It took a while for Butch Wilson to purge the word bus from his vocabulary. The longtime Red Arrow Motorcoach driver remembers being at the Calgary office in the 1980s, back when the company was trying to woo riders, and exclaiming that if he didn’t hurry, he’d “miss the bus” back to Edmonton. The comment was a minor slip-up, but one made within earshot of Robert Colborne, the transport entrepreneur who founded Pacific Western Transportation Ltd. (PWT) and dreamed up the idea of running an upscale motorcoach service between Edmonton and Calgary. Having heard Wilson utter the b-word, Colborne spoke up.

“Butch, we don’t run buses,” Colborne corrected. “We run coaches.”

Bus is still a dirty word at the privately owned Red Arrow, a division of Calgary-based PWT. “It’s not just a bus ride,” says Wilson, 58. “We provide a luxury coach.” Red Arrow makes more than 20 trips each day, carrying passengers between Edmonton, Fort McMurray, Red Deer and Calgary. When the coaches are full, this means almost 800 passengers.

Yet it seems odd to shun the word bus. Buses were how Colborne got his start in the transportation business. He owned a GM dealership in Wetaskiwin in the 1950s before founding PWT in 1957. It initially operated school buses in Red Deer under the name Prairie Bus Lines. In the ’60s, he expanded to hauling oil sands workers by bus between Fort McMurray and their jobsites under the Diversified Transportation Ltd. brand. Still, the word made him cringe. Most people associated “taking the bus” with Greyhound, a company that dominated – and still dominates – the Canadian intercity bus market with its milk runs. “He’s always had the belief that the bus industry had a very poor reputation, and he always felt he wanted to elevate that,” says Robert’s son Rick Colborne, 60, who started Red Arrow with his father and younger brother Mike in 1979 before becoming vice-president and general manager of Diversified. Hence the word coach – what the dictionary defines as a bus “comfortably equipped for longer journeys.”

Today’s fleet of 20 Red Arrow coaches easily lives up to that definition. Each vehicle is decked out with TVs, satellite radio, Wi-Fi, power outlets for laptops, snacks, beverages, newspapers and magazines. “We’re the only bus company in Canada that has all the amenities,” says general manager John Stepovy, who oversees a staff of about 100 employees, including 40 drivers. Greyhound has Wi-Fi and power outlets on some new buses in the U.S., but not in Canada. And while Greyhound – which is owned by Scotland-based transport giant FirstGroup plc – packs up to 55 passengers onto its buses whenever possible, a Red Arrow coach is much roomier, seating a maximum of 36 passengers in its comfy leather seats.

A one-way Calgary-Edmonton Red Arrow trip is a flat $69 – pricier than the Greyhound ($40-ish to $59, depending on when you book) but much cheaper than flying ($145-plus when taxes and fees are tallied up). Trying to compete with Greyhound fares would be impossible, says 51-year-old Mike Colborne, PWT’s CEO and president. “They can kill us on price, because their pockets are a lot deeper than our pockets as a private company… We’ve got to compete on the quality of the service and the value that we deliver.” So, although at first glance Red Arrow and Greyhound look like they’d be competing for the same passengers, Red Arrow believes its main competition isn’t Greyhound, but the airlines – and people’s cars.

Red Arrow carries business travellers, mostly. But its fares aren’t out of reach for students and others making personal trips. “Our typical demographic is a professional or a student that does have access to a vehicle, and they choose for reasons of safety and efficiency to travel with the coach,” says Stepovy. “The decision they’re making is: ‘Do I drive, do I fly or do I take the coach?’” Most drive. In 2006, cars accounted for more than 90 per cent of trips between Edmonton, Red Deer and Calgary. Air travel accounted for six per cent, and buses, including Red Arrow, accounted for only three per cent of trips.

It doesn’t sound like much. But when somebody gets on board the Red Arrow, they usually come back; its customers tend to be enthusiastically loyal. “If we get them to ride it once, they’re sold – absolutely sold,” says Mike. “And they’ll tell 10 other people how happy they were.” Calgary Mayor Naheed Nenshi, Wildrose Alliance leader Danielle Smith and former premier Peter Lougheed and his wife, Jeanne, have all been spotted on the black coaches that cruise along Highway 2 at about 120 km/h. “I find it very civilized,” says Edmonton Journal columnist Paula Simons, who uses the Red Arrow to get to Calgary and enjoys being “above the fray” of highway traffic, especially in winter. “If I’m going down to make a presentation, now I have three hours in which I can actually sit and think and read and research and prepare.” This is perhaps Red Arrow’s strongest selling feature: Travel time that’s enjoyable, comfortable and useful.

It was a tough sell, initially. The first Red Arrow coach that pulled out of Calgary on July 9, 1979, was even roomier than today’s coaches, seating 25 passengers at most. The coach had sandwiches, a big closet, flip-down work tables and cassette tape players pumping music into headphone jacks on each seat. Unfortunately, there were precisely zero customers on board to partake in these unconventional luxuries. “Very disappointing,” recalls Rick. Both Rick and Mike had become involved in their dad’s company as kids – working their way through the maintenance pit, the wash rack, the body shop and the dispatch office – and both were committed to their dad’s vision of an upscale coach service. But barely anyone noticed when Red Arrow launched. “For a while, we were the best-kept secret in Alberta,” remembers Wilson.

Things seemed to pick up on day two when a couple of customers bought tickets, but they turned out to be Greyhound employees checking out the new carrier on the sly. And although customers slowly trickled on board in the following months and years, it wasn’t enough to make the venture profitable. “We couldn’t convince people that we were different,” says Mike. “People just said, ‘It’s just a bus. It’s just like Greyhound.’ Well, no, it’s not.”

Red Arrow didn’t fit the industry mould, something the Colbornes had already discovered while setting up the operation in the late ’70s. Robert had approached the manufacturer of Greyhound buses, Motor Coach Industries, presenting his plan for roomy coaches with two seats on one side of the aisle and only one seat on the other. Robert asked if the company would be interested in building these custom coaches. The answer was no. “So he went to this little Canadian producer called Prevost, and they said they’d love to have the opportunity to design something that was upscale, because they were kind of a niche player,” says Mike. (Today, Red Arrow’s entire fleet is built by Prevost, which is now owned by Swedish-based Volvo.)

Red Arrow also had to convince the Alberta government – which regulates scheduled bus service – to grant it operating authority on the Fort McMurray-Calgary corridor. It took some doing, as Alberta’s intercity bus regulations were configured in the 1960s to ensure Greyhound ran a minimum number of routes throughout the province, an arrangement that guaranteed rural communities received reasonable bus service. It was a way of controlling Greyhound’s monopoly, says Alberta Transportation spokesperson Trent Bancarz. “In exchange for providing service to less-populated areas and rural routes, we protect Greyhound from competition on some of their more profitable routes,” Bancarz says. “So essentially, the more profitable ones subsidize the rural, less profitable ones.” Greyhound objected to Red Arrow’s initial application in the ’70s, but after a few weeks of hearings, the Colbornes got the green light.

After a few lean years, Red Arrow tweaked its service, getting rid of on-board sandwiches and closets and increasing the overall passenger capacity of its coaches. It also started targeting niche markets, like people with disabilities (a focus that continues today, as Red Arrow’s entire fleet is wheelchair-friendly.) More and more Albertans discovered Red Arrow, often by word of mouth, but it took a while. “It was a good 10 years before we really could say that we were being successful,” says Rick.

The company got a boost after the 1995 plebiscite in which Edmontonians voted to move scheduled air passenger service from the City Centre Airport to the Edmonton International Airport. The goal was to consolidate air passenger traffic and thus get more direct flights (instead of always having them routed through Calgary), but this meant people wanting to fly from Edmonton to Calgary now had to drive 30 kilometres south of downtown just to take off. Red Arrow carried its passengers from downtown to downtown, which immediately made it a more attractive choice for many.
Red Arrow still benefits from Edmonton’s airport struggles. Last year, the

Edmonton International Airport said that up to one million Edmontonians fly out of Calgary every year, and while that number seems unbelievably high – it was rolled out as part of the airport’s “stop the Calgary habit” media blitz – there’s definitely leakage. For the past five years, Red Arrow shuttled passengers from its north Calgary location to the Calgary airport. Then, last fall, the company decided to go further and start running coaches from Edmonton directly to the Calgary airport. Red Arrow saw a demand and responded, said Stepovy, who works out of Red Arrow’s Edmonton-based main office. “We’re not telling anyone not to fly out of Edmonton. All we’re trying to do is trying to scoop those people and give them a better option than driving themselves.”

As a whole, the Canadian intercity bus industry is struggling. The Canadian Bus Association has said that only 38 per cent of scheduled intercity bus routes are profitable. Greyhound has said that it’s losing $7.5 million a year in Alberta alone because of low ridership on rural routes, and the bus line has applied to Alberta Transportation to drop the number of buses it runs on its routes to a minimum of one trip per year, an arrangement that would essentially let Greyhound set its own schedule. Recent years haven’t been kind to Red Arrow, either – ridership “dropped off like a rock” after the stock market crash of 2008, says Mike, and more or less stayed that way for the next couple of years. But he also says the first two months of 2011 were record months for ridership.

Now Red Arrow plans to expand. Diversified already runs nine municipal transit services in cities across Canada – including Port Alberni, B.C., Fort McMurray and Milton, Ontario – and PWT runs an airport express bus from the Toronto Pearson International Airport to downtown Toronto. But expanding intercity service outside Alberta is trickier, according to PWT, because the industry is so heavily regulated – a setup the Colbornes and Stepovy all rail against. They say Red Arrow could end up spending some $100,000 on an application (legal fees, research and so on) and have nothing to show for it if the application isn’t approved. “Our company does not believe in any form of economic regulation,” says Mike. “I mean, why aren’t there any other services like Red Arrow in Canada? Because we’re regulated. It’s stifling the opportunity for entrepreneurs to innovate, to come up with fresh ideas.” Still, the company has toyed with the idea of taking Red Arrow elsewhere. “Ottawa-Montreal is a great example of a corridor with a lot of bus service, but nothing like what we’re doing,” says Stepovy. “So the opportunity’s there. It’s just tough because of the regulated market.”

Closer to home, Red Arrow plans to start a Calgary-Lethbridge route. But here, too, the company complains that regulation is a problem, as an application will likely be expensive and time-consuming. Red Arrow is asking would-be riders to fill out a government form expressing support for the new route. The company plans to submit the forms with its application and hope for the best. “We’ll be facing Greyhound in hearings the same as we did back in 1979,” says Rick.

Red Arrow wants the freedom to expand freely without bothering with any of this. Greyhound wants the freedom to cut rural service while still enjoying protection on its profitable routes. “We’re not looking for deregulation,” says Greyhound spokesperson Bonnie Bastian. “We would like to see more flexibility with the regulations we already have in place.” Alberta Transportation, charged with balancing these competing interests, seems to agree that an overhaul is in order – the airline and trucking industries were deregulated almost 25 years ago, allowing companies to run routes wherever they want – but has also indicated that Greyhound’s dream scenario isn’t the way to go. “We are potentially looking at a deregulated model,” says Bancarz. “There would be no protection for anyone.” Bancarz is vague on when this would happen, calling it an “evolving process.”

For Red Arrow, an open market means opportunity – maybe service to Grande Prairie and Medicine Hat, says Rick. But it also means vulnerability, as new players could start operating on the busy Calgary-Fort McMurray corridor, where both Greyhound and Red Arrow are currently protected. That doesn’t seem to bother Stepovy or the Colbornes, though. Get on with it already, they say. Bring it on. “We’re firmly entrenched in the marketplace and we believe we offer a cost-competitive service,” says Rick. “So if it was opened up to other carriers, we’re certainly not nervous about that.”

Speed Trap
The unlikely creation of a high-speed rail line from Edmonton to Calgary would almost certainly spell disaster for Red Arrow. A 2008 government-commissioned study on high-speed rail forecast that if the province was to build a 300 km/h rail line, Red Arrow’s market share on the Edmonton-Calgary corridor would plummet from 1.7 per cent to 0.6 per cent – more than two-thirds. It’s not surprising, then, that the company argues high-speed rail isn’t realistic for Alberta. “I don’t believe we have the population base between Edmonton and Calgary to support it,” says Rick Colborne, one of Red Arrow’s founders.