VIA Rail

[littlewill1166]

No. I'm just allergic to non-factual pessimism and attempts to pass it off as "analysis". I stick what I know about HFR and I wouldn't presume to know the overall business case with any certainty till that $70M study tells us something. You on the other hand, have spreadsheeted a few quick numbers for one segment and decided that the whole business case for HFR is likely flawed. You're just waiting for confirmation.... Now, in the interest of helping along your maturity. How exactly do you think your business career would go if you were this superficial and dismissive in your analysis?

For the... I've lost count how many times. My analysis was of the current corridor fleet replacement and has nothing to do with HFR. My position on HFR is separate from my analysis on post 6850. My post on 6850 related to the mix of business to economy cars that VIA is procuring to replace its current fleet, along with its financial, social, and political consequences under a status quo scenario.

I never said that the business case was flawed, I said that at the end of the day it's public transportation, and the majority of the value from it will be derived from its social, economic, and environmental benefits as presented in the EcoRail study and numerous studies before it. I also said and agree with you that we need the full business case to know whether the project will be profitable. Separate from my analysis on post 6850, previous studies of high-speed rail on the corridor have determined that the value of the economic/social impact rail has far exceeds the profit generated by the operator. From this, it was my opinion that VIA should sell this project based on its economic/social merits and not its profitability. To an extent, this is happening. VIA's HFR page focuses on the economic/social benefits for passengers and makes no mention of the project's profitability. Additionally, WSP Canada a consultant contracted by VIA to study HFR says: "The project could reduce VIA’s reliance on government funding in the [Quebec City to Toronto] corridor, particularly if HFR is implemented only in [the] Toronto-Ottawa-Montreal portion". Note, that there is no mention of profitability. Given VIA's hesitancy to promote the profitability of HFR, I believe that any profit generated from the project if any would be minuscule compared to the economic/social impacts it would have. I stand by my position that VIA should be selling this project based on its economic/social merit over its profitability. The people in charge, otherwise known as the consultants working on the project, along with VIA itself seemingly agree with me based on their actions.

 

[kEiThZ]

My post on 6850 related to the mix of business to economy cars that VIA is procuring to replace its current fleet, along with its financial, social, and political consequences under a status quo scenario.

An "analysis" that didn't at all take into account how/if markets are changing or what changing prices would do to business pax demand. And this has been explained before. Business demand for VIA is growing. A lot of corporate travel policies, including most notably for the federal government itself, allow VIA 1, in lieu of airfare. VIA knows this and is adjusting their fleet mix to cater to growing demand. Not surprising that infrequent student travelers don't' get this.

Additionally, WSP Canada a consultant contracted by VIA to study HFR says: "The project could reduce VIA’s reliance on government funding in the [Quebec City to Toronto] corridor, particularly if HFR is implemented only in [the] Toronto-Ottawa-Montreal portion". Note, that there is no mention of profitability.

How exactly are subsidies for the entire corridor reduced if the HFR portions aren't net profitable? If HFR still incurs a loss per passenger, the massive increase in capacity will see losses increases.

Given VIA's hesitancy to promote the profitability of HFR

This is the kind of assumptions that I was talking about.....

 

[Allandale25]

After reading all of this, can I just say that I don't really care if HFR is profitable or not? I mean, I don't want it to see such huge losses that it makes the government less likely to invest in it and it would be great if it at least broke even and if it does better, great. There are other benefits to HFR than just the scale of its profit.

 

[kEiThZ]

Why not have thru trains? I Kingston really big enough to do this?

The may well end up with thru trains. My assumption is that they wouldn't want this to remove the cascading delays that happen along the Lakeshore corridor due to freight traffic. They could also make thru trains and leave enough of a schedule buffer at Kingston for same train service negating the need to transfer.

Kingston is big enough to support something like this. Especially when you consider all the other communities en route. Also have to keep in mind that the trains would be far smaller. The Siemens Extra-Short configuration is three cars and 176 seats and Short configuration is four cars and 242 seats. These are perfect for originating in Kingston. What this service would do is better support ex-urban commuting. Not just out of Kingston, but especially out of Belleville, Trenton, Coburg and Port Hope. There's probably just as much or more traffic on Kingston-Ottawa. Especially taking into account Brockville and Smiths Falls. The only stretch that I am more skeptical about is Kingston-Montreal. I could see a substantial cut in trains along this stretch, since Coteau and Dorval would both be served by HFR and Gananoque and Brockville would be served by the Kingston-Ottawa train. I could see Cornwall down to 4 trains per day (2 morning and 2 evening).

 

[kEiThZ]

After reading all of this, can I just say that I don't really care if HFR is profitable or not? I mean, I don't want it to see such huge losses that it makes the government less likely to invest in it and it would be great if it at least broke even and if it does better, great. There are other benefits to HFR than just the scale of its profit.

No government is going to invest to create a massive liability. You can say that you don't care if it's profitable or not, but I assure you that the folks who have to put in the billions in capital to build this do care. They don't want to see VIA become a billion dollar annual sinkhole. Nor should you want that because cuts would follow.

 

[Bureaucromancer]

With regard to a Kingston hub, also bear in mind that the current number of trains can be used to create a pretty good approximation of a clockface schedule if thru-running and end to end demand doesn't need to be accommodated. I do agree that the Montreal leg is the weak link here, but my best guess is that the operating hours that now amount to 11 trains to Toronto (yes, I'm ignoring whatever the actual savings with the coupled departures is) with 6 and 5 to Ottawa and Montreal will be used to run something pretty close to hourly west of Kingston and two hourly to Ottawa. Honestly, even a reduction on Montreal may not be so terrible... Three round trips a day isn't HFR level, but would more than meet immediate local demand east of Kingston.

 

[Allandale25]

No government is going to invest to create a massive liability. You can say that you don't care if it's profitable or not, but I assure you that the folks who have to put in the billions in capital to build this do care. They don't want to see VIA become a billion dollar annual sinkhole. Nor should you want that because cuts would follow.

That's why I included the word "huge". Of course it shouldn't become a massive liability. At the time time, I haven't seen anyone define how much "profit" they would want HFR to achieve.

 

[kEiThZ]

With regard to a Kingston hub, also bear in mind that the current number of trains can be used to create a pretty good approximation of a clockface schedule if thru-running and end to end demand doesn't need to be accommodated. I do agree that the Montreal leg is the weak link here, but my best guess is that the operating hours that now amount to 11 trains to Toronto (yes, I'm ignoring whatever the actual savings with the coupled departures is) with 6 and 5 to Ottawa and Montreal will be used to run something pretty close to hourly west of Kingston and two hourly to Ottawa. Honestly, even a reduction on Montreal may not be so terrible... Three round trips a day isn't HFR level, but would more than meet immediate local demand east of Kingston.

There's no way they get 11 trains a day to Toronto. Keep in mind that all traffic between Toronto, Ottawa and Montreal moves over to the HFR corridor when that happens. Lakeshore service has to survive entirely around local traffic. If I had to guess, it would be something like 6-8 departures for Toronto, 4-6 departures for Ottawa and 4 departures for Montreal, with the schedule entirely focused around timings that enable day trips to Toronto, Ottawa and Montreal for Lakeshore residents (not just Kingston, this needs to be emphasized). And this level of service would be perfectly fine. It's absolutely ridiculous to begin with that service to these communities is effectively holding better service for the 11 million residents in the Toronto, Ottawa and Montreal metro areas hostage. You wouldn't see this in any other developed economy.

That's why I included the word "huge". Of course it shouldn't become a massive liability. At the time time, I haven't seen anyone define how much "profit" they would want HFR to achieve.

The baseline would be no more subsidies than today. But given the massive increase in seats that HFR would bring, the math quickly leads to a binary situation where losses grow or this thing is profitable enough to pay for the whole Corridor or even all of VIA. Hence why they've talked so much about stealing marketshare from driving. This has to happen for HFR to be successful. And I would argue that stealing from air on certain segments (Toronto-Ottawa, Montreal-Quebec City) is a big part of it too.

 

[micheal_can]

After reading all of this, can I just say that I don't really care if HFR is profitable or not? I mean, I don't want it to see such huge losses that it makes the government less likely to invest in it and it would be great if it at least broke even and if it does better, great. There are other benefits to HFR than just the scale of its profit.

Interestingly, it would add more places on Via's timetable. That alone is a good thing.

The may well end up with thru trains. My assumption is that they wouldn't want this to remove the cascading delays that happen along the Lakeshore corridor due to freight traffic. They could also make thru trains and leave enough of a schedule buffer at Kingston for same train service negating the need to transfer.

Kingston is big enough to support something like this. Especially when you consider all the other communities en route. Also have to keep in mind that the trains would be far smaller. The Siemens Extra-Short configuration is three cars and 176 seats and Short configuration is four cars and 242 seats. These are perfect for originating in Kingston. What this service would do is better support ex-urban commuting. Not just out of Kingston, but especially out of Belleville, Trenton, Coburg and Port Hope. There's probably just as much or more traffic on Kingston-Ottawa. Especially taking into account Brockville and Smiths Falls. The only stretch that I am more skeptical about is Kingston-Montreal. I could see a substantial cut in trains along this stretch, since Coteau and Dorval would both be served by HFR and Gananoque and Brockville would be served by the Kingston-Ottawa train. I could see Cornwall down to 4 trains per day (2 morning and 2 evening).

Having a dwell time in Kingston to alleviate potential delays would be a good thing. This would make it seem like each leg is on time.

No government is going to invest to create a massive liability. You can say that you don't care if it's profitable or not, but I assure you that the folks who have to put in the billions in capital to build this do care. They don't want to see VIA become a billion dollar annual sinkhole. Nor should you want that because cuts would follow.

Public transit is a giant sinkhole. Via is a public transit operator. No, it should not be massively in debt, but, it should also not be so expensive that it leaves out much of the population's ability to pay for a ride.

 

[micheal_can]

Is HFR going to cause the amount Via receives in government subsidy to go down, or just be reallocated within Via itself?

 

[kEiThZ]

Public transit is a giant sinkhole.

Not a sinkhole on the federal balance sheet. Elsewhere, the feds limit liability to them by providing some fixed funding (gas tax funds) or only contributing capital investments in transit.

And VIA is very specifically managed to stay with an allocated subsidy. There's no evidence at all that the feds are willing to grow that amount.

No, it should not be massively in debt, but, it should also not be so expensive that it leaves out much of the population's ability to pay for a ride.

These are two opposing goals that cannot be reconciled without massive investment by governments. If you want VIA to have affordability like transit, governments will have to subsidize it to the level that they do public transit. Where's that money coming from?

Is HFR going to cause the amount Via receives in government subsidy to go down, or just be reallocated within Via itself?

Nobody knows. But if I had to guess, the feds are probably hoping that HFR reduces the amount going to VIA annually. I don't see any evidence that HFR is a prelude to massive service expansion elsewhere.

My personal hope is that HFR on the TOMQ corridor is profitable enough to compel investment in a second phase from Toronto to Windsor via Kitchener and London. And hopefully a look at Calgary-Edmonton beyond that.

 

[crs1026]

That's why I included the word "huge". Of course it shouldn't become a massive liability. At the time time, I haven't seen anyone define how much "profit" they would want HFR to achieve.

I’m not sure it really matters if HFR is “profitable” in the sense of being able to sustain a standard commercial IPO to the satisfaction of Bay St analysts and commentators ( If that were achievable, the project would already have happened ).

All that matters is a) the government is able to say that private capital, and not taxpayer capital, is being used and b) net revenue has to be sufficiently positive in any manner that shuts down any serious opposition ability to portray the project as a boondoggle or the subsidy as “massive”. Some accounting leeway might be allowable so long as government is not perceived as egregiously cooking the books. Government support might be innocuous if amounts were smaller and it was delivered in a less visible manner.

Rightly or wrongly, the politics in this country do not allow the federal government to build better trains based on a belief in their benefit to common good..... the public is just too apathetic on the issue. Most of us in this forum likely believe the benefits are there, but we are preaching to the choir. So we are forced into a charade involving a fictional Infrastructure Bank, a bunch of business case analyses that diverge from an IPO format, etc etc. We in the choir may feel the lyrics need work, but this may be the way to achieve that, warts and all.

- Paul

 

[crs1026]

Nobody knows. But if I had to guess, the feds are probably hoping that HFR reduces the amount going to VIA annually. I don't see any evidence that HFR is a prelude to massive service expansion elsewhere.

My personal hope is that HFR on the TOMQ corridor is profitable enough to compel investment in a second phase from Toronto to Windsor via Kitchener and London. And hopefully a look at Calgary-Edmonton beyond that.

VIA’s HFR fact sheet (don’t have handy or I could cite the link) has words to the effect of “without subsidy”. I take that as code for “Will bring an end to subsidy on this route” which I am sure is there not for the IB’s satisfaction as much as for the bureaucrats and pundits and competing modes. The only scenario that I can imagine is that VIA’s annual envelope would be reduced as HFR opens. That’s part of why I am grinding the Kingston thing so much....whatever service is contemplated for that route post-HFR must also be break-even. Otherwise, the bureaucrats will swoop in and kill it.

One wonders if Ottawa and Ontario are both waiting for the other to pick up the cheque....I can see Ottawa declaring that the limit of its support extends to HFR 1.0 only, and any support for regional service west or east of Toronto is Ontario’s problem.

- Paul

 

[kEiThZ]

I can see Ottawa declaring that the limit of its support extends to HFR 1.0 only, and any support for regional service west or east of Toronto is Ontario’s problem.

I have read before (don't recall where) that there was interest in going west of Toronto after HFR 1.0. And I could see it happen. They could probably give the HFR treatment to the northern mainline with GO's developments, for a reasonable cost and get hourly train service to London with a <2.5 hr travel time on every train. That would capture the bulk of Corridor riders. And simply run every second train beyond London to Windsor or Sarnia.

All depends on how much such a plan costs and how well HFR does out of the gate. If ridership growth shows promised return and HFR to London comes for a billion or two, I could see the feds ponying up. There's enough votes to make that worthwhile. There's also the possibility that something happens at Pearson with its hub making a rail connection to Southern Ontario more valuable. But all this requires the confidence of a strong result from the HFR 1.0. If this turns out like UPE, no government will be investing in intercity rail for the rest of our lifetimes.

 

[littlewill1166]

An "analysis" that didn't at all take into account how/if markets are changing or what changing prices would do to business pax demand. And this has been explained before. Business demand for VIA is growing. A lot of corporate travel policies, including most notably for the federal government itself, allow VIA 1, in lieu of airfare. VIA knows this and is adjusting their fleet mix to cater to growing demand. Not surprising that infrequent student travelers don't' get this.

That's why I said, "ceteris paribus" in my analysis. It is the economic term for "all other things being equal". These policies have already existed for many years, and have not changed the Business to Economy passenger ratio over time within the Montreal-Quebec City corridor. And I'm going to remind you here one more time that the current order is meant for a status quo replacement of VIA's current corridor fleet. It is not meant for HFR, which could change VIA's business model. Rather, I've spoken to one of my friends who did an internship at VIA and I was told that it was in preparation for complimentary upgrades for frequent travellers through VIA Preference with the new reservation system. Under this situation, the increase in Business space becomes more socially palatable. I'm actually excited about this since I travel over 100 segments with VIA annually, contrary to yet another false personal assumption that you have made about me (which you should really stop doing). While it generates positive sentiment from VIA's riders, I'm not sure that the same can be said among the general public. I wrote that analysis because I cared about the future of VIA and was concerned about the direction it was headed towards. The analysis was derived from a report I did for an economics class which my prof found quite intriguing, and I got a very good mark on. At the end of the day, that's what really matters.

How exactly are subsidies for the entire corridor reduced if the HFR portions aren't net profitable? If HFR still incurs a loss per passenger, the massive increase in capacity will see losses increases.

Profit = Fixed Costs - Contribution Margin

Contribution Margin = Variable Revenues - Variable Expenses

The contribution margin can increase while profit is still negative. The current corridor has a positive contribution margin. However, it can not cover the fixed costs attributable to it. These things include Urban Sky's Salary, the salaries of his colleagues in the HQ/Operations Center, VIA's advertising budget, the cost of having maintenance available to maintain trains (but not the maintenance itself), etc. The fixed costs are allocated to each of VIA's divisions. Fixed costs aren't necessarily fixed, they are just costs that can't be directly attributable to the operation of each individual train from an accounting standpoint. For example, if VIA hypothetically ceased its Corridor services, it would likely stop advertising it's corridor services reducing overall fixed costs.

HFR could see an increase in contribution margin relative to fixed costs that does not exceed it. This results in a lower net loss, and thus a lower subsidy. But it does not yield a net profit. In essence, HFR is an investment for VIA to lose less money on its corridor services over the long term. It is not necessarily one for VIA to generate a net profit. Based on what's happened with UPX and the Scarborough subway extension, I am very skeptical of its actual profitability.

I've said this a couple of times before on this forum and I'll say it again. A better investment for VIA right now would be a revamp of its reservation system with improved revenue management and passenger management tools. It will also allow for more flexible pricing of tickets. It's been promised for several years, and whenever I mention it to the station staff in London, they joke about how VIA promised high-speed rail in the 80s. Based on VIA's performance on such a simple project relative to HFR by VIA's management, I continue to be skeptical of HFR.

This is the kind of assumptions that I was talking about.....

If you're going to quote me then you should include the full quote. The EcoTrains study shows that the incremental economic, public safety, social, and environmental value of that project far exceeds the incremental benefit to the rail operator itself. The same is true for almost all public passenger rail projects globally. If you want to bet $10,000 on that scenario miraculously reversing for HFR, I'd happily take your money.

1) Will the travel time Montreal-Ottawa-Toronto match, or improve on today’s travel time Toronto- Kingston - Montreal ? If not, why would we project double today’s ridership?

In case you haven't had a chance to look at the travel times yet, they are available here: https://www.theglobeandmail.com/bus...llenge-via-rails-business-case-for-extending/