Transport Committee on May 28th, 2009

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

Thank you.

I am going to start with you, Mr. Langis, because I quite like the way you gave your presentation. It is changing a bit from... I understand that the consortia you represent in the world operate both bus and rail services, and the two are sometimes integrated. That is the message you are giving us. Certainly if there were a public-private partnership, your parent companies would be interested in replacing VIA or bidding so they could offer an integrated service. That is more or less the message you are giving us.

[Sylvain Langis]

Exactly, and the reason why we are sending that message is that we think a public-private partnership would be more concerned with reasonable cost recovery, as compared to what we see at present.

Your colleague Mr. Volpe mentioned a few minutes ago that VIA currently receives an average subsidy of $52 per passenger. That is huge, it is more than the general average of average revenue from a bus passenger, and we do it with no subsidy.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

That's right, but the idea of incorporating rapid rail into our transportation system is not unthinkable, provided that it can be offered to business, to the people who are knowledgeable about it.

[Sylvain Langis]

We are saying it is not unthinkable, we think it should be done by a public-private partnership. There is one essential element: in order to have a certain volume of passengers in a transportation system, regardless of what it is, be it air, road or rail, it takes a population, it takes demographics. It's all very well to cite the case of Japan, as Mr. Jeanes did, but when we talk about demographics and compare Japanese demographics to Canada's, there is a big difference, particularly in terms of the geographic expanse to be served. Even France has had success with its high-speed trains, but its population is a whole lot bigger than ours, and that means it can provide that kind of service within its borders.

Here, would we be able to provide a rapid rail service in the main corridor, the most populous one in Canada, and attract people who use other transportation modes to this new mode, without having a negative impact on other transportation modes everywhere in the country? Could this be done without imposing heavy costs on all taxpayers to put a system in place in the main Canadian corridor?

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

I am going to come back to Mr. Jeanes. Obviously, other witnesses who have appeared before the committee tell us there is potential ridership that various transportation modes are not attracting at present. Rapid rail would have the potential capacity to develop ridership.

Do you believe that? As Mr. Langis asks, do you think the Quebec City to Montreal and Montreal to Windsor corridor could be developed and still have the other carriers earn a good living?

[David Jeanes]

There would certainly be shifts in ridership that would result if high-speed rail were developed in that corridor. I mentioned when giving my brief that I would expect a good deal of short-haul flight traffic, particularly business travellers, to use high-speed rail if it provided the downtown-to-downtown service in two hours between Ottawa and Toronto, or Montreal and Toronto, for example. If that same time-saving applied to longer trips, then business travellers on longer journeys travelling from southwestern Ontario to London, for example, or travelling from Quebec City to Ottawa would get significant benefits.

We have seen that in Europe. When high-speed rail was introduced between Paris and Lyon, and Paris and Geneva, most of the air traffic on those routes disappeared, unless it was connecting traffic from intercontinental flights, for example. You do get a shift like that. At the same time, the rail network is efficiently bringing many new passengers to airports to allow the use of the longer-haul intercontinental and transcontinental flights.

Also, with relation to the bus companies, certainly the types of destinations and the times of day.... Mr. Langis has pointed out how a bus is able to offer many more trips between Montreal and Quebec, for example. There are 19 per day. In Europe, some of the rail networks provide that many trips, but in other cases it's a hybrid of the two. At certain times of day a bus will provide the service. A bus can provide different stopping patterns from high-speed trains. But there needs to be a balance found for each element of a multi-modal system to perform in the most effective way. Price comes into that as well, as Mr. Langis has said. The bus can serve a lower-fare-paying passenger.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

I think ticket price, for one thing, is one of the aspects covered by the study to be done by Quebec, Ontario and Canada.

Mr. Galimberti, you seem to be making a categorical statement. You are paying costs you should not be paying—and I agree with you. Those costs relate to airport rent and so on.

But if those costs were restored, do you think you would be able to compete, or would you still have reservations? Have you had a chance to analyze the situation, or are you going to watch the results of the analyses that are done?

[Joseph Galimberti]

We haven't done that analysis. What I will say is that if the fees and taxes levied on Canadian passengers were reduced, one could reasonably assume that more Canadians would fly, and there would be more flights because it would be a more accessible product to sell. If they were reduced concurrent with the introduction of a competing service, I think it's very difficult to predict what the outcome would be. There's certainly an argument to be made for the train as far as convenience from a security perspective. If you're offering downtown-to-downtown service, we would see if aviation could compete in that circumstance. There would certainly be an effect, absolutely.

The other thing I will say is that if you reduce those fees and taxes, it does help to perhaps generate passenger traffic coming from out of the country. We can then connect that on down the network. For visitors to this country and long-haul traffic originating in Canada, there is a tangible effect from that fee structure. One would certainly hope that we would be more competitive with our neighbours to the south.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

Mr. McNaney, have the people at WestJet done an analysis dealing with rapid rail? What is your experience as a carrier when you are in other countries where there is rapid rail? Have you done an analysis of that?

[Mike McNaney]

We have looked at the Calgary-Edmonton corridor. One of the more interesting experiences we've had in that corridor came when the security tax first came in. I think it was levied at $12 one way, so that would be $24 for a round trip. We actually ended up reducing capacity in that corridor because it dissuaded people from purchasing tickets. I suppose we could say that we have lived negatively through the concept of seeing those fees increase and what it does to short-haul traffic. To your point, in terms of removing those fees and charges, I think we would do handstands and sing for days on end, and write songs to you in your name, if you actually managed to remove all of those fees and move Canada from 122 out of 130. Hell, if we got up to 15 we'd be happy. Any step in that direction would help.

The real world experience we've had with it is that as we've seen those fees go up, we've moved out of short-haul. One of the more ironic twists of that is we ended up competing more with these folks because we had to go to more long-haul routes. A flat $15 or $20 charge on a ticket is a smaller percentage on a long-haul because the ticket price is bigger.

[The Chair, Conservative, Merv Tweed]

Mr. Maloway.

[Jim Maloway, NDP, Elmwood—Transcona, MB]

Thank you, Mr. Chair.

My initial observation is that the strength of the free enterprise system is pretty evident. Companies that are in the business will adapt. You certainly have lots of lead time with the high-speed rail system. It will take quite a long time to develop this system, if it ever gets developed. I know airlines can reassign planes in a fairly efficient manner. There's a lot of market out there, and if you don't find a market in one place, I'm sure you'll find it in another. It certainly has been my experience.

I noticed you have talked about airports, and a lot of the problems with the airline industry stem from airport problems. I was in Washington last week at the congressional aviation hearings and I met a gentlemen by the name of James Crites, who is executive vice-president of the Dallas/Fort Worth International Airport. He had some very interesting observations and interesting things that he has had success getting adopted in the United States right now to solve some of the problems there with tarmac delays and other issues.

I think he observed that airports are being turned into shopping malls in a lot of cases. These are huge developments, when not as much attention as there should be is paid to the way the flights integrate with the way the airport runs. Some computer system is being developed in the States right now--I think it's still being worked on, but it has four or five components--to build an integrated system so you don't have these bottlenecks.

Another thing he has done—and the Atlanta airport has done this as well—is to buy cobuses. I don't know whether you have cobuses in Canada, but you're familiar with what they are. I've seen them in Heathrow Airport in Europe, where you don't get on the plane through a jetway anymore. The bus takes you out to the plane. That has eliminated a lot of the problem with tarmac delays in Atlanta airport, Dallas/Fort Worth, and others.

He's also built a ramp, he claims, where the planes just drive up to the ramp and people get off. I don't know how this thing works, but certainly I would recommend that we all look into this whole situation because he seems to be making headway in the United States, as far as making airports more efficient is concerned. That's part of our problem here. The big part of our problem is making people happy to travel.

There wouldn't be a big demand for high-speed rail if people weren't spending so much time getting to the airports, fighting their way onto the planes, and then having to fight their way off the planes. I think we need a more efficient system all the way around. Perhaps then we could look at reducing some of these fees. I agree the fees are atrocious, and these airports are really developing into big Taj Mahals by the looks of it, with the shopping mall aspects to them. I don't think the passenger really needs or wants something like that.

I'm asking you to comment on these things, if you would.

[The Chair, Conservative, Merv Tweed]

It's about high-speed rail, but I'll certainly allow the question.

Go ahead.

[Joseph Galimberti]

To your first point, certainly an argument can be made. Theoretically, airlines could readjust aircraft to certain new routes, but I think that discounts the human factor. As I mentioned in my presentation, airlines represent 43,000 employees. Those are employees in places like Windsor, where having a commercial aviation industry is an important part of that town.

There would be a concurrent adjustment in employment levels and levels of economic benefit and cargo availability and ability to do a downline connection on the aircraft from Windsor, if one were to try to shift away from aviation and go to rail. I think that's certainly something that needs to be considered. We would certainly have a fleet that would no longer be appropriate and we would need to consider either stepping down or finding some way to reassign. You can't do that with a family.

To your second point, I don't want to leave here with the impression that our presentation dwelt on our problems with airports. I have a very real problem with the fees associated with those airports. Certainly there are ways the Government of Canada can look at the governance structure of airport authorities and ensure that the overbuild we've seen domestically can be avoided. From an operational perspective, there are drawbacks and advantages to all these things, and that's the kind of thing that needs a very concrete, long, integrated study. You're not just talking about airport authorities and airlines. You're really talking about involving Nav Canada, CATSA, and in certain cases, customs and security. I would caution against solutions that may work in one case, working across the board.

[Jim Maloway, NDP, Elmwood—Transcona, MB]

I have no further questions right now.

[The Chair, Conservative, Merv Tweed]

Mr. Del Mastro.

[Dean Del Mastro, Conservative, Peterborough, ON]

Thank you very much, Mr. Chairman.

Thank you to the witnesses for coming today.

I think this is a really good study for the committee to be undertaking right now, especially considering that we do have a joint study going on between the provinces of Ontario and Quebec and the Government of Canada.

I just have a couple of questions.

A couple of people made the point that it's really tough to compete with an entity backed by the crown. I would actually concur with that. Certainly, Jim Devlin of Coach Canada in Peterborough has talked to me many times about how they sometimes have a hard time competing with VIA Rail in VIA's core, because sometimes VIA will put on a special that Coach Canada can't compete with on a profitable level. I do believe it's inherently unfair when we are actually subsidizing one industry to the harm of another. I know the airlines may take issue with that, but airports wouldn't be built if governments didn't build them, and everybody operates on infrastructure that's built by the government.

That said, here's my question. Can a high-speed rail system run cash positive? That's what we're talking about. Could you, as a P3, run cash positive? For example, could Greyhound operate a high-speed rail system? It has to be integrated. I think this is something that people need to understand for any kind of transportation system, and I don't care if it's air, buses, or subways.

That's one of the major problems at Pearson. We don't have a good integrated transit solution around Pearson. I'd be happy to talk to Mr. Galimberti about that. But in your opinion, could you run this cash positive if the infrastructure is built?

[Stuart Kendrick, Treasurer, Canadian Bus Association]

On behalf of FirstGroup and Greyhound, I'll say that with the infrastructure built and understanding the full costs, there's expertise within our organization in the U.K. that already does this, primarily in England.

We believe and we agree with your comment that inter-mobility and connectivity is a key to sustainable high-speed rail and also to an intercity bus market, especially in this corridor, where Greyhound is significantly impacted currently by VIA Rail and the pricing. Earlier we were unable to answer the question due to time, but this is roughly 90% of the revenue of Greyhound Canada in Ontario and Quebec.

[Dean Del Mastro, Conservative, Peterborough, ON]

I can say that certainly at the federal level we don't like writing blank cheques. We like making one-time capital commitments and then getting out so that we can write another budget that will make further commitments down the road.

To me, that's something this committee has to explore, which is the opportunity for high-speed rail to be a P3 operation in Canada, integrated with other businesses, so that operators of buses and airlines can in fact integrate this and it becomes a very significant economic engine. Obviously, the benefit of high-speed rail over air is that it can stop in communities where airplanes just cannot feasibly or economically stop.

To the airlines, I have a couple of questions. You mentioned that you have a user-pay model. I actually think there's nothing wrong with a user-pay model as long as it's fair.

With respect to Mr. Maloway's comments, Pearson Airport is the most significant economic driver in the city of Toronto and the entire GTA. It is the largest single economic driver in the province of Ontario. To what extent are you contributing to Pearson through your operations at Air Canada? How much economic activity is Air Canada bringing in and taking out of Pearson? Do you have any idea?

[Joseph Galimberti]

We're about 50% of capacity at Pearson, so half of their raison d'être is us.

[Dean Del Mastro, Conservative, Peterborough, ON]

It's about $160 billion at Pearson, so you're about $80 billion of their overall operations.

[Joseph Galimberti]

It's really difficult to quantify the indirect economic benefit of an airline, because there are all kinds of modelling that could be done for how much a passenger spends when he arrives in Canada and how much a connecting passenger is worth. What if they're buying two bottles at duty-free? There are all kinds of variables.

[Dean Del Mastro, Conservative, Peterborough, ON]

We do want them buying their duty-free here in Canada because that also supports jobs.

[Joseph Galimberti]

Absolutely.

[Dean Del Mastro, Conservative, Peterborough, ON]

Absolutely.

I don't have that much time left, Mr. Jeanes. The biggest benefit of rail, certainly of high-speed rail, is that the country is trying to improve its overall environmental performance and grow its economy. It kind of does both. Mr. Galimberti mentioned that they'd have to change a bunch of their fleet, obviously, if high-speed rail were undertaken. That fleet would probably be largely Bombardier built, because that's what they use in a lot of their regional transit.

But on this particular investment, have you done any calculations on how much it would reduce greenhouse gas emissions, and specifically over the Toronto-Montreal corridor?