micheal_can
Senior Member
We keep hearing that HFR will make the route profitable. Is there any truth to that?
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VIA Rail
- Thread starter ehlow
- Start date
We keep hearing that HFR will make the route profitable. Is there any truth to that?
littlewill1166
Active Member
Idk, need to see the business case... Although if it did, I have a feeling pension funds would be lining up to invest by now. More likely that it gets funded as a COVID-19 stimulus project with the goal of shoring up Ontario/Quebec voters, supporting the economy, and keeping people socially connected at this point...
Urban Sky
Senior Member
Just three warm-up questions before you send your application as VIA's new CFO:
- Can you tell me the approximate age of each of VIA's 6 main fleet types (HEP, RDC, LRC, Renaissance, F40 and P42)?
- Can you quote any recent examples for the resale value of used railway equipment of a comparable age?
- Can you tell me the industry-standard for the depreciation period of rolling stock in North America?
littlewill1166
Active Member
See Annex 5
Sterling Rail - Buy and Sell Locomotives, Rail Cars, Railroad Equipment, MOW, Passenger Cars, and Railroad Rail
Sterling Rail Railroad Classified Ads, buy or sell train cars
www.sterlingrail.com
For New Builds (Double Declining Balance):
2*((Fixed Asset Cost - Salvage Value)/Useful Lifespan)*Book Value
For Rebuilds (Straight Line):
Fixed Asset Cost - Salvage Value)/Useful Lifespan
It depends on whether its a locomotive or passenger car, its functions, etc.
For tax purposes, refer to this: https://www.canada.ca/en/revenue-ag...expenses/claiming-capital-cost-allowance.html
In retrospect it would have been so much easier for me had I said maintenance... No I'm not applying for CFO, easier and more profitable to trade options.
kEiThZ
Superstar
Right. It was just for Montreal-Quebec. Not all the highest traffic or highest yielding portion of the Corridor.
kEiThZ
Superstar
There's a difference between profitable and profitable enough for an institutional investor.
Urban Sky
Senior Member
I was seriously wondering during the last two months of your absence in this thread whether you had actually followed my strong suggestion to take a step away from the keyboard and to rethink your attitude towards other people and to reflect on the (at least partly) taxpayer-funded education you've enjoyed and the impact you want to leave on this society. I thought you couldn't possibly disappoint me more than you already did in your last tirade of posts (Posts #6,715 to #6,737), where you slammed my colleagues for not risking their health so that you could receive the sandwich you felt entitled to, but you unfortunately give me the impression as if you are trying your best to prove me wrong once again...
Note to the admins/mods: I appreciate your efforts to maintain a civil and friendly discussion and I am grateful that you have become much more present and visible than in earlier times where I lamented your absence. I hope that I have removed the part against which you objected as a "personal attack", but if I didn't, I would appreciate a private message to clarify your point. Thank you very much and keep up the good work!
littlewill1166
Active Member
Yup, but that's what the government is trying to do with the infrastructure bank. Need a copy of the business case to know for sure. Nonetheless, no one is biting, not even the CPPIB. The risk/reward doesn't appear to be there, not when institutional investors can pick toll roads or malls. With regard to the post above, given that the subsidy/passenger mile is within one cent of each other for all corridor routes according to the annual report, the load factors are generally consistent across all services(see chart below), and because average revenue per passenger on MTRL-QBEC is higher than on the rest of the corridor, I'm confident in applying my analysis throughout the corridor.
I never asked or said anything about a sandwich. I did post a photo of my meal, but I didn't feel entitled to it in any way. I felt that it wasn't safe for your colleagues to leave cars unattended for long periods of time. However, with what you said about GO being able to operate with 2 staff, it seems to me that you're the one who thinks that they're not essential. Personally I feel that it's not an effective use of taxpayer money to have them on board if they aren't contributing to the safe operation of the train given the incremental lodging, insurance, and possible medical costs if they get infected (which has happened). I didn't believe that anyone should miss a paycheque. However, I feel that they are essential and that they should be walking through cars on a regular basis to ensure that everything is fine. I've seen medical incidents like heart attacks, and seizures. I've also seen passengers fighting and smoking in the bathroom. I know that your colleagues shouldn't be dealing with this kind of stuff during a pandemic. But unlike GO, there is no emergency alarm on VIA, and your colleagues need to ensure that passengers are safe.
From a connectivity standpoint, providing funding to bus operators to offer corridor services would have ensured that there was more than one train a day connecting cities within the corridor. I was also troubled by how remote services were cut to once a week. Or in the case of the Canadian and Ocean cut entirely despite the fact that there are cities on those routes that have no alternative method of public transportation unlike cities within the corridor.
I'm sorry if I sound even more arrogant, entitled, self-centered, un-empathetic and megalomaniac than before. That's just the nature of the business that I work in. Being right is more important than being nice.
Edit: Regarding my previous position on masks and the suspension of services, I was generally right, and I am glad that VIA and public health have finally caught up with my recommendations. I stepped away to let things play out as I predicted.
Regarding the Niagara train, the part I was confused about was the definition of a commuter train. I find it mildly amusing how Transport Canada defines VIA as a commuter train operator while the CRA did not for the purposes of the former Public Transit Tax Credit.
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Urban Sky
Senior Member
To highlight this, let me conduct this back-of-the-envelope business case.
Let's assume that HFR will double VIA's corridor ridership (i.e. from 4.5 in 2018 to 9.0 million soon after HFR is operational) and increase its scheduled train-mileage by 50% from 8.7 million miles in 2018 to 13.1 million miles per year. Let's also assume that variable revenues are proportional to the ridership and that variable expenses are proportional to
- Variable revenues in 2018: $294 million
- Variable costs in 2018: $217 million
- Contribution in 2018: $77 million
- Variable revenues per year with HFR: $294 million * 200% = $588 million
- Variable costs per year with HFR: $217 million * 150% = $325.5 million
- Contribution per year with HFR: $588 million - $325.5 million = $262.5 million
- Subsidy saved per year: $262.5 million - $77 million = $185.5 million
- Payback-period: $6 billion / $185.5 million => after 33 years of operation
- Internal rate of return: 1.1%
First of all, I'm relieved to see that you interpreted this characterization less of a personal attack than the forum staff did. I didn't want to insult you, but I did want to express my shock, disbelief and speechlessness about your words. If I had the chance to change one thing I wrote in the (now deleted) post I wrote, I would have written "that all that taxpayer money wasn't spent on someone who could have made better use of this education" than "who actually deserved this education", as I don't want to judge the quality of academic work which has entitled you to your degree.
I have no problem imagining that you will fit into your industry, but for someone who went into the intercity passenger rail industry (not that there is much of such an industry in Canada) to help the society and the environment by providing the citizens in this country with better and more sustainable transportation options, this kind of perspective onto one's professional path is very foreign to me - especially at such an early stage in both life and your professional career (I guess you are around 23 years old and graduating with a Bachelor's degree this year, ready to leverage the work experience you've gained during internships, whereas I'm 31 years old, have a one-and-a-half year old son, been working in what I consider my dream job for half-a-decade by now and I believe that my Master's Thesis has already been circulated in this thread). Nevertheless, I don't want to place my CV and life choices over yours', but I would be curious to know how what (and how) you are going to answer when your own child starts asking you what you do for work and why you chose that work (to be sure: my own son is not yet able to ask me that - or any - question!
).I explained to you back then and I will explain it again that the staff is required for assisting passengers to board and detrain the train and to aid the evacuation. I don't know how GO Transit would manage to safely evacuate more than 2000 passengers with only one member of staff (ignoring the Locomotive Engineers), but I am happy that we have at least a Service Manager and usually also a few other On-Train Staff members, which are definitely "contributing to the safe operation of the train".
These are actually concerns we share each other, I'm highly critically of how the respective governments seemingly sat on their hands when first Orleans Express and then Greyhound deserted the Corridor rather than providing extra funding and ensuring that the bus and train timetables would complement each other (rather than overlapping). I believe that the decision to suspend the Canadian and Ocean was basically forced by NB and BC closing their respective borders, but I was surprised to not see any remote service operating between Capreol and at least Sioux Lookout (if not: Winnipeg)...
I don't know if you've worn a face mask yet, but it turned my shopping trips at the local craft beer store and grocer into a demanding physical activity. I suspect that wearing a N95 mask really was an overkill, but I wasn't able to wear it for more than 3 continuous minutes and can't imagine having to work in one...
Concerning the suspension of services, it usually takes more than a month to implement a timetable change and we've seen four different changes within 23 days (March 8 was just the change to daylight-savings time, which is a routine change only affecting timings in Saskatchewan, but Corridor timetables were reduced to 50% effective March 17 and then to two-trains-per-day on March 23 and finally to the one-train-per-day schedule in effect since March 31), which meant that we had to spew out a new timetable every week, which was an unprecedented experience to everyone involved. In any case, as per our newest travel advisory, we are going to restore the second train per day at least between Toronto and Ottawa or Montreal (and also the return of the Skeena has been announced for July):
I will try to respond to some of the other points you've raised, but thank you for reacting calmly and patiently to my impulsive response. I won't deny that I still disagree with you on many counts, but at least your explanations make you now sound a lot less tone death to me...
Edit (2020-09-26): included links to variable cost and revenue data (at beginning of post), to make more apparent that these figures are public...
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littlewill1166
Active Member
I'm really glad we got that cleared up. I think I did address the evacuation issue in my earlier posts and how it might be difficult to facilitate an evacuation if all the crew are sitting in car 3 together. Admittedly, I probably shouldn't have said "waste of taxpayer money". Also, I'm a bit younger, and less finished my degree than you think. ?First of all, I'm relieved to see that you interpreted this characterization less of a personal attack than the forum staff did. I didn't want to insult you, but I did want to express my shock, disbelief and speechlessness about your words. If I had the chance to change one thing I wrote in the (now deleted) post I wrote, I would have written "that all that taxpayer money wasn't spent on someone who could have made better use of this education" than "who actually deserved this education", as I don't want to judge the quality of academic work which has entitled you to your degree.
I have no problem imagining that you will fit into your industry, but for someone who went into the intercity passenger rail industry (not that there is much of such an industry in Canada) to help the society and the environment by providing the citizens in this country with better and more sustainable transportation options, this kind of perspective onto one's professional path is very foreign to me - especially at such an early stage in both life and your professional career (I guess you are around 23 years old and graduating with a Bachelor's degree this year, ready to leverage the work experience you've gained during internships, whereas I'm 31 years old, have a one-and-a-half year old son and I believe that my Master's Thesis has already been circulated in this thread). Nevertheless, I don't want to place my CV and life choices over yours', but I would be curious to know how what (and how) you are going to answer when your own child starts asking you what you do for work and why you chose that work (to be sure: my own son is not yet able to ask me that - or any - question!
I explained to you back then and I will explain it again that the staff is required for assisting passengers to board and detrain the train and to aid the evacuation. I don't know how GO Transit would manage to safely evacuate more than 2000 passengers with only one member of staff (ignoring the Locomotive Engineers), but I am happy that we have at least a Service Manager and usually also a few other On-Train Staff members, which are definitely "contributing to the safe operation of the train".
These are actually concerns we share each other, I'm highly critically of how the respective governments seemingly sat on their hands when first Orleans Express and then Greyhound deserted the Corridor rather than providing extra funding and ensuring that the bus and train timetables would complement each other (rather than overlapping). I believe that the decision to suspend the Canadian and Ocean was basically forced by NB and BC closing their respective borders, but I was surprised to not see any remote service operating between Capreol and at least Sioux Lookout (if not: Winnipeg)...
I don't know if you've worn a face mask yet, but it turned my shopping trips at the local craft beer store and grocer into a demanding physical activity. I suspect that wearing a N95 mask really was an overkill, but I wasn't able to wear it for more than 3 continuous minutes and can't imagine having to work in one...
Concerning the suspension of services, it usually takes more than a month to implement a timetable change and we've seen four different changes within 23 days (March 8 was just the change to daylight-savings time, which is a routine change only affecting timings in Saskatchewan, but Corridor timetables were reduced to 50% effective March 17 and then to two-trains-per-day on March 23 and finally to the one-train-per-day schedule in effect since March 31), which meant that we had to spew out a new timetable every week, which was an unprecedented experience to everyone involved. In any case, as per our newest travel advisory, we are going to restore the second train per day at least between Toronto and Ottawa or Montreal (and also the return of the Skeena has been announced for July):
View attachment 247296
I will try to respond to some of the other points you've raised, but thank you for reacting calmly and patiently to my impulsive response. I won't deny that I still disagree with you on many counts, but at least your explanations make you now sound a lot less tone death to me...
kEiThZ
Superstar
And nobody should be surprised by this. Keep in mind they are only now completing the $70M business case that includes a full EA. Prior to that, they had been given $3M for a study. No institutional investor is going to bet several billion a back of the envelope calculation, which is what a $3M study amounts to on a $4-6B ask.
Indeed, institutional investors have a long history of coming to the table after the shovels are in the ground. Or even letting governments build the infrastructure and buying it out after.
Will reiterate though, something can be profitable but not profitable enough for an institutional investor who needs a rate of return higher than inflation and preferably higher than the fixed income market over the long run. Anything less and they might as buy bonds. But that is, thankfully, not how government works.
"Past performance is not indicative of future results."
I would think someone getting into finance would have this phrase imprinted on their mind. I trade a good bit too. I would never assume that good or poor past performance is going to predict performance after a wholesale change in the business model.
kEiThZ
Superstar
I would add that this is all a shell game to keep deficits low enough to be politically acceptable. Governments want to build $100B worth of infrastructure but can only budget $50B over 10 years, without incurring a larger deficit. So they offer to sell the infrastructure to investors to free up capital to finish the other $50B in investments. And given number of institutional investors in Canada, this is looking more like a backdoor way to build pension fund balance sheets than infrastructure.
I was excited when the CIB was first announced. But the more I read into it, the more dismayed I am. They've utterly failed at delivering on new infrastructure plans. They've failed at getting new capital to the table. I'm really starting to wonder what value these bankers bring. And that's aside from seeing why paying Bay Street 5% is a good idea when the government can borrow at 0.5%.
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littlewill1166
Active Member
A project with a payback period that extends beyond the life of certain assets contained within as calculated (Locomotives) by Urban Sky, is a project that will not be profitable within its lifetime. I'm not saying that HFR shouldn't be built. I'm saying that VIA should sell HFR as a project to stimulate the economy, and improve connections. Finally for my analysis, I was assuming a status quo senario as HFR still hasn't been approved, yet the base replacement fleet for the current corridor trains has. Without significant changes VIA will continue to be a political football that gets kicked around.
Also, past performance is an indicator of future results in certain circumstances. Otherwise, technical analysis and order flow analysis wouldn't work.
kEiThZ
Superstar
You mean astrology for stock pickers? Yeah. I do ichimoku too. That applies to day trading. It doesn't apply to investing. Berkshire Hathaway isn't investing billions based on crayon lines on a chart. And this is why no day trader is really going to beat Warren Buffett on a long enough timeline.
And none of this applies at all to assessing multi-decade infrastructure projects. If it did, you wouldn't need MBAs at all. Just extend the lines from what an accountant gave you. No in-depth business case needed.
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kEiThZ
Superstar
Public sector employee didn't personally drop everything they were doing and risk their lives to tend to my immediate needs? All government sucks and is so inefficient!
Meh. He sounds like a cocky kid who had a few good options trades and thinks he's king shit because of it. If you know any bankers, this isn't new. It's funny and cute. He needs a few big losses to have humility cure that hubris. It'll come in due course.
I've got buddies who are investment bankers. They cringe at this kind of talk. And cringe harder when I remind them that they were similarly douchey once.
Now, let's get back to talking about trains....