Decision No. 46-W-1998

February 11, 1998

File No. W9125/H5/97-1

APPLICATION

Hydrofoil Lake Jet Lines Inc. (hereinafter Lake Jet Lines) has applied to the Minister of National Revenue for a licence to operate the services set out in the title. The matter was referred to the Canadian Transportation Agency (hereinafter the Agency) on September 2, 1997.

Lake Jet Lines proposes to use the 150-passenger hydrofoil Katran IV to operate a high-speed ferry service between Toronto, Jordan Harbour (near St. Catharines) and Queenston, Ontario, on the Niagara River. Lake Jet Lines also proposes to operate a service between Toronto, Ontario, and Rochester, New York. The Katran IV has a service speed of 32 knots and a maximum speed of 41 knots.

The Agency conducted a search of the relevant portion of the marine industry. Shaker Cruise Lines (hereinafter Shaker) of Toronto, Ontario, filed an objection to the application stating that in 1997 it introduced and operated a cross-lake ferry service between Toronto and Port Dalhousie and other ports on Western Lake Ontario with the 275-passenger "Lake Runner", which is a Canadian built, Canadian registered and Canadian owned vessel.

ISSUE

The issue to be addressed is whether or not the services operated by Shaker are identical or similar adequate marine services to the services proposed by Lake Jet Lines.

FACTS

Shaker introduced and operated a scheduled cross-lake ferry service in 1997 between Toronto and Port Dalhousie (bordering on St. Catharines) with the 275-passenger Lake Runner, a vessel of conventional design, operating at a speed of 20 knots. Shaker also provided service to Niagara-on-the-Lake. The speed of the Lake Runner will be upgraded to 26 knots or more this winter and the vessel will be reintroduced at a higher speed in April 1998.

Shaker intends to expand its services in 1998 with the addition of two 71-passenger Canadian registered and duty paid hydrofoils. Shaker has docking arrangements at Lewiston, New York, and will add Rochester, New York, as a destination in 1998.

POSITIONS OF THE PARTIES

Shaker

The proposed services would be in direct competition with Shaker's services. Jordan Harbour is only 2 miles from Port Dalhousie, which is Shaker's primary dock in the Niagara area, and Queenston is in close proximity to Niagara-on-the-Lake. Shaker is already operating the proposed services with Canadian flagged vessels.

Lake Jet Lines

Lake Jet Lines states that it also objects to the operation of foreign owned ships in Canadian waters. Lake Jet Lines is a company incorporated in Canada and has purchased the vessel that it proposes to use and is in the process of having the vessel registered in Canada.

There are presently no operators on the Toronto-Jordan Harbour and Toronto-Rochester routes. The hydrofoil will cover the same distance as the Lake Runner in about one-third of the time, thus providing a rapid transit for commuters. Lake Jet Lines evaluated a Toronto-based ferry service and the possible purchase of the vessel now operated by Shaker and concluded that such a vessel would not meet the needs of commuting passengers. The use of hydrofoils will greatly encourage the growth and development of water-based traffic and will be of economic benefit to Canada.

ANALYSIS AND FINDINGS

In accordance with the Coasting Trade Act, when applications for a coasting trade licence to operate a proposed marine passenger service are filed, the Agency must determine if there are suitable Canadian ships available to provide the proposed service or perform the activities described in the application or whether identical or similar adequate marine services are available from persons operating Canadian vessels.

The proposed Lake Jet Lines ferry service between Toronto and Jordan Harbour would serve the same market as is presently served by Shaker on its Toronto-Port Dalhousie service as Jordan Harbour and Port Dalhousie are in close proximity to each other. Similarly, Queenston is close to Niagara-on-the-Lake which is already served by Shaker. Shaker's services cater to commuters from the St. Catharines area to Toronto as well as to tourists from each area. Shaker's stated plans for expansion of its services in 1998 include service to Rochester, New York. The services proposed by Lake Jet Lines would cater to the same market areas for essentially the same passengers.

The existing services provided by Shaker are similar to the services proposed by Lake Jet Lines and the difference in vessel size, speed and configuration does not constitute a major difference in the market that is being served. While the vessel that Shaker proposes to use is of conventional design, there is no requirement that vessels identified in a similar service offer be identical to that proposed to be operated by an applicant. Although the higher speed hydrofoil could appeal to the commuter market, the need for a faster service has not been demonstrated as the services currently provided by Shaker respond adequately to the passenger demand.

CONCLUSION

The Agency hereby determines, pursuant to subsection 8(1) of the Coasting Trade Act, that there is a similar adequate marine service available from a person operating a Canadian ship.

This determination will be provided to the Minister of National Revenue for any necessary action as provided for in the Coasting Trade Act.