Transport Minister Marc Garneau is unlikely to provide federal subsidies to Greyhound to maintain passenger services in Western Canada, preferring to provide loan guarantees to local bus companies, according to a senior government official.

Greyhound has been lobbying the federal government to set up a fund to subsidize the bus service on routes it is planning to cancel in Alberta, Saskatchewan, Manitoba and British Columbia.

A senior official who was not authorized to speak on the record said cabinet does not have much appetite to provide even interim federal subsidies to a foreign-owned bus company. Greyhound’s head office is in Dallas, although the company is a subsidiary of British-owned FirstGroup.

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The federal official said the government would prefer to give loan guarantees to local transportation firms in Western Canada and start-up money for Indigenous communities to operate intercity buses.

Mr. Garneau indicated in a letter last week to transport ministers from the four provinces that Ottawa has no interest in bailing out Greyhound and would look to other private-sector and local bus services.

“The full scale of the impacts of the loss of Greyhound’s presence in Western Canada will depend on the speed and extent to which other entrants fill the market,” he wrote in the July 19 letter obtained by The Globe and Mail. “I note that a number of operators have signalled an interest in serving some communities affected by Greyhound’s service reduction.”

Mélany Gauvin, director of operations in Mr. Garneau’s office, said in an e-mail on Wednesday the government is “encouraged by the recent expression of interest by Canadian bus carriers using different business models and equipment to fill some of the potential service gaps caused by Greyhound’s decision.”

Greyhound senior vice-president Stuart Kendrick said he does not believe using local operators is the best way to serve the four provinces, arguing it is important that bus service connect to major centres along the Trans-Canada Highway.

“A lot of people don’t just want to ride from point A to B. They want to go to ABCD,” he said in an interview. “If you want to travel from an aboriginal community into the main centre and then go to another location – that is important. … You need to have seamless transportation."

Greyhound is promoting the idea of a connecting-community fund. The proposal, based on a U.S. program, is for Ottawa to allocate money to the provinces and municipalities to meet essential transportation needs in rural communities. Private transport companies could bid on non-profitable routes and receive subsidies to cover the costs.

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“There is a need for a similar funding model to preserve connectivity and really have a sustainable intercity bus service that sends rural Canada into the major corridors,” Mr. Kendrick said.

He said the federal government has provided little information to the company about its plans to help rural communities when Greyhound shuts down the routes on Oct. 31.

Prime Minister Justin Trudeau asked Mr. Garneau to work with the provinces and communities to find a solution. Last week, the premiers urged Ottawa to work with Greyhound to maintain services temporarily in Western Canada while affected communities come up with alternatives.

“Really, the issue here is not a two- or three-month extension. It is a long-term solution,” Mr. Kendrick said.

Earlier this month, Greyhound announced that services in the four western provinces will end in the fall, citing a 41-per-cent decline in ridership since 2010, the entry of ultralow-cost carriers and regulatory constraints.

Greyhound also noted that it faced increased competition from subsidized national and interregional passenger transportation services.

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“There has been a heavy decline in ridership in rural Canada where the routes are not sustainable and the private carrier really can’t make a go of it off the fare box,” Mr. Kendrick said.