[...]
5 Some observations on VIA Rail's future
VIA Rail's current level of operational subsidies is only enough to maintain the present level of passenger rail service. Capital funding is intermittent and is used largely to repair and refurbish existing rolling stock and installations, not to significantly upgrade the passenger rail system.
Despite unpredictable government subsidies, VIA Rail has managed over the years to stabilize its annual ridership volume. It has also achieved some success in improving its operational efficiency and in managing its contractual obligations with CNR and CPR. These efforts, however, have not been enough to realize profitability.
11 Commercial viability remains an elusive goal, and VIA Rail cannot expect to continue operations without federal government support.
VIA Rail's ability to run its business efficiently is severely constrained by the fact that it must share railroad tracks with the two national rail carriers and other regional rail carriers and does not have priority access to these tracks. Thus, VIA Rail cannot easily establish the frequency or routes that would best promote its own commercial interests. Increasing the frequency and speed of VIA Rail's passenger service on the existing rail infrastructure would also directly affect maintenance costs, track capacity and passenger safety for all the carriers using those tracks.
Even if VIA Rail could gain greater access to existing tracks or build its own separate rail network, questions still remain about the commercial potential of passenger rail service compared to alternative modes of transportation in Canada. According to a number of studies, passenger rail could potentially fit particular market niches, such as the Québec City–Windsor corridor, that have been found to have the best commercial growth potential for such services. These routes could even be competitive against short-haul regional airlines. However, the gap between potential and actual profitability remains wide and difficult to bridge.
12
5.1 High-speed rail: panacea or pipe dream?
Current institutional and market constraints severely limit the growth prospects for passenger rail service in Canada. Since 1989, a number of studies have examined the viability and the growth potential of this service under a range of scenarios. Although the studies differ in approach and methodology, they concur on several points:
13
- Under prevailing market conditions, passenger rail service is uneconomical and, without continued and substantial government support, will continue to decline.
- VIA Rail must negotiate with the mainline freight carriers to secure access and right-of-use of rail tracks. This situation raises questions about the suitability of passenger rail service using a railroad network that is principally dedicated to freight haulage. Should building a separate, dedicated track network for passenger rail service be considered?
- A limited number of routes exist with some potential for growth in passenger volume and revenue, mostly within the Québec City–Windsor corridor.
- VIA Rail's existing rolling stock and fixed installations are rapidly aging and will need to be replaced and/or upgraded.
- High-speed passenger rail provides the best potential for profitability and market growth but would require substantial investment in advanced technology and new equipment.
- High-speed rail options would require a dedicated track and electrification of the entire network, with few or no level crossings.
- Most, if not all, scenarios involving the adoption of high-speed rail would require continued government financial commitment, particularly in the form of underwriting the significant capital costs of the project.
- Some scenarios involve the federal government nationalizing fixed railroad installations and allowing a single, private carrier to provide passenger rail service competing against other modes of transportation.
Studies of the feasibility of a high-speed rail network in Canada have found that, while such a network would be technically feasible and desirable on a number of fronts (e.g., it would provide some environmental and economic benefits), it would not realize a high enough return on capital outlay to attract private-sector investors to finance the entire project. For this initiative to proceed, large financial commitments would have to be secured from the federal government, including the underwriting of part of the capital costs associated with the development and building of new and advanced rolling stock and fixed facilities.
14
In February 2009, the federal government, together with the governments of Ontario and Quebec, awarded a $3-million contract to the EcoTrain consortium to update a 1995 study on the feasibility of high-speed rail in the Québec City–Windsor corridor.
15 The 1995 study (which was sponsored by the same three governments) had concluded that a high-speed rail link would be possible and desirable, but not without public investment amounting to 75% of total project costs.
16 Released to the public in November 2011, the report for the updated study estimated the total development costs of the high-speed rail project at between $18.9 billion and $21.3 billion in 2009 dollars, depending on the locomotive technology used (i.e., diesel versus electric). It also found that, while the completed project could cover all operating costs, participating governments would have to contribute significantly to the development costs and receive no financial return on their investment.
17 According to press reports, the Minister of Transport has said, "In these fiscal circumstances, a new project of this scope is not a priority for our government."
18
6 Recent developments
Given that the federal government does not consider high-speed passenger rail a practical option or as a feasible solution to improve passenger rail service, VIA Rail has recently taken the initiative to explore another approach. VIA Rail is promoting the notion of high-frequency rail (HFR) rather than high-speed rail (HSR) through the acquisition and building of a rail network dedicated to passenger rail service only. A dedicated track for passenger rail service would resolve the rail traffic congestion issues associated with sharing the network with freight rail carriers.
19
A passenger rail dedicated track would also allow VIA Rail more latitude to increase frequency of service; improve the availability and convenience of rail service to all Canadians and thus add ridership volume; generate more passenger revenue; reduce reliance on government subsidies; and improve the percentage of trains running on schedule.
VIA Rail's HFR strategy would require the acquisition of existing trackage from freight railways and the rehabilitation or rebuilding of existing rights-of-way found within the Toronto–Ottawa–Montréal segment of the Québec City–Windsor corridor. Unlike the HSR option, which would require the construction of an entirely new and dedicated high-speed rail network infrastructure and necessitate substantial investment in new and untried technology and equipment, the HFR option offers merely to expand and rehabilitate the existing rail network for passenger rail service using existing technology and operating at conventional speeds. The HFR strategy proposed by VIA Rail is considerably less costly than the proposed HSR schemes, with lower execution risk and quicker implementation to market.
According to VIA Rail, the HFR project would cost $3 billion in capital costs, two thirds of which would be for the acquisition and rehabilitation of trackage and signalling infrastructure. The Toronto–Ottawa–Montréal dedicated segment was selected for having the best potential to achieve profitability, and over the years VIA Rail would slowly expand passenger rail service to a greater number of communities across Canada. The dedicated rail network would include VIA Rail's intercity passenger rail services and regional and metropolitan commuter rail services such as MetroLinx (Greater Toronto region) and the Agence métropolitaine de transport (Greater Montréal region).
With a dedicated track, VIA Rail hopes that doubling the frequency of passenger rail service would increase ridership almost fourfold, thus increasing revenues and reducing reliance on federal government subsidies. To further reduce the burden on the Canadian taxpayer, VIA Rail is seeking to secure private financing to implement the project.
20
VIA Rail intends to submit its HFR proposal to federal cabinet either by the end of 2015 or early 2016. If the proposal is approved, VIA Rail would implement the initiative in four to seven years.
21
[...]