Analysis

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Financial performance

The financial performance of the Canadian passenger bus and urban transit companies, in terms of total revenue, continued its upward trend in 2008. During the year, total revenue rose to $11.4 billion, up 11.1% from 2007. Gains were realized in all industries with the other transit and ground passenger industry leading the pack at 20.9%.

Overall, the annual growth rate in total expenses lagged behind total revenue in 2008. Total expenses for all the industries rose 9.9% to $9.0 billion. As a result of the strong growth in total revenue over total expenses, net income climbed 16.0% to $2.4 billion. The higher gain in net income was attributed mainly to three industries: urban transit, school and employee bus as well as charter bus and sightseeing (Table 1).

The urban transit industry continued to be the dominant industry in 2008, representing 71.5% of the total revenue of all the industries. For 2008, total revenue for the urban transit industry rose 11.9%, to $8.1 billion. Of this total, 61.9% came from operating and capital subsidies. The school and employee bus industry followed at a distant second, with 15.3% of the total revenue.

The overall increase in total revenue for the urban transit industry was attributed to a number of factors. These included increases in both operating and capital subsidies from various levels of government, a rise in the number of companies, increased ridership, and increased costs of tickets and transit passes. Of these factors, operating and capital funding from federal, provincial/territorial and municipal governments had the largest impact on total revenue. Despite its heavy reliance on these subsidies, the industry continued to show strength in 2008 as revenues from its transit operations (composed of urban transit, commuter and services for persons with disabilities and seniors) rose 8.6% to $2.9 billion.

Human resource expenses continued to be the main expense incurred, representing 61.2% of total operating expenses in 2008. However, this figure varied between the industries. For example, wages, salaries and benefits in the urban transit industry accounted for 67.2% of its total operating expenses, whereas in the charter bus and sightseeing industry, these expense items covered only 42.2%. Explanations for the variation may be due to the incorporation of different operating procedures, the degree of unionization and varying compensation levels. A breakdown of the major types of expenses incurred by the industries is provided in Chart 1 below.

Companies offering urban transit services accounted for about 45.9% of the operating revenues (excluding operating subsidies) in 2008. This was followed by companies offering school bus transportation services at 15.7%.

In terms of passengers carried, urban transit service operators carried over 1.8 billion passengers in 2008, a 5.8% increase from 2007.

Capital investment

The Canadian passenger bus and urban transit industries continued to make capital-related investments in 2008 in an effort to acquire and/or upgrade their physical assets. For the year, the industries spent more than $2.9 billion on the purchase of buses and other rolling stock and other capital related expenditures, up 18.2% over 2007 levels. The distribution of the investments between the two asset types was fairly close, with fleet purchases having a slight edge at 50.4%.

The urban transit industry accounted for 94.7% of total capital expenditures (see Table 3), propelled largely by capital funding from the various levels of government. This industry spent about $1.3 billion on the acquisition of urban transit buses and other rolling stock while the school bus industry invested just over $70 million. The interurban and rural bus industry spent the least amount on the acquisition of buses and other rolling stock.

Employment

Employment, based on the number of full-time equivalents, increased 7.6% in 2008 to 99,636 (see Table 4). More than half (52.4%) of the total employees were employed in the urban transit industry. With the exception of the interurban and rural bus industry, which fell 4.4%, employment in all other bus industries increased in 2008.

From a compensation perspective, total compensation rose 9.2% to $5.3 billion in 2008. As a result of the increase in compensation, the average expenditure per employee rose to $53,140, up 1.4% from 2007, although there were variations within the industries. For example, the average expenditure per employee in the urban transit industry was over $73,000, compared with about $24,000 in the school and employee bus industry.

The fleet

The number of revenue equipment operated, edged up 2.4% to 63,879 in 2008. About 57.5% of the fleet belonged to the school and employee bus industry, with the urban transit industry following at a distant second with about 29%. Table 5 shows the distribution of fleet by vehicle type. The figure reported is less than the number of buses registered in Canada, since it includes buses that are used to generate revenue, and excludes buses that are owned by private organizations or companies that use the vehicles to transport people and goods for private purposes (e.g. churches).

Fuel used for rolling stock

The bus industries consumed varying amounts of fuel in 2008 in order to power their fleet. Diesel fuel continued to be the primary fuel source consumed, rising 7.9% to 937.6 million litres (see Table 6). More than half of the fuel was used by the urban transit industry, which saw its consumption increase by 4.3% to 509.9 million litres. For the year, the school and employee bus industry consumed 262.4 million litres of diesel in 2008, a 15.9% increase from its 2007 level.

Revenues and expenditures by province and by geographic region

In addition to the revenue and expenditure findings at the national level, revenue and expenditures can also be observed at provincial/territorial and geographic region levels. Tables 7, 8 and 9 present information on the province and geographic region where the companies generated operating revenues and made expenditures. Non-operating expenses and revenues are not allocated on a geographic basis but are shown for Canada as a total. The urban transit industry generated more revenue than the other industries combined (Table 7). Ontario continued to dominate in both categories, with 43.3% and 35.9% of total operating revenues, respectively. This was followed by Quebec, with 25.9% and 25.1%, respectively. Both provinces also saw year-over-year operating revenue increases surrounding the urban transit industries, with Ontario rising 8.6% to $2.5 billion and Quebec rising 8.5% to $1.5 billion in 2008.

Table 8 presents operating revenue information by activity and by region. Over 31% of the operating revenue in the regions was generated from urban transit services. Ontario accounted for 48.3% of the operating revenues from urban transit services in 2008, followed by Quebec at 23.1%. These two regions accounted for the majority of the $3.0 billion in other operating revenues and operating subsidies, with Ontario comprising 37.4% and Quebec with 27.8%. School bus services also accounted for a sizeable portion of the operating revenue within each of the regions, typically ranking as the third largest revenue source. The only exception was British Columbia which saw a stronger reliance on revenues from scheduled intercity, motor coach charter services and local sightseeing services over school bus services.

Human resource expenditures, which constituted over 60% of total operating expenditures, rose in every region (Table 9). However, there were variations across the regions. The Atlantic region saw the largest increase in human resource expenditures at 22.9%, followed by the Prairies and British Columbia at 19.1% and 10.5%, respectively. Both Quebec and Ontario regions grew below the national average of 9.2%.

Maintenance cost by vehicle type

Maintenance expenses rose to $638.9 million in 2008, an increase of 15.0% from 2007 (Table 9). From a geographic region perspective, maintenance expenses rose in all regions.

Vehicle maintenance expenditures can be examined by observing costs on a per kilometre basis for the three main bus types – motor coaches, school buses and urban transit buses. Within each of these three bus types, there are different vehicle lengths, model types and passenger capacities. However, the data presented in Table 10 represent an aggregate average regardless of model variations. Maintenance costs include parts, shop supplies, tires, and tubes. Direct labour costs are excluded from the maintenance cost figure, although labour costs stemming from repairs by third parties are included.

Maintenance costs per kilometre rose from $0.26 in 2007 to $0.33 in 2008 for motor coaches, increased to $0.17 from $0.14 in 2007 for school buses and rose to $0.32 from $0.30 for urban transit buses. Over the five year period from 2004 to 2008, maintenance costs per kilometre for school buses and urban transit buses have remained relatively stable. For school buses, costs per kilometre have risen by only a cent, while increasing eight cents for motor coaches and remaining unchanged for urban transit buses.