VIA Rail

[kEiThZ]

Technically VIA has offered that since 2013. You can connect to "VIA_WiFi_VIDEO" and stream movies and TV shows served from hardware on the train. There's almost nothing you would want to watch due to a decision that everything on VIA should be Canadian sourced where possible.

Oh yeah. Forgot about their streaming. I usually read on the train. But when I last used their to that I found it spotty. I don't find it as smooth as say Air Canada or United's app.

 

[crs1026]

Ordering through seatback IFE or the mobile app if no IFE, becomes a fantastic system if there's no cafe car. Attendant doesn't have to go around asking what people want. Swipe/tap and pay at the seat.

A great idea (airlines could apply it too, but I have yet to see it done in coach). But the option to walk a car or two to a cafe car is something I enjoy, and it’s common on many (most?) other carriers. Menu options can be impressive, too, if the cafe does more than distribute prepackaged items. I had an amazing grilled cheese sandwich on one train in Norway, cooked right in front of me. Revenue per hour per square foot of car space was likely just as good as a less elaborate snack counter with cellophane wrapped fare.

VIA is the only rail carrier I know that insists you stay in your seat for the whole trip.

I guess I see the pods differently. I see them as a way to give an economy class passenger on the Ocean or Canadian a way to sleep. And for a Corridor business passenger a place to work in privacy. And in both cases a big differentiator against other forms of transport. You aren't getting a chaise lounge on a bus from Quebec City to Halifax. And you aren't really getting room to work on your flight from Toronto to Montreal.

I can see business travellers who would be content to cocoon in a pod for their trip, but a liesure traveller might want that window seat. I wonder if one could design for both.

For longer distances, the privacy might appeal to some .....the biggest downside to long distance coach travel is being stuck next to an irritating seatmate. But I bet most would be craning to look out the window.

There are precedents for mid-density long distance accommodations - Slumbercoaches, Amtrak economy bedrooms. But it’s a slippery slope... 30 passengers per Slumbercoach at $100 versus 15 passengers in a Manor class sleeper at $300 each....Silver and Blue was predicated on a demand/price curve that attracts the lowest number of higher paying patrons. Dayniters were an attempt, but VIA ditched those.

What airlines do you fly?

Westjet B737-700s, and Rouge whatevers. Bring a tablet, or rent one. The functionality and programming doesn’t match the high end systems.
I don’t know what gadgets they provide up in Row 3, but that’s not my experience. It’s about cramming people in and extracting revenue from every amenity. I bring a book and preload my iPad.

- Paul

 

[kEiThZ]

A great idea (airlines could apply it too, but I have yet to see it done in coach).

It's becoming more common. And I've seen it in Economy. Requires integration between app or IFE, the booking/customer service system and the onboard system for the attendant.

Westjet B737-700s, and Rouge whatevers. Bring a tablet, or rent one.

Air Canada and WestJet mainline have seatback IFE as standard across all classes though. Air Canada even spent more upgrading theirs on the new A220 that will see heavy use in the Corridor cities.

But the option to walk a car or two to a cafe car is something I enjoy, and it’s common on many (most?) other carriers.

I agree. I'd prefer a cafe car too. But as long as VIA isn't doing that, in-seat ordering through app or IFE should be the goal. The current setup is cumbersome and awkward for everybody. I've waited forever for the attendant to bring the cart around. Then had to fumble for cash (before they began handling credit cards). That poor attendant has to go around soliciting orders. There's a better way here.

I can see business travellers who would be content to cocoon in a pod for their trip, but a liesure traveller might want that window seat. I wonder if one could design for both.

I think you and I are imagining different things. When I say pods, I imagine alternating 1-1 configurations:

1-x yyyy x-1
x-1 yyyy 1-x

Where 1 is the seat and yyyy is the aisle, and x is the void. In that config every seat is a single with a window view and aisle access. You can stack them closer too by having the foot well under the void of the seat in front. Something like this:

Alternatively, there's the 2-2/1-1 layout that JetBlue uses for its business class in the US. Accommodates single travelers and those traveling in pairs:

I envision the same coach would work as a business car on the Corridor and as an economy sleeper overnight. Kinda like how an airline's short-haul business class seat and long haul premium economy seat are often the same.

But it’s a slippery slope... 30 passengers per Slumbercoach at $100 versus 15 passengers in a Manor class sleeper at $300 each....Silver and Blue was predicated on a demand/price curve that attracts the lowest number of higher paying patrons. Dayniters were an attempt, but VIA ditched those.

You're right that there could be some revenue machinations involved. But I'm also thinking this may have cost savings by having fewer coaches and attendants. Or, as I envision it, this would be the standard economy seat outside the Corridor. So they would charge a bit more than economy now, give everyone a sleeper seat and have fewer cabins, that would be better equipped and extract a higher premium. If the business case allows them to offer even more seats, that is great! VIA needs ways to enable more users while not blowing the business case. I really think this is an idea worth investigating.

 

[littlewill1166]

You're right that there could be some revenue machinations involved. But I'm also thinking this may have cost savings by having fewer coaches and attendants. Or, as I envision it, this would be the standard economy seat outside the Corridor. So they would charge a bit more than economy now, give everyone a sleeper seat and have fewer cabins, that would be better equipped and extract a higher premium. If the business case allows them to offer even more seats, that is great! VIA needs ways to enable more users while not blowing the business case. I really think this is an idea worth investigating.

Thing is that outside the corridor, VIA is essential public transportation for remote communities... Politically it would be best if fares were kept as affordable as possible. A fancy economy seat doesn't exactly support this.

 

[kEiThZ]

Thing is that outside the corridor, VIA is essential public transportation for remote communities... Politically it would be best if fares were kept as affordable as possible. A fancy economy seat doesn't exactly support this.

I am suggesting that on balance it may just work out. The offering may well be attractive enough to steal share from other modes while the incremental cost may well be sufficient that VIA would be net profitable on this. I just wish the idea was studied.

 

[littlewill1166]

I am suggesting that on balance it may just work out. The offering may well be attractive enough to steal share from other modes while the incremental cost may well be sufficient that VIA would be net profitable on this. I just wish the idea was studied.

I think you should have a look at post 6850 again. On non-corridor routes, VIA essentially has a monopoly following the downfall of Greyhound. You can't exactly steal from a mode that doesn't exist. While I can see how it might be a good idea to cycle in idle sleeper cars from the Canadian onto the corridor during the winter to increase utilization. In the vast majority of circumstances the cost structure of intercity trains inhibits their ability to be a profitable venture. See video below:

Rather, rail transportation offers a means of stimulating the economy by enhancing transport links. Access to public transportation is a significant determinant of economic success for people living in rural areas. Making non-corridor routes more expensive with the goal of increasing revenues (which won't work, see post 6850), would hinder the positive economic impact passenger trains have on rural/remote communities.

 

[Bureaucromancer]

To be frank, I think we'll be lucky if the Canadian restarts in November without some form of involvement by Rocky Mountaineer.

 

[kEiThZ]

On non-corridor routes, VIA essentially has a monopoly following the downfall of Greyhound. You can't exactly steal from a mode that doesn't exist.

Are people not driving and flying into these communities? You absolutely can steal marketshare from those modes.

In the vast majority of circumstances the cost structure of intercity trains inhibits their ability to be a profitable venture.

And yet we know that portions of the Corridor are net cashflow positive. And could certainly yield a lot more with investment. Your Wendover video is slightly less applicable in a country with higher (and increasing) gas prices, 6 months a year of poor driving conditions and complement unsubsidized aviation infrastructure, unlike in the US.

But more to the point here, these sleeper trains are already subsidized. It's worthwhile to investigate whether changing the mix of seating offered could reduce the subsidy demanded.

 

[littlewill1166]

Are people not driving and flying into these communities? You absolutely can steal marketshare from those modes.

No, if you go on VIA's website and look at like McTavish, or Club Sommet, there is no road access to these stations.

And yet we know that portions of the Corridor are net cashflow positive.

But more to the point here, these sleeper trains are already subsidized. It's worthwhile to investigate whether changing the mix of seating offered could reduce the subsidy demanded.

Cash flow can be generated from a variety of sources. Some are sustainable, some are not. According to VIA's 2018 Annual Report page 87, VIA's over half of the corporation's operating cash flow comes from amortization and depreciation, and its investing cash flows come from the government. If you look at the income statement on page 83, over half of VIA's, over half of VIA's revenues come in the form of subsidies. Yes, VIA is indeed cash flow positive, but that's only because the Government of Canada is providing operating and capital funding to VIA. If you have any information to suggest otherwise, I'd like to see it.

 

[kEiThZ]

Cash flow can be generated from a variety of sources. Some are sustainable, some are not. According to VIA's 2018 Annual Report page 87, VIA's over half of the corporation's operating cash flow comes from amortization and depreciation, and its investing cash flows come from the government. If you look at the income statement on page 83, over half of VIA's, over half of VIA's revenues come in the form of subsidies. Yes, VIA is indeed cash flow positive, but that's only because the Government of Canada is providing operating and capital funding to VIA.

I never said all of VIA is cashflow positive. Most of the Corridor is. And that would only improve with better service where they are already profitable. VIA as a whole will never be profitable. Nor should we expect them to be. We should expect to deploy the subsidy more smartly though.

No, if you go on VIA's website and look at like McTavish, or Club Sommet, there is no road access to these stations

A handful of communities are not the rule. They are the exception. The vast majority of VIA's sleeper routes see competition from driving and flying. I am thinking of routes like The Ocean where there a basic economy seat offers no real differentiation over the bus or driving.

 

[littlewill1166]

I never said all of VIA is cashflow positive. Most of the Corridor is. And that would only improve with better service where they are already profitable. VIA as a whole will never be profitable. Nor should we expect them to be. We should expect to deploy the subsidy more smartly though.

Well... All of VIA is cash flow positive and has to be over time unless they want liquidity issues. Cash flow is a measure of liquidity and not a measure of profitability. Cash flow positive does not mean profitable without government funding. Air Canada lost $1.049 billion in Q1 2020, but they had a positive cash flow of $498 million from financing and depreciation according to their quarterly report page 5. According to page 11 of VIA's 2018 Annual Report, all train services operate at a loss and require government subsidies to fund the shortfall.

A handful of communities are not the rule. They are the exception. The vast majority of VIA's sleeper routes see competition from driving and flying. I am thinking of routes like The Ocean where there a basic economy seat offers no real differentiation over the bus or driving.

For Montreal to Halifax, the price of an escape ticket is +/- $20 the price of flying. Maritime Bus stopped taking reservations, so unfortunately I wasn't able to find pricing for the bus. By substituting the current economy seats with pods, the cost for VIA to offer the service to serve small communities on the route like Jacquet River, Charlo, and many others. According to APTA, every dollar spent on public transport by the government yields $3.35 in economic benefits. Making non-corridor routes more expensive with the goal of increasing revenues (which won't work, see post 6850), would hinder the positive economic impact passenger trains have on rural/remote communities. Furthermore, it could cannibalize revenues from VIA's berth and cabin-for-one sleeper services.

 

[Urban Sky]

@Urban Sky Any news on the Mount Royal tunnel sharing between HFR and the REM? News I hear from my part, it's not even being considered into engineering plans.

I unfortunately can't say anything about anything specific to this case, therefore, I will try to think how a generic investor would act: provided with a clear mandate about developing a transit project, but without any guidelines or limits to that mandate, I would probably also just take what I find useful and not spend any consideration of what alternative uses might be in the public interest now or later. As a pension fund, I'm solely accountable to my individual or institutional investors who have trusted me their money and voluntarily foregoing revenue by making provisions for transportation networks which will be outside of my responsibility would difficult to justify to them, especially if it causes delays to be the planning stage, thus delaying construction and thus the positive cashflows which generate the return of my own investors. Preserving the public interest is solely the responsibility of the governments, its institutions and the general public and if they don't force me to ensure interoperability, why would I care nor why should I care? Because that's why governments always retain the responsibility for conceptualizing and planning of vital pieces of transportation infrastructure and maintain control in key aspects of its operation to preserve the public interest - well, that's what I thought until 4 years ago...

This is probably still more than I should have said, but I don't anticipate that any thinkable outcome would affect HFR negatively west of Montreal - and if east of Montreal was crucial to the business case of HFR, it would have most probably been included in the initial scope of the project...

I also don't see how VIA is able to compete with the bus companies on price while being profitable given that their current per passenger subsidy is equivalent to the starting fares on the busses here (page 11). Ultimately, I see VIA going after expense accounts with good service being the driver of its future ridership. Meanwhile, those on a budget will be relegated to grabbing a ride with friends or the dreaded bus.

If you take the average implied cost per passenger and multiply it by the load factor from my analysis below, the breakeven is $68.60 per passenger on the Montreal to Quebec City route assuming a 100% load factor (which is not feasible on a train). Given that there is almost no route to profitability for VIA as shown in my analysis below, the only justifications for funding VIA are political and social. For this, I ask you to refer to the bottom half of my analysis below.


If you do the math, the revenue generated by VIA from business class in the Montreal to Quebec City corridor is roughly equivalent to economy class once you account for the differences in seat density and differences in service. Yet the decreased seat density in business inhibits the ability for VIA to maximize the total passenger capacity of its corridor fleet. I'll edit this post once I have time to clean up my charts.

View attachment 245722
[...]

As seen in the chart VIA's unadjusted average business fare barely covers the blended implied cost per passenger, with economy fares falling far below it.

[...]

From a political perspective, the optics today of middle/upper-class people riding "fancy" trains with a per passenger subsidy that is roughly equivalent to a lower-class person's Greyhound/Megabus fare doesn't look good. I'm concerned that an exacerbation of this through a focus on business travellers could be one day politically wielded to disband VIA's corridor services given that busses are a vastly more cost-effective method of public transportation. I hope I'm wrong, but the numbers I see don't add up.

According to page 11 of VIA's 2018 Annual Report, all train services operate at a loss and require government subsidies to fund the shortfall.

The problem with your analysis is that the financial figures you take the "fully allocated" costs and revenues from the Annual Report rather than the "direct" costs and revenues from the Corporate Plan 2019-2023 Summary. As I've explained in more detail in Post #6,745, fully allocated costs are only appropriate when looking at a network as static ("How much subsidy does the network require and how does it distribute across the network?"), whereas direct costs represent the share of the railroad's total costs which are actually associated with the operations of a particular route (and thus change somewhat proportionally if that service is expanded or reduced). As the Quarterly Reports for Q1 and Q2 will certainly show this year, VIA's so-called "operating costs" are largely insensitive to a change in the amount of trains actually operated, as most of its costs are not associated with the operation of any specific train (or of any train at all).

For the purposes of inter-carrier competition (e.g. Megabus-VIA or RMR-VIA), the relevant question is whether the operation of a certain service increases or decreases VIA's overall subsidy need. And that question is answered by the direct cost and revenue figures published in the Corporate Plan, as only 48.4% of the operating costs reported for the Corridor reported in the Annual Report are actually related to the operation of the Corridor services, whereas the majority of that figure (51.6%) is simply VIA's overheads allocated to the Corridor, whereas almost all (96.3%) of the Corridor's operating revenues are indeed generated by these services. Therefore, once you acknowledge that the avoidable costs of operating VIA's Corridor services are $217.0 million (and not the $448.8 million reported as "operating costs" in VIA's Annual Report) and that its revenues are $294.0 million (so only slightly less than the $305.3 million reported in the Annual Report), the Corridor's subsidy of $143.5 million per year ($31.66 per passenger, $3.64 per train-mile and 2.7 cents per passenger-mile) turns into a profit of $77.0 million ($16.99 per passenger, $1.95 per train-mile and 1.5 cents per passenger-mile), of which $37.8 million is consumed by the direct deficits of the non-Corridor services (Canadian: $6.5 million, Ocean: $11.3 million and the Regional services: $20.0 million), while the balance of $39.2 million helps to lower the deficit resulting from VIA's non-direct costs (e.g. overheads like my very own salary), which is why this "profit" is also called "contribution"...:

Compiled from: VIA Rail Corporate Plan 2019-2023 Summary (pp.20-21), with Passenger data provided in (or extracted from) the Annual Report 2018 (p.9) and train-mileage data calculated in Post #6,434.

For a break-down for the entire VIA network, please refer to the following table I posted in Post #6,745:

To be frank, I think we'll be lucky if the Canadian restarts in November without some form of involvement by Rocky Mountaineer.

Rocky is always good for anti-VIA lobbying, but I don't see them making any potent argument: if you look in the table above, the Canadian recovered 90.1% of its direct costs in 2018 and even 101.2% in 2017. Let's ignore the 2017 figure, but if the Canadian manages to recover 90% of its direct costs over its entire route, over the entire year and over all passenger segments, then you can safely assume that its operation generate a healthy profit on the route segments (Jasper-Vancouver), seasons (April-October) and passenger segments (high-end tourism) where it competes directly with RMR, which means that rather than subsidizing a service to compete against RMR, the revenues generated by this service reduce VIA's overall subsidy need...

 

[littlewill1166]

The problem with your analysis is that the financial figures you take the "fully allocated" costs and revenues from the Annual Report rather than the "direct" costs and revenues from the Corporate Plan 2019-2023 Summary. As I've explained in more detail in Post #6,745, fully allocated costs are only appropriate when looking at a network as static ("How much subsidy does the network require and how does it distribute across the network?"), whereas direct costs represent the share of the railroad's total costs which are actually associated with the operations of a particular route (and thus change somewhat proportionally if that service is expanded or reduced). As the Quarterly Reports for Q1 and Q2 will certainly show this year, VIA's so-called "operating costs" are largely insensitive to a change in the amount of trains actually operated, as most of its costs are not associated with the operation of any specific train (or of any train at all).

For the purposes of inter-carrier competition (e.g. Megabus-VIA or RMR-VIA), the relevant question is whether the operation of a certain service increases or decreases VIA's overall subsidy need. And that question is answered by the direct cost and revenue figures published in the Corporate Plan, as only 48.4% of the operating costs reported for the Corridor reported in the Annual Report are actually related to the operation of the Corridor services, whereas the majority of that figure (51.6%) is simply VIA's overheads allocated to the Corridor, whereas almost all (96.3%) of the Corridor's operating revenues are indeed generated by these services. Therefore, once you acknowledge that the avoidable costs of operating VIA's Corridor services are $217.0 million (and not the $448.8 million reported as "operating costs" in VIA's Annual Report) and that its revenues are $294.0 million (so only slightly less than the $305.3 million reported in the Annual Report), the Corridor's subsidy of $143.5 million per year ($31.66 per passenger, $3.64 per train-mile and 2.7 cents per passenger-mile) turns into a profit of $77.0 million ($16.99 per passenger, $1.95 per train-mile and 1.5 cents per passenger-mile), of which $37.8 million is consumed by the direct deficits of the non-Corridor services (Canadian: $6.5 million, Ocean: $11.3 million and the Regional services: $20.0 million), while the balance of $39.2 million helps to lower the deficit resulting from VIA's non-direct costs (e.g. overheads like my very own salary), which is why this "profit" is also called "contribution"...:
View attachment 247184
Compiled from: VIA Rail Corporate Plan 2019-2023 Summary (pp.20-21), with Passenger data provided in (or extracted from) the Annual Report 2018 (p.9) and train-mileage data calculated in Post #6,434.

For a break-down for the entire VIA network, please refer to the following table I posted in Post #6,745:

This reminds me of a case study I did relating to a certain company and its oil wells a while back. While VIA does have a positive contribution for its corridor services, profit = contribution - fixed costs. If VIA cut its corridor services completely, there are ways for it to cut its fixed costs substantially. It could sell its locomotives and train coaches reducing depreciation costs. It could slash its advertising and marketing budget significantly. It wouldn't have to employ as many operations personnel and managers in Montreal. The call center team could be smaller. I'm absolutely not saying that VIA should be doing this, but using the fully allocated costs provides a better view of a company's performance from a financial point of view.

Using a breakdown of direct and indirect costs is great from an operational standpoint in the sense that it allows VIA management to determine what segments/routes to operate. However, I did a financial analysis of VIA's performance and its appeal to outside investors. In that analysis, I determined that from a financial standpoint, VIA's corridor services were not profitable and that its services would need to be justified economically, socially, and politically in order to ensure continued funding.

Edit: For anyone who wants an overview of the differences in the types of analyses we did: https://www.investopedia.com/ask/an...l-accounting-differ-managerial-accounting.asp

 

[kEiThZ]

However, I did a financial analysis of VIA's performance and its appeal to outside investors. In that analysis, I determined that from a financial standpoint, VIA's corridor services were not profitable and that its services would need to be justified economically, socially, and politically in order to ensure continued funding.

Post it.

 

[littlewill1166]

Post it.

I did, 6850. Urban Sky did an operational analysis, I did a financial analysis. Operational analysis is for internal use, financial analysis is for external use...

Edit: Although, mine was just for Montreal-Quebec City since I wanted to do a comparison of business vs economy. If you want a full financial analysis of VIA, you could just read the annual report.