7 ROAD TRANSPORTATION

INDUSTRY STRUCTURE

TRUCKING INDUSTRY

Trucking plays a significant role in Canada’s economy. Goods shipped by truck range from raw materials to components to final products. For-hire carriers, private carriers, owner-operators and courier firms make up the industry. As a whole, the industry generated an estimated $67 billion in revenues in 2005. Trucking firms can be differentiated in a number of ways: the size of their fleet of trucks; the type of equipment they use; the geographic scope of their operations; the type of services they offer; and the type of freight they carry. They can also be differentiated by jurisdiction of operations. Carriers that provide interprovincial or international (extra-provincial) trucking services fall entirely within federal jurisdiction, while carriers that operate solely within a province fall within that province’s jurisdiction.

For-hire motor carriers are defined as those that haul freight for others for compensation. They offer either truckload (TL) or less-than-truckload (LTL) services, or a mix of the two. These carriers are further categorized according to the types of freight they carry, such as general freight, household goods, liquid and dry bulk, forest products and other specialized freight. In 2005, there were over 10,000 (approximate) for-hire motor carriers in Canada, compared with 9,900 in 2004.

In 2005, rankings by revenue of the 100 largest for-hire trucking operations¹ in the United States and Canada included six Canadian carriers: TransForce Income Fund (22nd), Montreal, Quebec; Trimac Transportation Services (43rd), Calgary, Alberta; Day and Ross Transportation group (50th), Hartland, New Brunswick; Vitran Corp (60th), Toronto, Ontario; Contrans Income Fund (73rd), Woodstock, Ontario; and Mullen Group Income Fund (95th), Aldersyde, Alberta.

In 2006, based on total number of fleets’ units (straight trucks, tractors and trailers), the top 10 for-hire trucking companies² in Canada were TransForce Income Fund (15,500 units); Contrans Income Fund (8,380 units); TransX, Winnipeg, Manitoba (4,860 units); SLH Transport, Kingston, Ontario (4,800 units); Challenger Motor Freight, Cambridge, Ontario (4,780 units); Day and Ross Transportation Group, Hartland, New Brunswick (4,186 units); Robert Transport/Groupe Robert, Boucherville, Quebec (3,810 units); Paul’s Hauling Group, Winnipeg, Manitoba (3,700 units); Trimac Transportation Services, Calgary, Alberta (3,600 units); and Canada Cartage Diversified Income Fund, Mississauga, Ontario (3,400 units).

The year 2006³ saw changes in the industry (acquisitions, strategic alliances and mergers of motor carriers). Canada’s largest for-hire trucking operation, TransForce Income Fund of Montreal, continued to acquire firms serving the energy sector in Western Canada, including Byers Transportation, an Edmontonbased LTL carrier; Howard Transportation, a specialized carrier based in Alberta; and Westfreight Systems involved in oilfield transportation services. Contrans Income Fund acquired the Saint John-based General Freight Carriers, a flatbed carrier, and Spectrum Transport, a Calgary-based dry bulk carrier. As for the Mullen Group Income Fund, it reported six acquisitions of over $1.2 billion in 2006: four were trucking operations involved in the energy sector (Spearing Service, Burnell Contractors, Canada Dewatering and the Brady Group) while the others were a flat deck carrier and a logistics carrier (Steen and Kleysen).

Owner-operators own and drive their own trucks and operate as small independent for-hire truckers hauling trailers for other carriers or directly for a shipper. By using owner-operators, trucking companies can expand or contract their capacity in response to changing market conditions. There were an estimated 36,000 owner-operators in Canada in 2005, compared with 35,200 in 2004.

Couriers and parcel-delivery firms are considered to be part of trucking activity because they operate trucks and provide some of the same services as for-hire carriers. However, there are relatively few trucks used in the courier industry — approximately 2,200 — as most companies use small cube vans, automobiles and even bicycles for deliveries. Operations include same-day messenger delivery and overnight or later delivery. In 2005, the courier industry generated an estimated $6.4 billion in total revenues, based on average volumes of 2.4 million packages per day. There are approximately 20,000 small courier companies that generate revenues less than $1 million annually. While accounting for 97 per cent of the total number of courier companies, these companies generate only 18 per cent of total courier revenues.

Private trucking is that part of the industry not covered by the for-hire segment. It includes companies that primarily haul their own freight but that occasionally haul goods for others for compensation. The value of these services is captured under some other, non-trucking part of the national accounts (e.g. farming or manufacturing) because these trucks are operated by someone working for an industry other than for-hire trucking. Most companies that haul their own products in trucks they own do not ordinarily record revenues for this operation. At $30.2 billion, the estimate for private trucking is better viewed as the operating costs of trucks for these companies. Caution should be exercised in using this estimated value. To estimate the value of private trucking in 2005, the percentage increases/decreases in the forhire sector since 1998 were applied to the value of private trucking as calculated in the January 1998 study Profile of Private Trucking in Canada.

Other includes that part of the industry using trucks for purposes other than hauling freight commercially. For example, a construction company uses trucks and trailers to transport heavy machinery between job sites. Municipal governments, which use trucks as platforms for specialized equipment such as a garbage packer, treetrimmer, crane or snowplow, run some of the largest fleets on the road.

In terms of annual business bankruptcies, the number of trucking bankruptcies has steadily decreased in last five years and in 2006 stood at 451, the lowest total since 1998. The number of trucking bankruptcies decreased 20 per cent in 2004, 14 per cent in 2005 and 11 per cent in 2006. These decreases are more pronounced than those observed for other sectors of the economy. Addendum Table A7-1 shows the number of trucking bankruptcies compared with the economy by region from 1990 to 2006.

In terms of revenues, general freight carriers continue to dominate the for-hire sector, accounting for almost 60 per cent of for-hire revenues in 2005. Specialized freight accounted for 17 per cent of total revenues. Table 7-2 compares the revenues of all for-hire trucking firms by the type of freight carried from 2000 to 2005.

Table 7-3 shows total for-hire trucking revenues by size of carrier from 2000 to 2005, as measured by four categories of earned annual revenues: less than $1 million, $1 million to $12 million, $12 million to $25 million, and $25 million or more. Since 1991, total revenues have tripled. Large carriers (earning between $12 million and $25 million), however, have seen the proportion of their revenues increase from 11 per cent in 1991 to 21 per cent in 2000 to almost 28 per cent in 2005. Addendum tables A7-2 and A7-3 show the same information over a longer time series.

Reported sales of Class 8⁴ trucks have fluctuated yearly. This has been driven by a number of factors, including the profitability of carriers, the demand for trucking services and carriers’ fleet replacement policies. Market conditions tend to drive increases or decreases in the demand for many trucking services. Swings in these market conditions tend to be exacerbated in the final demand for trucking services. Following the 2001 economic slowdown in both Canada and the United States, truck sales in Canada have increased steadily each year, reaching an all time record of 39,131 vehicles in 2006. Figure 7-1 shows the sales of Class 8 trucks from 1990 to 2006.

Note: Including motor for-hire carriers of freight earning annual revenues of $30,000 or more.

¹Small for-hire carriers estimated for 2005. Return

Sources: Transport Canada, based on Statistics Canada, Quarterly Motor Carriers of Freight Survey (QMCF) (2000-2005) and Annual Motor Carriers of Freight Survey (small for-hire carriers), Service Bulletin Cat. 50-002

Note: Including motor for-hire carriers of freight earning annual revenues of $30,000 or more.

¹all for-hire carriers estimated for 2005.Return

Sources: Transport Canada, based on Statistics Canada, Quarterly Motor Carriers of Freight Survey (QMCF) (2000-2005) and Annual Motor Carriers of Freight Survey (small for-hire carriers), Service Bulletin Cat. 50-002

FIGURE 7-1: SALES OF CLASS 8 TRUCKS IN CANADA, 1990 – 2006

Sources: Canadian Vehicle Manufacturers’ Association

BUS INDUSTRY

The Canadian bus industry provides a variety of services, and individual operators and corporate owners commonly provide services in several of the recognized categories.⁵ This makes it difficult to categorize the service provided the industry as a whole. For example, Laidlaw International Inc. is a major school bus operator while at the same time, as Greyhound, the largest provider of scheduled intercity service in Canada and the United States. Most bus operators in all categories offer some form of charter bus service.

Scheduled Intercity Service –– Intercity bus service links all Canadian provinces and territories except Nunavut. Greyhound (and its subsidiaries) is the largest operator in Canada and primarily operates in Ontario and the four western provinces. As noted, it is owned by Laidlaw. In Quebec and the Maritime Provinces, the major service provider is Groupe Orléans, which operates as Orléans Express in Quebec and Acadian in the Maritimes. There are also a number of smaller regional and local carriers, particularly in Quebec.

Charter, Tour, Shuttle and Other Commercial Services –– A wide range of other bus services is also available in Canada. Charter and tour operators primarily serve the discretionary travel market. One of the most common forms of shuttle busing is airport service. In addition, some commercial carriers provide contracting busing, that is, regular service to a particular group such as workplace travel paid for by the employer. Some of the larger companies provide all these services and others besides, the most prominent example being Pacific Western Transportation Ltd. Others concentrate on the charter/tour market, examples being Brewster Transportation & Tours, and Coach Canada. Pacific Western and Coach Canada also offer scheduled service in Alberta and Ontario, respectively.

School Service –– As the name implies, school bus carriers provide bus service to transport students to and from school. In some instances, the service is provided directly by the school administration, but most commonly in Canada, school bus service is contracted to private operators. Besides Laidlaw, the larger school bus operators include First Bus, Pacific Western and Stock Transportation. Most school bus operators also provide some charter service.

Urban Transit Service –– Transit service is available in over 90 cities, towns, regional municipalities and other urban entities in all Canadian provinces and two of the territories. Over 20 million Canadians, using buses, coaches, trolleys, street cars, light rail, heavy rail, and even vans and taxis, make use of these services each year. Some urban transit operators offer school bus and charter services and dedicated services to persons with disabilities.

BUS TRANSPORTATION

In Canada, approximately 1,500 bus operators move more than 1.5 billion passengers each year. In 2005, the Canadian bus industry generated an estimated⁶ $8.5 billion in total revenues, including government operating and capital contributions. This industry can be looked at either by segment (i.e. by main company activity as classified under NAICS) or by service lines (or service activities) performed.

Bus segments (NAICS) –– In 2005, urban transit was once again the largest segment, capturing almost 70 per cent of total industry revenues including government contributions (or 49 per cent of total revenues excluding government contributions). Operating and capital contributions from governments accounted for 56 per cent of urban transit operators’ total revenue. Urban transit operators are typically dedicated to transit operations, with only a fraction of their revenues coming from other service lines.

The school bus segment was the second largest segment, capturing around 25 per cent of total bus revenues (excluding government contributions). Intercity operators and charter/tour operators followed. Almost all those operators, regardless of their primary business, provided other service lines, demonstrating the varied nature of the industry.

Service Lines –– The industry sectors have been clouded over the past number of years due to industry diversification, mergers and acquisitions, and consolidated reporting. As a result, the “segment” approach is less reliable⁷ in evaluating the bus industry, while the “service line” approach gives a better indication of industry activity. Overall, the industry grew from $5.2 billion in 1995 to $8.5 billion in 2005, an average annual growth of five per cent. This growth, however, was unevenly distributed among service lines, averaging between nil growth for “other passenger revenues” and 5.9 per cent for “urban transit” services, followed by “charters, shuttle and sightseeing” services at 5.8 per cent.

A new bus survey that captured a larger number of companies⁸ indicates that service line revenues have been somewhat higher since 2001. Urban transit services (including urban transit operators and other operators offering transit services) carried an estimated 1,720 million passengers in 2005, 2.5 per cent more than in 2004. Transport Canada estimates that intercity services carried 16.0 million passengers in 2005, almost three per cent more than in 2004. Table 7-4 shows bus revenues by service lines from 1995 to 2005. Addendum Table A7-7 shows numbers of passengers carried by the bus industry from 1985 to 2005.

URBAN TRANSIT

In 2005, urban transit operators reported revenues of $6.0 billion, up 15 per cent from 2004. The main source of revenues was once again government contributions, at 56 per cent of the total, followed by urban transit services at 41 per cent. From 1995 to 2005, urban transit systems’ operating revenues grew at an average annual rate of 5.4 per cent. Government contributions, however, showed some fluctuations over the period, including a large increase in 2005. As a result, the government contribution’s share of total urban transit revenues reached 57 per cent in 2005; this is the same level as in 1995 after decreasing to a proportion of 53 – 54 per cent in early 2000. Addendum Table A7-4 shows revenue services offered by urban transit operators over the 1995 – 2005 period. Figure 7.2 illustrates revenue sources for urban transit operators in 2005.

¹ From 1995 to 2000: Including bus operators with annual revenues greater than $200,000; Starting 2001, a new 'Passenger bus and urban transit' survey was Initiated by Statistics Canada covering a greater number of bus companies (no threshold revenues). Return

² Preliminary data for 2004. Return

³ Estimated data by Transport Canada. Return

⁴ Including operating and capital government contributions for urban transit. Return

Sources: Transport Canada, adapted from Statistics Canada, Passenger bus and urban transit statistics, Cat. 53-215, and Statistics Canada, Service Bulletin, Cat. 50-002; special tabulation based on NAICS and Canadian Urban Transit Association (CUTA).

FIGURE 7-2: TOTAL REVENUES BY SOURCE – URBAN TRANSIT SECTOR, 2005

In the early 1990s, ridership levels on urban transit decreased, reaching a low of 1,353 million passengers in 1996. Since then, with the exception of a small decrease in 2001, ridership has increased steadily, peaking at 1,661 million passengers in 2005. This was the highest level in the last two decades. The distance travelled by urban transit vehicles followed a similar pattern. Vehiclekilometres jumped from a low of 716.4 million in 1996 to 943.6 million in 2005, an average annual increase of 2.3 per cent. For ridership and distance data over a longer period, see Table A7-5 in the Addendum. Figure 7-3 illustrates long-term trends in the urban transit sector from 1985 to 2005.

In terms of vehicles, the urban transit fleet increased at an average annual rate of almost two per cent from 1995 to 2005, from 13,140 to 15,580 units. The main change in the fleet composition over this period was the replacement of standard buses by more accessible, low-floor buses, which increased from 305 to 5,952 units. Low-floor motor buses, which represented three per cent of total standard motor buses used by transit authorities in 1995, accounted for 51 per cent of the total standard bus park in 2005. See Addendum Table A7-6 for details on urban transit fleet composition over the 1995 – 2005 period.

FIGURE 7-3: LONG-TERM TREND IN URBAN TRANSIT, 1985 – 2005

¹ Transport Topics, July 24, 2006. Return

² Motor Truck, January/February 2007 issue. Return

³ Press release and companies’ Web sites. Return

⁴ Class 8 includes trucks with a gross vehicle weight exceeding 15,000 kilograms. Return

⁵ The North American Industrial Classification System (NAICS) has been used in Canada since 1997. The bus industry is grouped under six headings: urban transit systems; interurban and rural bus transportation (scheduled intercity); school and employee bus transportation; charter bus industry; other ground passenger transportation (shuttle); and scenic/sightseeing transportation. Return

⁶ Estimates of the bus industry revenues by Transport Canada, as Statistics Canada passenger bus and urban transit survey results for 2005 were not released (under revision). Return

⁷ For example, from 1995 to 2000, the “segment” approach did not adequately measure the bus industry, as some scheduled intercity carriers were recorded under school bus operators due to consolidated financial reporting coming from mergers and acquisitions. This was one of many factors that triggered the redesign by Statistics Canada of a new passenger bus survey (implemented in 2001) to collect both industry and activity data. Return

⁸ From 1994 to 2000, the passenger bus and urban transit survey covered companies having annual gross revenues of $200,000 or more. Starting in 2001, however, the new passenger bus survey has covered all companies that have at least one bus establishment engaged in the provision of bus and urban transit services. Return

Major Events in 2006

Other Issues of Significance

Infrastructure

Industry Structure

Passenger Transportation

Freight Transportation

Trucking Freight Transportation

Price, Productivity and Financial Performance