Riding The Rails – Via Rail

Commentary, Transportation, Frontier Centre

Passenger train service in Canada, delivered almost exclusively by Via Rail, has reached a "crossroads", declared a newspaper headline early in September.

Without a cool $1 billion in public investment, Via told the House of Commons transport committee, the future of rail travel was "in severe jeopardy". Facing a steady decline in public subsidies-Ottawa shells out only 24¢ per passenger-mile compared to 41¢ five years ago-Via delayed replacing its aging passenger cars, now an average 35 years old.

But the years of declining support have, it turns out, been good for Via Rail. Passenger loads and total revenue turned around over the half decade, mostly from cutting unnecessary staff. Would it be wise public policy to turn the gravy tap back on and reverse this progress?

Faster, cheaper, more convenient methods of moving people caused the collapse in demand for passenger train travel. The relative advantages of planes, automobiles and buses allowed them to grab most of the market. Those who still travel by train seek relaxation or nostalgia, not speed or economy. The service that remains fills a luxury niche; it is no longer the sole vital link between widely separated communities.

One private Vancouver company recognized these facts. In 1990, the Great Canadian Railtour Company bought the Jasper-to-Vancouver Rocky Mountaineer line from Via, then under orders to contain a flood of red ink, for $8 million. The line began to make money in 1995, and by 1996 had increased its passenger traffic five-fold. Great Canadian Railtour’s smart marketing succeeded where Via had failed. Travelling only by day in order to offer passengers a greater scenic view, the new company brought fresh prosperity to the hotel and tourist industry in towns along the route.

Once the upstart had rubbed its nose in the dust, Via responded by trying to duplicate the service. Trouble is, the original purchase agreement contained a clause which restricted the Via’s right to compete directly with it. The Crown corporation’s permanent contingent of 200 lawyers-more than Railtour’s entire staff-failed to budge the government. Goliath lost.

The Railtour example suggests an innovative policy option that originated in Britain and is now being imitated throughout Europe.

In 1995, the Brits created a share company called Railtrack and set it up as a regulated monopoly controlling the physical lines of the former British Rail. Railtrack is responsible for maintaining all railbeds and stations, and it is obliged to provide access to all comers. Passenger service was broken up into 25 franchises operating trains on different routes. Although not without its warts, overall the system has turned into a winner, with improved service, increased passenger loads and rising stock prices. Even Railtrack’s shares have been profitable investments. Some fares have actually fallen.

In Britain, as in France, Germany and the Low Countries, passenger trains represent much more of a public necessity than they do in North America, where long distances and lower population densities favour air and highway travel. They have chosen to decentralize — to create markets where nationalized monopolies once existed. We have much less to lose by such a venture.

When Canada, following the American lead, allowed short lines to pick up abandoned freight routes, that flexibility provided a new lease on life to many communities which had been faced with a total loss of service. OmniTrax’s surprising turnaround of the Churchill line proves that it can be done — if public policy allows all players the room to experiment.

Even with another $1 billion to play with, Via Rail will never turn a profit. It is the prisoner of demanding, politically set service goals that made might have made sense a hundred years ago but which no longer apply.