OTTAWA — Canada’s airline industry is sounding competition alarms about Transport Minister David Collenette’s push to allow Via Rail Canada Inc. to borrow on private markets for a proposed fast-train rail system to serve the Quebec City-Windsor corridor, the Globe and Mail reported.
The Air Transport Association of Canada fears this will help the government-backed rail operator steal more passengers from airlines and bus companies.
“A decision to allow Via to seek private financing with a Crown guarantee is the same as a decision to grant the money directly,” Clifford Mackay, ATAC president, wrote in an Oct. 18 letter to Mr. Collenette.
“It constitutes a massive expansion of government’s direct competition with Canadian businesses and workers [and] it will be the largest single government investment in transportation in history.”
Via has sent Ottawa proposals for upgrading Canada’s central railway corridor to carry faster trains, and federal sources have said the Crown corporation’s proposals would require between $2-billion and $3-billion in investment.
ATAC officials say they doubt that Via could raise significant private funds without the federal government’s backing of the railway as a Crown corporation.
Ottawa has made no decision on the proposal, but Mr. Collenette told reporters he’s investigating whether Via could be allowed to raise money privately to help finance the fast-train rail system in Canada’s central railway corridor.
“I think it’s quite reasonable to explore ways that Via can raise money on the private market so it doesn’t come right out of government expenditures,” Mr. Collenette told The Globe and Mail last week.
Mr. Mackay said the rationale for a “massive subsidy” of passenger rail service in Central Canada is unclear. “About 90 per cent of Via’s entire passenger base is now in the corridor between Canada’s two largest and wealthiest cities,” he said.
“It goes without saying that a high percentage of these [rail] travellers are business and bureaucratic travellers who do not require a taxpayer subsidy.”
Mr. Mackay has copied his protest letter to Prime Minister Jean Chrétien, Finance Minister John Manley and airport, bus and labour interests that could be hurt by the proposed expansion. But Mr. Mackay said air carriers are already smarting at how Via, subsidized by Ottawa, has boosted rail service to lure away Central Canadian customers.
“In recent years, we have watched with alarm as the government’s rail service aggressively sought to capture market share from air carriers in this critical market,” he wrote.
“This year, for the first time in decades, rail traffic will exceed airline traffic in some corridor cities.”
According to ATAC, Via has boosted the number of trains in the Central Canadian corridor to 283 from 198 over the last decade and has released plans to expand corridor service to close to 400 trains by 2006.
Mr. Mackay said it’s unfair that Via is using taxpayers’ dollars to expand at the expense of private companies.
“Under normal market conditions, this [expansion] might be attributable to customer choice; avoiding security hassles, for instance. But Via Rail does not operate in normal market conditions,” he said.
“The government’s rail service loses money on every passenger, on every route [and] as it expands ridership — taking customers from airlines and bus companies — it increases the loss that Canadian taxpayers must cover.”
Federal sources have said the fast-train rail system proposal would ultimately require a “big chunk” of money from Ottawa but Canadian National Railway Co. and Canadian Pacific Railway Ltd. would be expected to chip in as well.
Ottawa announced a $400-million injection for Via in 2000 to “revitalize” the railway and has pledged $170-million a year in additional subsidies.
Mr. Mackay also charged that Via is deliberately seeking to “persuade passengers to change their travel patterns and use passenger rail,” and suggested that Via is “pricing its service below the bus industry in some markets.”
“If Via was a private firm, we believe it would be investigated by the
Competition Bureau for predatory practices,” he wrote.
Via and Mr. Collenette could not be immediately reached for comment yesterday.
Mr. Mackay called for a national debate on the issue among members of Parliament, affected towns and cities, and “the bus and airline companies who are the direct target of this plan.”