VIA Rail Canada can work as a private company

There is talk from Canadian Prime Minister Stephen Harper of selling VIA Rail Canada; turning the Crown Corporation into a private business.

What a great idea.

Mr. Harper, Canada’s 22nd Prime Minister, and leader of the Conservative Party (today’s version of the former Progressive Conservative Party of the times of Brian Mulroney and Kim Campbell in the 1980s and 90s), thinks other Canadian federal responsibilities may work better in private hands, too, such as Canada’s postal service and the mint.

At the end of the 1980s, when Mr. Mulroney was Prime Minister, the idea of VIA becoming privatized was studied and discussed.

I know, because I was there. I led the team doing the privatization study. Privatizing VIA is a viable option, but it can’t be done overnight. The same can be said of Amtrak here in the United States, but it always brings howls of protest and derision from liberals and socialists who love the idea of government being the only provider of surface transportation. These are people who have no faith in the merits of capitalism and entrepreneurship, nor faith in individuals knowing what is best for themselves versus what Big Brother wants them to do for the betterment of Big Brother.

VIA Rail Canada at the end of the 1990s was a stronger company than it is today, with more trains, more route miles, and more potential.

VIA was created and operated as a “subsidiary” of Canadian National Railroad, then itself a Crown Corporation. Today, CN is North America’s largest railroad, and one of the best run. It is also no longer a Crown Corporation; in the 1990s it became a private company, and once the power of capitalism was unleashed at CN, it took off like a rocket.

Today, CN reaches from Vancouver on Canada’s West Coast to Halifax on the East Coast, to New Orleans on America’s Gulf Coast.

Once CN became private, VIA Rail Canada stood more on its own, and still operates primarily over CN tracks. Canadian Pacific Railroad was eager to divest itself of passenger trains when VIA was formed, and delightedly shed its passenger responsibilities so it could concentrate on the freight business.

When Prime Minister Mulroney’s government drastically cut VIA funding in 1989, it signaled the end of the original route of CP’s flagship train, the Canadian, between Montreal/Toronto and Vancouver via Calgary.

VIA, knowing the importance of the brand name of the Canadian, simply dropped the Super Continental name of the flagship western transcontinental train of CN, and slapped the Canadian name on that route, shifting the CP’s better equipment to the more northern route via Jasper, Alberta.

Also since the 1989 cuts, VIA’s former Rocky Mountaineer was privatized by Vancouver Grey Line bus operator Peter Armstrong, who has turned that franchise into an ongoing gold mine with seasonal operation out of Vancouver eastward, including summer trains and Christmas season runs.

Alas, on the East Coast, the Montreal to Halifax service, The Atlantic, which operated over CP via Maine, went away when CP transferred much of that line to a short line operator. Today’s remaining eastern service train is The Ocean, which operates jointly with The Chaleur, on a northern CN route via Moncton, New Brunswick.

Today, VIA has done much with little. The company, which has often been labeled one of the worst run companies in Canada, has managed to maintain high levels of passenger service, used innovative marketing, and has spruced up some services where ridership has grown.

In the early 1990s, all of the former CP Budd-built passenger cars underwent extensive refurbishing at the former Pointe St. Charles shops in Quebec. The 1950s equipment was completely updated and made to look and run like new. Now, nearly 20 years later, this equipment is still in daily use.

Ten years later, VIA purchased unloved European passenger cars, brought them to Canada, dubbed them Renaissance equipment, and re-equipped The Ocean with new sleeping cars to great acclaim.

But, back to the basic question: How can VIA Rail Canada be privatized?

Not quickly. Our 1990 study indicated VIA could be privatized, but would need a declining federal subsidy of 11 years to reach full profitability, and all of its long distance trains would need – for economy of scale – to be converted to bi-level passenger equipment, modeled on Amtrak’s Superliners.

VIA also needs to shed much of its expensive corporate overhead, and act more like a short line railroad. Even though VIA’s operation are far-flung over a vast continent, the number of trains it operates are few, the number of maintenance bases it operates are few, and its overall number of operating employees is low. It’s the corporate overhead that’s the killer.

CP, recognizing the folly of keeping its headquarters on Montreal where CN and VIA are also headquartered, moved its headquarters to Calgary, Alberta, shedding many employees and much overhead in the process. With a fresh start in a new headquarters town in Canada’s west, CP was able to rebuild its corporate structure in a far more efficient manner. VIA needs to do the same thing; our recommendation 18 years ago was to move VIA headquarters to Edmonton, Alberta.

VIA operates a number of what we called social services; trains to remote parts of Canada which can only be reached by rail, general aviation, or dog sleds. Canada long ago realized the best way to keep these small cities and towns and hamlets connected to the rest of the country was by rail. Those services much be maintained, but should be maintained at government expense, and by a direct subsidy for those lines from the federal government to a privatized VIA.

This essay could go on for another 2,000 words about how the privatization of VIA could take place and what the many benefits would be to the Canadian public. Since the 1990 study, Peter Armstrong has vividly demonstrated through his private version of the Rocky Mountaineer service how private passenger service has been financially successful in Canada, especially when government regulation has stayed out of the way.

There is no law which dictates railroad passenger service must be run by government to be successful, both socially and financially.

Today’s private freight railroads are much stronger financially and have more enlightened management than the freight railroads of the 1970s, which were desperate for mere survival.

It’s time to take a serious look at private passenger rail, especially for VIA Rail Canada. The only thing which could be lost are the shackles of government ownership and control.