Key parts of our network would likely be jeopardized as a result.

The carriers who belong to the National Airlines Council of Canada currently employ over 43,900 people and carried over 58 million passengers last year, and this generated direct and indirect economic benefits in Canada amounting to several billion dollars.

We would enthusiastically welcome a discussion about how we can grow our business, employ more Canadians, and bring more visitors to Canada by reducing the competitive disadvantage we currently face as a result of having to pass the full cost of aviation infrastructure directly to our passengers. We would also be greatly troubled if public investment were used to create a modal disparity between air and rail, threatening the health of our companies and the jobs of our employees.

I will turn it over to my colleague from WestJet.

[Mike McNaney, Representative, National Airlines Council of Canada]

Thank you, Mr. Chairman.

My name is Mike McNaney. I'm the VP of regulatory affairs at WestJet. I'm appearing today under the NAC banner. We just thought, because this is an east and west discussion, it might be useful if two of our members were here. And indeed, it's a banner day in Canadian aviation, because WestJet agrees with everything Air Canada just said—and that has never happened before.

I will be very brief. As Joe said, we're not here to condemn or oppose high-speed rail, but we do have concerns about the policy environment in which it would operate.

As Joe noted, in the airline industry in Canada we are ostensibly 100% user-pay. So in 2008, WestJet paid $56 million in security taxes, $128 million in navigational fees, $155 million in airport improvement fees, and $183 million in airport landing and facilities fees. We were fortunate enough last year to be one of the few air carriers in North America to turn a profit. When you take out all the operational costs and all the charges and fees, etc., our profit came out to approximately $13 a passenger. We're actually quite proud of that margin, but as you can see, it is a fairly tight margin. That's just the nature of the industry and the nature of the business.

We are not arguing that the various fees and charges we pay should be eliminated or be reduced to zero. The user must pay. But over the years in Canada, this user-pay principle has taken on a life of its own, and we face continuing increases in these fees and charges. And it's because of these cost realities, as Joe noted, that when we hear the notion of billions of dollars of public money for high-speed rail—and we understand there have been no decisions made as to what percentages will be between private and public.... Nonetheless, when we hear these discussions, I guess we suffer from a little bit of modal envy—which is the best way I can phrase it—that in the name of competitiveness and public investment in infrastructure, another form of transportation will have a very different environment in which to operate.

To quickly conclude, Mr. Chairman, it isn't the competitive aspect that has us concerned; it's the policy environment and cost environment under which this competition may present itself to the air carriers.

Thank you.

[Sylvain Langis]

Mr. Chairman, with me today is Mr. Stuart Kendrick from Greyhound Canada. He is their senior vice-president and he's also treasurer of the Canadian Bus Association.

I'm the president of the Canadian Bus Association and the president of Groupe Orléans Express, based in Montreal, which operates intercity lines throughout the eastern provinces of Canada.

On behalf of the Canadian Bus Association, I first want to thank you for the opportunity to appear before you today to give you our views on high-speed rail and whether and how such a transportation system should be introduced in Canada.

First, it would seem appropriate to give you a word or two about who we are. We represent the major scheduled intercity bus carriers in Canada, and our members carry upwards of 75% of all scheduled bus passenger trips across Canada, equating to approximately 10 million bus passenger trips annually. We are an advocacy organization, in the sense that our raison d'être is to speak and act on behalf of our members on all matters pertaining to public policy that impact on us and our customers, the travelling public.

The scheduled bus industry has two central messages that it wishes to impart to the Committee today.

First, any future funding commitment of taxpayer monies to a high-speed rail system must be fair and should not be used to create a more uneven playing field among completing passenger modes. In particular, there must be a meaningful fare gap between subsidized high-speed rail travel and unsubsidized bus travel. Government should not grant billions in taxpayer subsidies in order to reduce rail trip times by 50% between cities and then allow the rail operator to charge passenger fares at the same levels as unsubsidized private sector bus operators operating on the same city-pairs. In other words, high-speed rail passenger fares must be set at levels that are reasonably compensatory in relation to costs.

The underlying imperative here is that we must have a seamless transportation system that serves all segments of the travelling public. That means that the public policy environment that Parliament creates must accommodate air, rail, and buses because each of these modes responds to the needs of one segment or another of our population. Policies that disadvantage one mode at the expense of another only have the effect of disadvantaging the travelling public. If, for example, rail is publicly subsidized in high-density population corridors to the extent that the bus mode cannot compete, who will carry passengers to and from communities where rail does not go?

It seems self-evident to us that, given our geography and our demography, we need a policy framework that enables a cost-effective but integrated transportation system that does its best to meet everyone's needs.

If government decides to proceed with high-speed rail, some CBA members and their respective ownerships will actively seek the opportunity to join the public-private consortium. Our shareholders, Greyhound and Orléans Express, are major players in the world of transportation in Europe and North America, and through them, we have extensive experience in operating both conventional and high-speed rail systems. Of even greater importance, we have experience in operating multi-modal transportation systems that integrate rail with bus and with transit.

Our two respective bus companies are owned by two of the largest transportation conglomerates in the world. Greyhound Canada is 100% owned by FirstGroup plc of Scotland. To provide an indication of comparative size, the annual passenger service revenues of FirstGroup exceed $10 billion Canadian and are four times greater than those of Air Canada. FirstGroup has 2.5 billion passenger trips annually and has some 136,000 employees.

Orléans Express is 75% owned by Keolis of France, the national passenger rail operator in France, which is in turn partly owned by SNCF and the Caisse de dépôt et placement du Québec. The annual passenger services revenues of Keolis exceed $5 billion Canadian and are two times greater than those of Air Canada. Keolis transports 2 billion passengers annually and has some 39,000 employees.

FirstGroup and Keolis are each involved in operating intercity rail networks, transit networks, and intercity bus networks. We know the problems, we know how to solve them, and our parent companies each have the financial resources to participate in major public-private partnerships. Indeed, both ownership groups have gained already amassed considerable experience with 3-P consortia in other countries.

We appreciate that the federal provincial feasibility study now underway for high-speed rail still has a number of issues to address before the findings of the 1995 feasibility study can be updated. Demand forecasts need to be recast. Newly available technology must be analyzed, with a particular view to Canadian climate concerns. Cost estimates need to be reassessed. Some form of a preliminary environmental assessment must be performed.

If the results of this current study are deemed to be sufficiently positive by the three governments, this will then trigger detailed technical studies that will require time and money to complete.

Final routings for a selected technology have to be decided together with the associated construction and land assembly costs. As required by law, a full-blown environmental assessment study must be performed according to these final routings. The firm costs of the technology chosen, the resulting costs of the track-bed that must be laid, and the attendant infrastructure costs will all be established.

The ridership demand forecast can then be completed after the precise trip times and the fares to be paid by high-speed rail passengers have been specified.

High-speed rail trip times will depend upon which technology is chosen, upon which routing is chosen, and upon the number of intermediate stops, if any, along the way. Ticket prices to be paid by high-speed rail passengers will depend on ridership, the final costs established in the detailed engineering studies, and on how much the capital and any subsequent operating cost shortfalls have to be captured by taxpayer subsidies.

Once this preparatory work has been completed, each of the three governments will then be in a position to commit funding over the project's lifetime, assuming they can reach agreement on their respective funding shares after the private sector funding commitment has been established. Once these agreements have been reached, physical construction of a high-speed rail system would then commence.

In conclusion, I want to reiterate that considering the role of the Canadian intercity bus industry and moving Canadians from all regions of the country, we will vigorously oppose the introduction of a high-speed rail system in Canada that does not compete fairly with other modal passenger carriers. However, given the experience that two of our members have in operating integrated passenger transportation systems in other countries, we understand how it is possible to design sophisticated passenger transportation systems that serve the public interest, while making it possible for private sector operators to participate and to thrive. If the committee recommends a public-private partnership to operate such a system, I think you will find a willing partner within the ranks of the Canadian Bus Association.

Thank you. We'll be very happy to answer your questions.

[The Chair, Conservative, Merv Tweed]

Thank you very much.

Mr. Volpe, you have seven minutes.

[Joe Volpe, Liberal, Eglinton—Lawrence, ON]

Thank you very much, Mr. Chair.

Thank you very much, gentlemen, for coming to share your views with us.

As a committee, we specifically wanted to meet with all of you because we wanted to get as broad a perspective as possible on the views associated with high-speed train travel introduction in the country. Allow me, for a moment, to simply say that all of you have said something that I think everybody around the table has appreciated for some time--and I'm glad you came here to reiterate that--that is, that the introduction of a high-speed rail system should be considered as part of a multi-modal passenger system throughout the country. Specifically, you have to start somewhere, and this committee has looked at two areas that really engage three provinces, as a start.

The committee, I think so far, has been interested in the concept of ensuring that there is a multi-modal approach to any kind of an introduction, but we're not the ones conducting the feasibility study. Our questions are a little bit more specific.

I'm wondering if I can go beyond saying thank you, Mr. Jeanes, for introducing the concept of economic development and technological innovation. If I can come back to you in a minute, I will. I just want to see if I can maximize the seven minutes. It's an issue that has not been discussed at great length with us for some time, in part because people have different interests—all legitimate, but they are different.

With the airline representatives, I wonder if, when we consider establishing an infrastructure in order to allow for the operation by a private interest, it is your estimation that the user-pay principle has already taken into consideration all the public investments in airports, in the regulatory environment, and in the appropriate supervision that must accompany that business prior to your getting a plane off the ground.

[Joseph Galimberti]

As regards the public investment that was made in airports, when that asset was turned over to airport authorities across the country, off the top of my head, I would guess that the book value they estimated was $1.9 billion. The airport rent that has been collected since those assets were divested by the federal government has far exceeded that. One could quite easily make the mathematical argument that this asset has already been paid for by the Canadian taxpayer and our passengers.

As regards Nav Canada and the air traveller security charge, certainly there has to be some element of user-pay. We appreciate that this infrastructure can't be supported ad infinitum by the government, but there are other models out there that allow that to be done in a more economical way.

[Joe Volpe, Liberal, Eglinton—Lawrence, ON]

One of the points that both of you raised, and people from the bus industry also raised, was the comparative cost and its competitive disadvantage or advantage, as the case may be. It's very difficult for committee members to come up with the appropriate assessment, as I imagine the people conducting the feasibility study will find equally difficult.

What percentage of your carrying capacity is in the corridors that the committee is currently looking at—that is, Windsor-Quebec City or Edmonton-Calgary?

[Mike McNaney]

For Edmonton-Calgary, it's approximately 500,000 seats. It's about five to six flights a day.

[Joe Volpe, Liberal, Eglinton—Lawrence, ON]

And as a percentage of your overall operation?

[Mike McNaney]

I'd have to do some math. I'd have to go to the back of the room for half an hour before I could come back to you on that one.

For Montreal-Toronto—

[Joe Volpe, Liberal, Eglinton—Lawrence, ON]

Whether it was Montreal-Toronto or Calgary-Edmonton, and whether I used your numbers or Air Canada's numbers, if I said the impact would probably be, combined, about 15% of your business, would that be too high a number?

[Mike McNaney]

I will speak briefly just for WestJet. They're a lot bigger on Montreal-Toronto. We're trying, but they're still a lot bigger on Montreal-Toronto. For Montreal-Toronto, it's about also six or seven flights a day. So again, that's 500,000 or 600,000 seats per annum.

There would be two impacts. There will be some dislocation of guests, or customers, however you want to phrase it, from the competition. That will happen. The other thing is, depending on what the split is in terms of public investment, the best way I can phrase it is that we continue to argue the need for investment in our sector as opposed to taking money out.

Joe mentioned that there are better and smarter ways to do it. For example, in the U.S., their excise tax on jet fuel actually goes into paying the FAA. Our excise tax on jet fuel is twice the amount theirs is, and it goes into general coffers.

I have great concern that as the years go by, as we try to fight for greater investment, we're not going to get it, and the response will be that the budget is fairly tapped out because we're putting $1 billion this year, or $2 billion next year, in the construction or the operation of these lines, whatever the case may be.

So there are two dislocations. There's the actual dislocation from a competitive perspective, and then there's the ongoing one. We know right now that the organizations that provide us with the services we're currently being charged for are seeing drops in traffic numbers because people are flying less. Their fixed infrastructure means they're probably going to be coming back to us with demands for increased costs, which is a tax increase at the absolute worst time that we can deal with it.

[Joe Volpe, Liberal, Eglinton—Lawrence, ON]

Mr. Langis, I guess when you talk about a competitive disadvantage, your position is a little different from that of the airlines. The airlines cater to a particular class of passenger. By class I mean—let me monetize that word—people who are prepared to pay, let's say, in a corridor upwards of $400 for a return trip, whereas your clientele has a different class of usage and your price point is considerably lower. So you're not competing with the airlines. But in assuming that the train passenger business—VIA, for example—today is not putting you at a disadvantage, because you have 10 million passengers and VIA has only 4.1 million, so presumably you're doing okay, they're already getting $52 per passenger as a subsidy. So presumably if that were still the case going forward with high-speed, you wouldn't have a problem. That is what I gather from your brief.

[Sylvain Langis]

It's not exactly what I said.

Just to give you an example, I can't speak for—

[Joe Volpe, Liberal, Eglinton—Lawrence, ON]

You would still be at the same competitive disadvantage if a passenger on high-speed were getting the same subsidy as somebody on VIA would be getting.

[Sylvain Langis]

There are many elements in there.

One, the bus industry now serves the portion of Canadians—you said it yourself—who cannot necessarily afford taking the plane. So we're serving, more often than not, the poorest portion of Canadians. Here we're talking about putting in place a system that would be subsidized for those who can afford paying to travel.

[Joe Volpe, Liberal, Eglinton—Lawrence, ON]

Let me interrupt for a second.

[The Chair, Conservative, Merv Tweed]

I'm sorry, I have to give everybody a chance.

Mr. Langis.

[Sylvain Langis]

To give you an example, Orléans Express between Montreal and Quebec City operates at least 19 frequencies in each direction every day. We have the frequency. VIA doesn't. This is why we get volume. In that corridor between Montreal and Quebec City, we carry between 700,000 and 800,000 passenger trips a year, which is much more than VIA does.

If VIA or another organization comes in with a much faster train to go from one city to another, it is certain that a good portion of our passengers, which are also travelling for business reasons, will go to the train. In the province of Quebec, this is the major route that serves to cross-subsidize all the other regions in the province of Quebec, where we're trying to maintain an equal level of service throughout the system.

So yes, it would cause problems, not only between Montreal and Quebec City but also to the rest of the system.

[The Chair, Conservative, Merv Tweed]

Monsieur Laframboise.