Decision No. 57-W-1998

February 18, 1998

File No. W9125/G12/97-1

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APPLICATION

Waterways Transportation Services Corp. (hereinafter Waterways) has applied to the Minister of National Revenue for a licence to operate the service set out in the title. The matter was referred to the Canadian Transportation Agency (hereinafter the Agency) on November 10, 1997.

Waterways proposes to use the 300-passenger "Waterways 1" to provide a high-speed ferry scheduled service between Toronto and Jordan Harbour (situated close to St. Catharines). The vessel has an operating speed of 35 knots and has waterjet propulsion.

The Agency conducted a search of the relevant portion of the marine industry. The Agency received an offer from Blouin Associés of Québec, Quebec, on behalf of Groupe Dufour, proposing the use of the "Famille Dufour II", a 340-passenger Canadian built catamaran, available for sale for approximately $8 million or for lease reflecting this price. In addition, Shaker Cruise Lines (hereinafter Shaker) of Toronto, Ontario, filed an objection to the application in which it states that it operates a cross-lake ferry service between Toronto and Port Dalhousie with the 275-passenger "Lake Runner". Shaker subsequently offered the use of the "Lake Runner" to provide the proposed service at a price of $2.6 million.

Shaker also mentioned that a Canadian built catamaran, the "CNM Evolution", capable of carrying 150 to 200 passengers and 30 automobiles, was available for sale or lease from C.R. Ward & Associates of Sidney, British Columbia.

Canamac Cruises of Toronto, Ontario, objects to the operation of non-Canadian registered vessels that would compete with other Canadian charter vessels used for dinner/dance and sightseeing operations.

BACKGROUND

In September 1996, Waterways applied for a coasting trade licence to use an unnamed Australian registered, 350-passenger, 36-knot catamaran to provide a high-speed ferry service between Toronto and St. Catharines from April 1 to October 31, 1997. In response to that application, Blouin Associés filed an offer proposing the use of the "Famille Dufour II", a 340-passenger, 35-knot catamaran, at a sale price of $9.5 million; Groupe AML offered the use of the "M/V Montréal O.N.", a 325-passenger standard vessel with an operating speed of 20 knots; and Shaker advised that it would be operating a new service in 1997 serving ports along Western Lake Ontario, including Toronto and St. Catharines, using the "M/V Marine Cruiser", a 144-passenger standard vessel with an operating speed of 20 knots. Shaker also indicated that the passenger capacity of the vessel would be increased.

The Agency concluded that while the "Famille Dufour II" was technically suitable, the sale price of the vessel would render the proposed service commercially unviable. The Agency also concluded that the "M/V Montréal O.N." was unsuitable from a technical perspective as the operating speed was much slower than that of the catamaran proposed to be used by Waterways. With respect to Shaker's service proposal, the Agency concluded that the shoreline service proposed by Shaker to many cities would not be an identical adequate marine service or similar to the service proposed by Waterways. Accordingly, the Agency determined in Decision No. 561-W-1996 dated November 15, 1996 that there were no suitable Canadian ships available to provide the service or perform the activities described in the application, and that identical or similar adequate marine services were not available from any person operating a Canadian ship.

While Waterways obtained a coasting trade licence for operation in 1997, it did not introduce any vessel into service.

ISSUE

The issue to be addressed is whether or not there are Canadian vessels suitable and available to provide the proposed service or perform the activities described in the application or whether or not identical or similar adequate marine services are available from persons operating Canadian vessels.

POSITIONS OF THE PARTIES

Shaker

Shaker states that it operated a scheduled, cross-lake ferry service in 1997 between Toronto and Port Dalhousie (bordering on St. Catharines and two miles from Jordan Harbour) with the 275- passenger "Lake Runner" operating at a speed of 20 knots. Shaker also provided direct service between Toronto and Niagara-on-the-Lake. The scheduled services were operated until the end of the season in September 1997. The services were suspended at that time due to a decrease in ridership; alternate transportation was, however, available and provided to passengers. The speed of the "Lake Runner" will be increased to 26 knots this winter for the sake of commuters.

Shaker advised that it will expand its services in 1998 with the operation of two 71-passenger, Canadian registered and duty paid hydrofoils. Shaker's service to Niagara-on-the-Lake will be expanded in 1998 and it will also add Lewiston, New York, as a new destination in 1998.

Shaker offered for sale the "Lake Runner" and advised of another Canadian registered catamaran also available for sale or lease.

Shaker concluded that it already operates a similar cross-lake ferry service and that only Canadian registered and duty paid vessels should be allowed to compete on Lake Ontario. Consequently, the Agency can and should conclude that the granting of a coasting trade licence would be contrary to the Coasting Trade Act.

Blouin Associés

Blouin Associés's client, Groupe Dufour, has a Canadian built catamaran that is suitable and available for the proposed service and also has a shipyard where similar vessels could be constructed.

Canamac Cruises

Canamac Cruises objects to non-Canadian registered vessels being allowed to compete with Canadian charter vessels providing dinner/dance, sightseeing operations.

Waterways

Waterways submitted that Shaker did not operate a scheduled service in 1997 and does not intend to provide a scheduled service in 1998. A Shaker schedule from 1997 contained the statement that all trips were subject to minimum ridership and that, in many circumstances, passengers were told that the service was not available. The 71-passenger hydrofoils that Shaker proposes to use are not suitable for the service proposed by Waterways and are also not suitable for cross-lake ferry service.

The "CNM Evolution" referred to by Shaker as being available for sale or lease is a combination passenger/automobile vessel which is unsuitable for a passenger only service.

The sale price of the "Famille Dufour II" precluded any meaningful discussion and the use of a vessel costing about four times as much as Waterways' own vessel would render the proposed service unviable. Waterways referred to the Agency determination in Decision No. 561-W-1996 that the sale price of the "Famille Dufour II" (at $9.5 million) would render the proposed Toronto-St. Catharines service commercially unviable. The availability of the "Famille Dufour II" is questionable in view of the stated intention of the vessel owners to have continued operation of the vessel on the St. Lawrence River in 1998. If this is so, it is impossible to conceive how the vessel could be available for operation of the service proposed by Waterways.

Canamac Cruises does not have a Canadian registered catamaran as required for the operation of the proposed service and it does not operate a high-speed ferry service. Waterways does not contemplate dinner/dance, sightseeing operations.

ANALYSIS AND FINDINGS

The proposed Waterways ferry service between Toronto and Jordan Harbour would serve the same market as is presently served by Shaker on its Toronto-Port Dalhousie service since Jordan Harbour and Port Dalhousie are approximately 3.2 kilometres from each other. Shaker's services cater to commuters from St. Catharines to Toronto as well as to tourists from each area. The service proposed by Waterways would cater to the same market areas for the same passengers.

The present operating speed of the "Lake Runner" of 20 knots will be increased to 26 knots this winter. The increased operating speed will reduce the crossing time between Toronto and Port Dalhousie. Although the higher speed catamaran proposed to be used by Waterways could appeal to the commuter segment of the market, speed is not considered a determining factor when catering to the tourist segment of the market which constitutes a large part of the market proposed to be served by Waterways. Therefore, the difference between 35 and 26 knots is not considered too significant in relation to the market served.

The "Lake Runner" operated by Shaker has a capacity of 275 passengers, which approaches the capacity of the Waterways catamaran of 300 passengers. Based on projected load factors for the proposed Waterways service, the lesser capacity of the "Lake Runner" would not be a factor in being able to meet passenger demand.

The existing services provided by Shaker are similar to the service proposed by Waterways. 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.

The set of circumstances associated with the current application differs from that which was before the Agency when it issued Decision No. 561-W-1996. Contrary to the situation in 1996, Shaker is now an established Canadian operator with a Canadian registered vessel having a passenger capacity of almost double the one referred to at that time. In 1997, Shaker provided service between Toronto and Port Dalhousie and between Toronto and Niagara-on-the-Lake, i.e. point-to-point services, which differs from its 1996 service proposal which contemplated service to several cities along the Western shore of Lake Ontario.

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. In view of this, there is no need for the Agency to rule on the suitability and availability of Canadian vessels as the determination of a similar adequate marine service is sufficient for a denial of the application.

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