kEiThZ
Superstar
They don't lose money on Corridor flight. But when slots are limited, a 777 long haul makes more than a 737 short haul.
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Alto - High Speed Rail (Toronto-Quebec City)
- Thread starter innsertnamehere
- Start date
They don't lose money on Corridor flight. But when slots are limited, a 777 long haul makes more than a 737 short haul.
mtlmark
New Member
Alto cannot touch the Kingston sub, it is CN property and the Carney government publicly stated they were not going to expropriate CN property.
I would argue the fact that Air Canada is part of the consortium suggests one of two things;
1) AC will influence the price of Alto to offset the perceived loss of revenue of the short haul flights vs long hauls(i.e. influence the Alto ticket price above their flights)
or
2) AC will do as you say and flush the short flights in the Montreal-Ottawa-Toronto triangle to Alto by influencing pricing favorably in Alto favor.
When it comes to Air Canada having a conflict of interest, I'm a bit of a cynic. Canadian industry/business loves oligarchies. Look at our telecommunication plans, the bread scandal involving all the major grocers. It would not surprise me at all if Air Canada goes option 1; price Alto higher then their short haul flights.
Keep in mind, unless things change (which they can) Dorval airport is not being served by Alto in phase 1 (Ott-Mtl). The REM will be calling at the airport(Dorval)and the consortium will probably ensure Alto connects with the REM network somewhere in town(Montreal). Pearson is in the same boat, there's nothing so far to suggest Alto will stop there. Should Toronto Union not be the stop in Toronto, UPX cannot ferry passengers to and from Alto.
Considering, the Mount-Royal tunnel was only recently converted, I do not believe a secondary tunnel under the mountain will be built. Public transit(Metro) most likely would link anyone looking to use the REM from Central station to head out to Dorval airport.
crs1026
Superstar
I’m a cynic also, but I have to think that the other more senior members of the consortium would have insisted on some contract language or governance that would protect their interests and not allow Air Canada to unilaterally drive pricing
Alto is only in part a proxy for air travel and a great deal of its economic viability depends on modal share from highway travel. So while Air Canada may see its self interest as pricing Alto high, the self interest of other parties will likely lean towards attracting riders at lower fares as well.
There is also the reality that the short haul air market requires added terminals and runways that Ottawa will be wanting to not fund. I expect Ottawa will oppose AC retaining business by pricing Alto higher than air, as that passes air terminal cost to the taxpayer. Alto assumes that AC and others will run out of terminal slots for T.O-M-Q flights.
Worst case, Alto fares will be set by some quasi regulatory tribunal just like telco, retail gas and electricity rates, in which case free market forces will indeed be abandoned and lawyers will get rich. And then various governments will appease the public by throwing in some form of subsidy or revenue manipulation to make fares “affordable”. This is indeed the Canadian way, it seems.
My personal preference is that Alto be a “peoples’ train” and not an elite business class flyer substitute. But having said that, it will be interesting to see how pricing is determined. Ottawa has said very little about that. In the spirit of starting a New Year with optimism, I will keep my mind open and see what is said.
- Paul
MisterF
Senior Member
The optimistic side of me thinks that Air Canada is taking lessons from Kodak, which invented digital photography and famously missed the forest for the trees when they shelved it because it wasn't going to help them sell more film. And we all know what happened to Kodak. Similarly, Air Canada could fight a competitive high speed rail system or sabotage it with high prices trying to preserve their Corridor airline business. But I'd like to think that they understand that getting into high speed rail while losing most of their Corridor flights will be a net win. Maybe they recognize that this is happening with our without them and they'd rather be included.
Clearly we have no idea what prices are going to be this early in the game. But pricing for a dedicated high speed rail line with frequent departures is very different from Via Rail's need to squeeze every dollar out of the limited number of departures they're able to provide. With trains running every half an hour or similar, capacity will be way higher than the trains and planes we have today. Prices will probably be whatever they need to be to get butts in seats.
Clearly we have no idea what prices are going to be this early in the game. But pricing for a dedicated high speed rail line with frequent departures is very different from Via Rail's need to squeeze every dollar out of the limited number of departures they're able to provide. With trains running every half an hour or similar, capacity will be way higher than the trains and planes we have today. Prices will probably be whatever they need to be to get butts in seats.
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kEiThZ
Superstar
The Corridor is the most profitable aviation market in Canada. But that's the domestic part. Most of AC's actual profits don't come from the domestic market. And AC now faces a situation where two of its Corridor hubs (and its two biggest hubs) are slot constrained. This completely changes the calculus for AC. This means that they can't grow the actual high profit part of their business (long haul) unless some slots are freed up or airports spend billions on expansions to make more slots. The latter is getting difficult. If Corridor traffic at Pearson can be reduced to no more than an hourly flight to YOW and YUL, or maybe even every 90-120 mins at different points in the day, they can open up slots on which they can sell long-haul seats. And HSR in which they are a shareholder is a great way to do this. They get a cut of Corridor travel profits while opening up slots they can sell more long haul. Oh and their competitors who aren't investing in rail and don't have long haul? They are going to pay even more for the slots they have.
I actually don't think AC is a very active investor in Cadence. They might provide some advice on air-rail integration. But mostly, I suspect they are providing data on demand and price yields that helps Cadence do business modelling.
Bordercollie
Senior Member
A smart thing to do would have been to lease the corridor to different operators like they do in the UK and give them slots.
This way companies would compete to provide the best service.
kEiThZ
Superstar
This would have required the government to build the entire corridor. And in Canada, that means it would never get built.
micheal_can
Senior Member
I have the feeling that AC is looking at this as a way to increase their profits, and serve the area, and open up more slots especially at YYZ to more profitable international flights.
I think that is the intent of a P3 contract. They do not own the system. They are building, maintaining and operating it.
crs1026
Superstar
You do know that the UK is backing away from this model and the private operators are being wound up and train service amalgamated into a single operator as their current franchises expire ?
- Paul
Bordercollie
Senior Member
Interesting. I would have thought that making companies compete with each other would provide better service
crs1026
Superstar
There wasn't as much head to head competition as one might think. More often, the various franchises were regional or route based.
Complaints and poor service stories abounded. A business doesn't have to be a monolith to be disorganized and indifferent to the customer.
Having said that, there were bright spots.... but the margin wasn't always there to keep them thriving.
- Paul
DSCToronto
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Though the concept of having a track owner who leases space to a variety of companies is 'interesting'. In UK, Network Rail ("we own, repair and develop the railway infrastructure in England, Scotland and Wales") is a state-owned company. The operating companies (there are 29 of them) vary from those with one route (e.g. Heathrow Express) to some with many routes all over the country.. However, the actual experiences in UK have not been good and the government has been trying to fix the model for a decade or more. Some of the operators have recently been refused contract extensions and the latest plan is to renationalise the operating companies into a new company: Great British Railways. https://en.wikipedia.org/wiki/Great_British_Railways
kEiThZ
Superstar
The UK model has Network Rail running almost like a highway authority. They manage the infrastructure all allocate for more than just passenger use. That's maybe what we should have done when we privatized CN and CP. Now? Makes no sense. Nothing will be accomplished by simply separating the infrastructure owner from the operator in Alto's case. The government's concern isn't actually the lowest fare. It's maximum return on investment so that the project doesn't become a white elephant to the taxpayer. You can disagree with the goal. But that is the goal that is driving a lot of their decisionmaking.
nfitz
Superstar
Do we know yet if Great British Rail (GBR) will be the operator for all the services? Might they not go the GO Transit or YRT route and hire companies for simple operations contracts?
I'm not sure if we know if they are even nationalizing all the operating companies back into GBR. For example a lot of old BR services in London are now under TFL, and I doubt that will change.
And then there's Transport for Wales Rail (TfW), which seems to be doing a decent job under the current system; so why change it? And services like Eurostar and Virgin to Europe. And even private operators that want to run new services outside of GBR, such as Wrexham to London Euston. Or even services that didn't exist under the old BR model, such as the current Cardiff to Sheffield trains.
But heck, there's a lot I don't know about all this. Perhaps a lot still that is unknown to even those involved in these early days of GBR.
crs1026
Superstar
I don't have detailed knowledge, but it's clear that the problem that the new entity has to solve is public dissatisfaction with poor service and unreliability. I can't see the entity being able to cede control of operations, given the obstacles that would create to directly driving performance and responding to public expectations.. It's quite possible that they might subcontract operations to others with specific performance provisions (similar to GO contracting operations to Alstom) - but that is a very different model than opening the field to competing entities and stepping back to watch.
The system owner/franchise model might have been popular in the UK because of its multiplicity and complexity of routes and the number of subdivisions that can be formed productively. But it makes no sense to Alto which has only one corridor and one route to slice up. It's not comparable, either, to having competing airlines connecting the same points.... do we want competing rail companies to have their own branded terminal areas, and have a timetable that disperses slots instead of offering a single uniform set of timings?
Let's not let the Alto discussion drift into nationalisation dreams either. Ottawa is not going to nationalise 8,000 miles of freight railway to get a better deal on 500 miles of HSR corridor that doesn't even have a freight function. It's a nice what-if thing to debate in other forums, but it has no bearing on building Alto.
- Paul