Operations

Ontario, Quebec, B.C. Operators Battle On Many Fronts

Posted on December 26, 2013 by Tom Halligan - Also by this author

TORONTO — Canadian luxury transportation industry operators wrestle with many of the same problems as their U.S. counterparts — heavy-handed rules and regulations, high licensing fees, competition from Uber, rising costs and responding to changing consumer demands.

Uber is a major topic among operators who serve Toronto, said John Dahdaly, president of Cullitons Limousine of Willowdale, Ontario. Uber, which began running in the city last year, also is established in Vancouver and runs a pilot program in Montreal. Dahdaly, also president of the Ontario Limousine Owners Association (OLOA), said such technology is affecting the industry.

“We have to accept the fact that technology will continue to advance and that doesn’t always coincide with our business model,” Dahdaly said. “We have to make sure the mobile-app transportation competition conforms to the same rules and regulations as licensed operators.”

In Vancouver, for example, British Columbia’s Passenger Transportation Board shut down Uber last year after it established a Town Car service that did not conform to the province’s minimum rate ($75 per ride) for limousine service. Although the set $75 rate often is negotiable, the mandate basically undercuts Uber’s ability to offer cheaper rates than traditional limousine operators.

‘It’s a disruptive technology and we’ll have to deal with it,” said Craig McCutcheon, president of Toronto-based Rosedale Livery Limited. “In our city, Uber has basically created a black car service that didn’t exist here before and offers ‘in-between’ pricing that pulls people out of taxis and limousine service. If anything, Uber has legitimized the one-car unlicensed drivers that always existed under the radar, but now they have to be licensed.”

One of the problems Uber has created is luring drivers away from livery companies. McCutcheon noted that the available chauffeur pool is drying up because drivers leave for Uber. “You have a guy who may be friends with a hotel doorman and he leaves for Uber because he can get business … sure, there are lots of drivers out there delivering pizzas, but what I need is chauffeurs,” he added.

Operators such as Kyara Kahakauwila, vice president of operations at L.A. Limousines in Victoria, B.C., faces chauffeured vehicles costs that average about $10,000 more per vehicle than ones sold in the U.S.

Operators such as Kyara Kahakauwila, vice president of operations at L.A. Limousines in Victoria, B.C., faces chauffeured vehicles costs that average about $10,000 more per vehicle than ones sold in the U.S.

Across the continent on the Pacific Coast, Victoria, B.C.-based L.A. Limousines and Transportation Services doesn’t have Uber to deal with, but there are other issues that keep the company focused on improving its operation.

A main issue is that vehicles cost an average of $10,000 more than those sold in the U.S., said Kyara Kahakauwila, vice president of operations. “We don’t get access to special pricing, and we have to buy from a Canadian dealership. And if we want it modified by a coachbuilder, we have to ship it to the states and then have it shipped back — all the time we’re paying for a vehicle we won’t have for a few months.”

The added vehicle costs, coupled with provincial tariffs and fuel prices that average around $5 per gallon, mean higher customer rates. “Our rates are more expensive than our counterparts in the U.S., but our insurance rates are lower,” Kahakauwila said. Because insurance is provided by the Insurance Corporation of British Columbia, operators get very competitive rates and significantly lower than in the U.S. “No one in the states can touch our insurance rates, so that does help balance out higher costs in other areas,” she added. Minimum liability insurance for commercial vehicles is $1 million, but the company carries $5 million to $10 million depending on the vehicle.

In response to the high fuel costs, the company bought a Lexus es300h, which averages between 40-50 mpg depending on the season, Kahakauwila said.

The company’s buses also are energy-efficient, running on plant-based bio-diesel. “We do get specific requests for the Lexus, so it’s been a good addition to our fleet,” she added.

On the state of the industry, Kahakauwila was upbeat. “I see the industry becoming more credible. There’s less bling and more professionalism, which is fantastic for the overall industry.”

Craig McCutcheon, president of Toronto-based Rosedale Livery Limited, has to deal with the disruptions caused by Uber.
Craig McCutcheon, president of Toronto-based Rosedale Livery Limited, has to deal with the disruptions caused by Uber.


Extending Vehicle Lifespans

One of the main initiatives the OLOA is fighting in Toronto is a regulation that requires operators to retire vehicles after six years. The association has petitioned the city Licensing Commission for a one-year extension, mainly because the Lincoln Town Car stopped production in 2012 and the operators want to keep stretches and sedans because they assert it is in their financial interest to do so, Dahdaly said. The OLOA also is working with the commission to update its 2005 bylaws and regulations to reflect changes in the industry.

Quebec

In Quebec, operators face possibly the highest licensing permits in the world coupled with restrictive regulations, said Andy Poulos, president and CEO of MTL Limousine Worldwide. A permit costs a minimum of $200,000 per sedan and about $50,000 to $90,000 per SUV and stretch (one-time permit purchases). And because there are limited available permits, it is hard to obtain additional permits.

In addition, government regulations do not allow limousine companies to operate vehicles with more than nine passengers unless they have a bus permit. It is nearly impossible to obtain because if an operator applies for a bus permit, the bus operators fight the applicant and always win, Poulos said.

Regarding fleet purchases, Poulos reiterated Kahakauwila’s point that it costs more to purchase vehicles in Canada than the U.S. “We don’t get the fleet sale discounts in Canada or the extended warranties, and if we want it customized we have to ship the vehicle to the U.S. because there are no custom coach builders in the country.”

To circumvent the high cost, Poulos said he and many operators buy used vehicles from the states because it is much cheaper than buying new in Canada. “It doesn’t make a lot of sense, so we are trying to educate the government to see reality, especially with the changing markets and more operators looking at different vehicles because of the end of the Lincoln Town Car,” he said.

In Quebec, operators face possibly the highest licensing permits in the world coupled with restrictive regulations, said Andy Poulos, president and CEO of MTL Limousine Worldwide.
In Quebec, operators face possibly the highest licensing permits in the world coupled with restrictive regulations, said Andy Poulos, president and CEO of MTL Limousine Worldwide.

Gunter Schlieper doesn’t hold back when it comes to industry regulations in British Columbia. “Many of the regulations make no sense in the real world, and the ones that do, they don’t enforce.” Schlieper is owner of Vancouver-based Classic Livery & Coach and Straightline Consulting Service, which serves British Columbia operators.

“There are excessive regulations, but they can be worked with — except there is a total lack of enforcement, which means too many carriers operate in violation of the regulations just to survive the competition from unregulated carriers, and the plain out-and-out illegal carriers,” Schlieper said.

Another problem is that the Vancouver Passenger Transportation Board (PTB) initiated a requirement that if operators do not use their plates in two years or more, the PTB can take them. “Tell me, who doesn’t cut back when business is slow and then return to regular service when things improve — without penalty? Nobody, except us.” To escape the rule, operators lease out plates they aren’t using and basically create new competition “and rogue operators,” Schlieper added.

An industry advocate, Schlieper said that if his industry had political clout like the taxi industry, the regulatory situation would not exist. “We don’t, so we have to live with it as best we can. Most of us can make it, maybe not as much as we would like, but it can be done. The public on the other hand is not getting what the PTB purports they are doing to ensure proper regulation and safety.”

Unlike British Columbia, Quebec does not have special province insurance rates, so operators pay higher rates. “Yes, we do charge higher rates. There is money to be made, but you have to be smart,” Poulos said.  

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