10

STRUCTURE OF THE TRANSPORTATION INDUSTRY

Trucking Industry

Major Events in 2001

Motor Vehicle Transport Act Amendments

On June 14, 2001,Note 1 Parliament passed and received Royal Assent for amendments to the Motor Vehicle Transport Act. The amendments deal primarily with motor carrier (truck and bus) safety. They will enable the creation of a national safety and fitness compliance regime, based on the National Safety Code for Motor Carriers.

Provinces and territories are currently enacting the compliance regime at the provincial level. The amendments will come into force when the provincial regimes have achieved a reasonable level of uniformity, with the latter part of 2002 set as the target date for implementation.

Vehicle Weights and Dimensions

In August 2000, Ontario and Quebec announced an agreement to harmonize weight and dimension limits for specific vehicle types operating between the two provinces. The provisions of this agreement came into effect in early 2001. An agreement establishing uniform weight and dimension regulations in the four Atlantic Provinces -- New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador -- came into effect through legislative and/or regulatory amendments introduced in late 2001. Implementation of this agreement was accompanied by a transition plan for existing non-compliant vehicles that extends until December 2009. In mid-2001, Manitoba, Saskatchewan, Alberta and British Columbia completed consultations on an agreement to establish common permit conditions for movement of oversize and/or overweight loads.

Hours of Service Regulations

Both Canada and the United States are reviewing changes to the regulations governing hours of work for commercial vehicle drivers. The House of Commons Standing Committee on Transportation and Government Operations (SCOTGO) has been invited by the Minister of Transport to examine the issue of hours of service and to look at the proposed changes.

Structure of the Canadian Trucking Industry

The trucking industry is an important player in Canada's transportation system. It includes for-hire carriers, private carriers, owner-operators and courier firms, and it generates an estimated $47.8 billion in revenues in 2000. For-hire trucking firms alone account for more than 40 per cent of the Gross Domestic Product of the whole transportation sector. There are approximately 256,000 heavy trucksNote 2 registered in Canada. It has been estimated that, weekly, more than 600,000 truck trips take place on the nation's major highways.Note 3

There are a number of factors that can be used to differentiate trucking firms: the size of their fleet of trucks; the type of equipment they use; the geographic coverage of their operations; the type of services they offer; and the type of freight they carry.

Trucking operations can also be differentiated along jurisdictional lines. Intraprovincial trucking operations take place strictly within a province (or territory) and fall under provincial responsibility, while interprovincial activities are services offered from one province to another. International trucking services are offered from one province to another country.

Figure 10-2 shows the structure and revenues of the trucking industry.

For-hire trucking firms offer for compensation either truckload (TL) or less-than-truckload (LTL) services, or a mix of the two. For-hire trucking services can be further categorized according to the types of freight carried, such as general freight services, household goods services, liquid and dry bulk services, forest products services and specialized freight services.

Private trucking services are transportation services provided by a company that is transporting its own goods. Such private trucking activities are observed among retail distributors for consumer goods, chemical product producers, pulp and paper companies, beverage distributors, and wholesale distributors of agricultural products. A private fleet of trucks can be used not only for the carriage of a firm's own goods/products but also to haul goods for other firms if it has obtained all the proper operating authorities, which blurs the distinction between private and for-hire trucking activities.

Owner-operators are small independent operators who own or lease their own truck and haul trailers or other equipment for a carrier. Owner-operators can work directly for a shipper, for either private or for-hire carriers, and for one or more carriers. While some owner-operators are under long-term contracts to carriers, they also provide carriers with additional operational flexibility, which allows them to respond to peaks in demand for services.

Table 10-1 presents the number of owner-operators under contract by carrier type, as well as the revenues generated by their activities by province in 1999, the latest year for which such data is available. Just over one half of all owner-operators are based in either Ontario or Quebec.

Courier services include the delivery of all letters, envelopes, paks (plastic pouches designed to accommodate large documents or small parcels), boxes and cartons. In 2000, the courier industry generated total revenues of $4.7 billion (estimated) on average volumes of two million packages per day. The courier industry is made up of two major segments:

• overnight or later delivery, where shipments are delivered at least one day following the day they are picked up; and
• same-day messenger delivery, where shipments are delivered the same day they are picked up.

Alliances, Mergers and Acquisitions

A number of strategic alliances, mergers and acquisitions of motor carriers took place during 2001.

• Clarke Inc. acquired four small US-based freight management companies.
• Quebec-based TransForce Inc. acquired the majority of the assets of Daily Motor Freight Inc., thereby improving its position in the LTL sector in eastern Canada.
• Cabano/Kingsway Transport Inc. signed a strategic alliance with Ohio-based R&L Carriers that will enable Cabano Kingsway to expand its services and offer deliveries throughout the United States.
• A Canadian investment firm and senior executives of Highland Transport purchased the company, a subsidiary of Westminster Holdings. Highland has a fleet of 800 tractors and 1,200 vans providing truckload and container service in Ontario, Quebec, the Maritimes and the United States.

Bankruptcies

The number of bankruptcies in the trucking industry generally follows the pattern observed for the economy as a whole. As Figure 10-3 shows, the number of trucking bankruptcies dropped between 1991 and 1994, stabilized in 1995, then increased in 1996 and 1997. Following a decline in 1998, the number of bankruptcies has steadily increased in each of the last three years. In 2001, 932 bankruptcies were reported -- the highest number in the last ten years.

Bankruptcies and other forms of exit from the industry generally reflect market adjustments to changes in the level of demand. Truck bankruptcies are observed mainly among small one- or two-truck operations and companies involved with activities ancillary to trucking services. The trucking industry has total annual revenues estimated at $48 billion. The total asset value of the trucking companies that had to declare bankruptcy was approximately $100 million.

Table 10-2 shows annual trucking bankruptcies by region from 1990 to 2001.

Market Segment by Freight Transported

Table 10-3 compares the revenues of large for-hire trucking firms by the type of freight carried. General freight carriers dominate the for-hire sector, accounting for 64 per cent of for-hire revenues in 2000.

Market Segment by Revenues

Figure 10-4 presents the number of for-hire carriers earning annual revenues of $1 million or more between 1991 and 2000. Data for this period shows that the total number of for-hire carriers has increased steadily, though part of this increase is due to a new survey frame used by Statistics Canada since 1995 to conduct its trucking survey. The number of carriers in this category has almost doubled since 1991. The number of very large carriers, those with more than $25 million in revenues, has fluctuated between 55 and 80 over this period.

Table 10-4 shows total for-hire trucking revenues by size of carrier from 1991 to 2000, by revenue categories, including carriers that earn $25 million or more annually; $12 million to $25 million; $1 million to $12 million; and less than $1 million. Although total revenues have more than doubled since 1991, the proportion of revenues in each of the categories in 2000 has remained relatively stable.

Equipment Sales

The economic slowdown experienced in both Canada and the United States in 2001 has an impact on the number of new trucks purchased during the year. Sales of new Class 8 trucksNote 4 totalled 18,361 in 2001, 34 per cent fewer than in 2000 and 43 per cent fewer than the record sale level of 30,984 in 1999. Sales volumes were down in every province, with the largest decreases observed in British Columbia, Ontario and New Brunswick. Table 10-5 presents the number of Class 8 trucks sold by province from 1999 to 2001, while Figure 10-5 shows the number of Class 8 trucks sold across Canada from 1990 to 2001.

STRUCTURE OF THE TRANSPORTATION INDUSTRY

Rail Industry Structure

Trucking Industry

Bus Industry

Marine Transportation Industry

Air Transportation Industry

Appendix 10-1 Canadian Air Transport Security Authority (CATSA)
Appendix 10-2 Bill C-42:  The Public Safety Act

NOTES

1. 49-50 Elizabeth II, Chapter 13, Motor Vehicle Transport Act.

2. Trucks weighing over 10,000 kilograms.

3. Canadian Trucking Alliance.

4. Trucks with a gross vehicle weight exceeding 15,000 kilograms.