Issue 200 of Today's Railways Europe
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 Issue 200 of Today's Railways Europe Issue 200 of Today's Railways Europe Document Transcript

  • DIRECTIVE 440:RAIL LIBERALISATION IN THE EU The first step towards privatisation was often the division of activities in order to clarify accounting.by Nick Fotis Whether this sort of situation makes it easier is not known – in France, BB 22212, the last of the class in service in Fret SNCF livery, but now allocated to the Infrastructure sector works IntercitésIn the beginning... passenger train 5963 Paris Bercy–Clermont Ferrand at Clémentel on 15 June 2012. Lionel SutyIn the first half of the 20th century mostcountries tended to nationalise the existing 1987 into six vertically-integrated passenger Amtrak their loss-making passenger trainsprivate railways, often because they were companies and a nationwide freight railway. and remove this burden, for a price) andbankrupt; cases such as Austro-Hungarian The most profitable of these (JR East, JR in 1976 the government had to nationalisecompany GySEV/Raaberbahn tended to be Central, JR West) were fully privatised Penn Central and other railways, as Conrail,the exception that proves the rule. by 2006, and are publicly traded, while while relaxing railway and labour regulations. After World War II, European railways the others are still struggling. The JNR Conrail needed 15 years to catch up onhad to face the enormous task of rebuilding Settlement Corporation had to shoulder deferred maintenance and under-investmentthemselves. In the meantime, this mode JPY 22.7 trillion of the debt, and the rest before becoming profitable, while sheddingof transport had to face new challenges, was distributed to the members of the JR large numbers of staff and redundant routes.particularly the plane, the private car and Group. The larger JR Group companies have The remaining private companies andthe lorry, which gradually eroded rail’s modal managed to reduce their part of the debt the unions were forced to ask the federalshare. Despite system-wide dieselisation and and raise traffic, while the JNR Settlement government for more deregulation, whichelectrification, both private and state railways Corporation was dissolved in 1998 having came in the form of the Staggers Act in 1980.were losing money and market share at an been unable to pay back the debt, which This permitted rail carriers to establish anyalarming rate, this problem reaching crisis had risen to more than JPY 30 trillion. Its rate for a rail service unless there was nopoint in the 1980s. debts were incorporated into the national effective competition. Rail shippers and governments general debt. carriers could establish contracts without theAn international problem Even privately-owned North American need for regulatory approval. The industry-The situation was not limited to European railways, while avoiding direct war damage, wide rate-making system was dismantled,railways. One well-known example was were starved of investment capital (needed and each company was free to compete asJapan National Railways (JNR), which for network maintenance and replacing they wished. This deregulation led to bothhad to rebuild its network essentially from steam with diesel and electric traction) while lower prices for shippers and railway industryscratch due to World War II damage, plus burdened with a complex set of regulations profitability, as companies were able toshoulder the large cost of its high speed regarding pricing and closure of redundant rationalise their systems while improvingShinkansen network, plus a large workforce lines. The most startling case was the collapse productivity using more automation and– the latter two were pushed more by political of Penn Central in 1970, the largest corporate reducing staff numbers. Prices were reducedconsiderations than business criteria. JNR’s bankruptcy in American history at the time. by 55% per ton-mile from 1980 to 1995,accumulated debt reached JPY 37.1 trillion This triggered more railway bankruptcies, productivity rose by 8% a year, the industryin 1987 – the equivalent of s213 billion at the mostly in the northeastern states. In 1971, operating ratio (the percentage of costs intime, or s372 billion today. Congress was forced to create Amtrak as relation to revenue) fell from 93% to 86%, The Japanese solution was to break JNR in a government-owned passenger operator while income rose by 19%. (while letting private railways to hand to22 TODAY’S RAILWAYS EUROPE XXX
  • Text on second pair of pages is a stand-alone (but highly relevant to the rest of the article). Text on this pagecontinues on the fifth page. Please leave text on next two pages on the second pair of pages.First steps in Europe case of contracts between the passenger rail final vote was 559 in favour, 12 against and operators and the state these were called four abstentions. On 1 January 1994, theThe Swedish experiment “franchises”. The TOCs would have virtually incorporation of Deutsche Bahn AG (DBThe first steps towards liberalisation were no own assets, since the rolling stock would be AG) was signed in Frankfurt, and four daysmade in 1988 in Sweden, when the parliament leased from ROSCOs (Rolling Stock Owning later DB AG has entered the Berlin companymandated the partial privatisation of the companies) which took over all BR passenger registry, with the federal government ofstate railways, as the existing system was rolling stock. Six rail freight companies were Germany as sole shareholder, with equity ofmaking clear cost accounting of the system also to be established, but in the end five (with DEM 4.2 billion.impossible. Swedish State Railways (Statens the exception of Freightliner) were sold in The reorganisation of two state railwaysJärnvägar) lost its network, transferred to the 1996 a subsidiary of the American Wisconsin into a privately-run company was a complexSwedish Rail Administration (Banverket) Central Railroad, which named the operation affair, measures taken including:and only retained train operations and real English, Welsh and Scottish Railway (EWS). • debt and delayed investment in DR networkestate. The Swedish experiment also allowed The network was handed over to the to be government responsibilitylocal authorities to tender local passenger Railtrack, a regulated private monopoly • government-mandated tasks (e.g. militarytrain services. with conflicting targets: to raise shareholder transport) to be paid for by the government In 2001, SJ was broken up in turn into value and to maximise income from the use • staff reductionsseven companies: SJ AB (passenger trains), of the rail network by the operators. This • reorganisation into multiple subsidiaries.Green Cargo (freight trains), Jernhusen (real often meant cost-cutting measures, such The main subsidiaries in the new DB were:estate), EuroMaint (train maintenance), as deferred maintenance, and outsourcing DB Reise & Turistik (long-distance passengerUnigrid (information technology), TraffiCare – rail engineering capabilities were broken trains, later renamed DB Fernverkehr),(terminal services, such as train cleaning into 13 companies and sold to the private DB Regio (regional trains), DB Cargoand shunting) and TrainTech Engineering. sector. Initially, the company managed to (freight, later renamed Railion), DB NetzC u r rent ly, t he f i r st t h ree rema i n i n improve train punctuality, obtain more (infrastructure, signalling) and DB Stationgovernment ownership, while on 1 April investment and had a better train safety & Service (passenger stations). In addition,2010 Banverket was merged with the Swedish record. The fatal accidents in Southall (1997), DB started to employ CEOs from the privateRoad Administration (Vägverket) in order to Ladbroke Grove (1999) and Hatfield (2000) sector and without rail experience... withform the Swedish Transport Administration threw Railtrack into a vicious circle from mixed results.(Trafikverket). which it never recovered. In 2002 Railtrack In mid 1999, the DB Group contained 199 The separation in 1998 resulted in a surge became “not for profit” Network Rail (NR), companies, while they participated in 375in infrastructure investment, mostly borne by officially a private-sector entity, but with other companies. Holding company DB AGthe taxpayer. The Swedish model, which is no debts underwritten by the government, which held a share in 80 of the 375 companies, whilelonger an experiment, was very influential in also partially funds the company. NR still the rest were controlled by the five majorthe rest of Europe. struggles with the complex UK rail system subsidiaries. while it tries to bring back in-house necessary In December 2007, DB reorganised again,A different route in Britain engineering skills and maintenance capacity. bringing all passenger services into the DBThe British were the next, but took a very Bahn arm, logistics under DB Schenker and German reunification, then division infrastructure and operations under DBdifferent route. Between 1923 and 1948, theUK’s many small railways were consolidated The German case was more complex, as Netze. There have been repeated attempts tointo the “Big Four” – the Great Western the country (and the state railway) was privatise DB AG or DB Bahn, but so far theseRailway (GWR), London, Midland and split in two after World War II, with West have been unsuccessful. DB Netz cannot beScottish Railway (LMS), L ondon and Germany having Deutsche Bahn (DB) and privatised without changing the law.Nor th Easter n Railway (L N ER), and East Germany having Deutsche Reichsbahn Apart from these case studies, otherSouthern Railway (SR). These were in turn (DR). With the German reunification of European states followed (more or less) anationalised as British Railways (BR) in 1989–90, DB and DR’s existing problems more typical route of separating operations1948, which replaced all steam locos and were compounded. DR, and to a lesser from infrastructure, while opening theclosed many routes (based on the infamous extent DB, was suffering from chronic network to other operators. The degrees“Beeching Report”) in the 1950s and 1960s. under-investment. For example, highways of liberalisation vary, and the IBM RailGradually, the region-based system, which received DEM 450 billion of public money in liberalisation index tracks progress on thiswas still influencing operations after the the period 1960–92, while railways received front.“Big Four”, was replaced by business sectors DEM 56.25 billion. Politically, DB was in the Another approach is the concession systemincluding Railfreight and InterCity. Between middle of a power game between the federal for 20–30 years, if the infrastructure is in a1993 and 1997, BR was privatised in an states and the federal government, while very bad state and the operator(s) have tounusual and, according to many, a rather legislation made contradictory demands. invest substantial amounts of money in it.haphazard and unnecessarily complex way. For example, article 87 of the Basic German This model was followed in Latin America When the Conservatives won the election Railway Law and Paragraph 28 demanded, at and Africa, to varying degrees of success.in 1992, there were conflicting ideas on the same time, operation as a governmental For example, in Argentina, three rail freighthow to proceed with BR privatisation. Most organisation and full coverage of costs and operators were unable to invest the agreedargued for either a single entity or regional, as much net income as a private company. 1.2 billion Dollars as traffic fell and duringvertically-integrated companies (as in So, it was not surprising that DB’s passenger the crisis of 1999 the state stopped paying theJapan). The Treasury view (which in the end modal share fell from 60% in 1950 to 29% agreed subsidies to the commuter operator. Inprevailed) called for the creation of seven, in 1990, while freight fell from 36% to 6% at Brazil only 60% of government rail fundinglater 25, passenger railway franchises (Train the same time. Meanwhile, the accumulated went to support the public rail transportOperating Companies or TOCs) as a way debt of DEM 13.6 billion of 1970 had reached system, the rest going to a specialised lineto maximise revenue. The Railways Act of DEM 47 billion in 1990 and was forecast to serving a steel company. Two non-mining1993 established a complex structure for the reach DEM 80 billion in 1996. There were railways comprised more than 90% of Brazil’ssystem. BR was to be broken up into over 100 16 attempts to remodel DB, but only for the rail network. The two non-mining railroadsseparate companies, with most relationships 17th time were the pressures strong enough were divided into seven separate concessions,between them established by contracts, and to force through real reform, as German each for 30 years with the possibility of ansome through regulatory mechanisms. The reunification added more urgency. extension for another 30 years. One companycontracts often needed to be approved by The railway reform (Bahnreform) law was used to hold old rail debts and to holdthe Office of Rail Regulation (ORR). In the was submitted to the German parliament title to rail tracks and related facilities. (Bundestag) on 17 February 1993, and theTODAY’S RAILWAYS EUROPE XXX 23
  • EU TRANSPORT POLICYby Roland Beier andNick FotisOne of the subjects mentioned in Today’sRailways issue 1 was the EU and the rules whichsometimes caused problems. We reported thatDirective 91/440, whose effects would meanstrict rules on the type and state of rolling stockallowed access to separated infrastructure andthe imposition of modern signalling equipment.At the time, groups preserving locomotives andorganising railtours were starting to worry aboutthe effect on their activities.One of the main tasks of the EuropeanUnion is the creation of a single market.Such a market requires good transportinfrastructure in which railways need toplay a vital role. In order to improve the useof railways the EU established a policy ofliberalisation which was backed by variouslegislative initiatives. However, this alonewas not enough to improve the European Crossrail is one of the most successful private companies to emerge from the EU’s push torailway system. Renewed and additional liberalise the railways. The company was founded as DLC in Belgium and later merged by formerinfrastructure was required and there was Regionalverkehr’s freight arm in Switzerland. Here Crossrail 185 591 and another loco of the sameneed to harmonise the various national type haul a long and well-filled intermodal service towards Italy at Mattstetten in Switzerland ontransport infrastructure improvement plans 15 June 2012. Mario Stefaniby designing a future European transportnetwork. safety regulations in the different countries were regarded as obstacles. A major influence Member States to RUs established in the EC,EU legislation on railways was the apparently successful Swedish thus opening the way for non-state-ownedIn the 1970s and 1980s most European railway experiment of 1988 with separation of train operators. These criteria include financialcompanies were state-owned monopolies operations from infrastructure. capacity, professional skill and appropriatewithin their countries. So-called “private” insurance coverage of civil responsibility.railways existed as well in some countries Directive 91/440 In addition, Directive 95/19/EC coveredbut only used their own infrastructure, The fi rst step towards a new rai lway the allocation of railway infrastructurecomplementing the state-owned railway. The policy was Directive 91/440/EEC on the capacity and the charging of infrastructuremonopolies continued to lose market share development of Community railways, which usage fees, paving the way for running trainsto road transport as their employees were would restructure railway companies to in “open access” mode. Progressively, the EUtreated as civil servants and the railways the requirements of the single market. The introduced more Directives and clarifiedlacked the flexibility to compete with road Directive was based on four principles: previous ones, with the goal of increasingand air transport. As a result increasing • independence of railway companies from competition on the rail network. Thesesums of money were needed to subsidise the state directives were grouped in the so-calledthe monopolies although rail market shares • separation of infrastructure and train “Railway Packages”.continued to shrink. This was the transport operati ng, i n order to cla r i f y c ostpolicy of many countries including the aim of First Railway Package accounting. The Directive did not includeincreasing rail’s share of the transport sector. the complete separation of management On 15 March 2001 the EC introducedAlthough some countries spent heavily between operations and infrastructure, the First Railway Package by publishingto improve rail infrastructure, railways however. Directives 2001/12/EC, 2001/13/EC andcontinued to lose market share in most cases. • freeing railways from their burdens of debt 2001/14/EC. The Directives enabled any I n the 199 0 s the EU (or European • granting access to rail infrastructure to RU licensed within the EC to have access onEconomic Community – EEC, later EC – as train operating companies (“Railway an equal basis to the Trans European Railit was called at that time) decided to define a Undertakings” or RUs in EU parlance) Freight Network, and subsequently to thecommon railway policy. The basic idea was to which would be able to run cross-border national rail networks of Member States. Theraise the efficiency of the existing rail network services. major points were:by introducing competition from private and/ The Directive was to be implemented from • a clea r def i n it ion of t he releva ntor other national operators cross-border. This 1 January 1993 but in practice, liberalisation responsibilities of industry participants,would be achieved by creating a single market took place only in a few member states, especially infrastructure managers (IMs)in rail transport, thus raising competitivity amongst them Germany. In practice the and RUsboth within rail itself and in respect of other provisions of Directive 91/440 were too vague • separation of RUs and capacity allocationtransport modes. Lower costs, better safety and so liberalisation had to be driven forward bodies; there must be a separate allocationand lower environmental impact would favour by additional legislation. body if the IM is organisationally linkedcompetitiveness whilst structural limitations In 1995 Directive 95/18 was published, to a RUand the old age of infrastructure as well as concerning the criteria for the issue, renewal • a requirement for the IM to publish adissimilarity of operating conditions and or amendment of Operating Licences by “Network Statement” setting out the capabilities of the network, usage fees,24 TODAY’S RAILWAYS EUROPE XXX
  • conditions of use and capacity allocation rules• separation of accounting for freight and passenger services• separation of RUs from the entity issuing operating licences• rights of access for all operators of international freight services from 2008, but with no provision for “cabotage”;• provisions to declare infrastructure to be “congested”, resulting in a requirement to carry out capacity analyses and develop c apacit y en ha nc ement pla ns where economically viable• provision for a common timetable change date on the second Sunday in December (included in a subsequent regulation).T h i s wou ld lead to t he step - by- stepliberalisation of freight transport – in part by2003 and in total by 2008. The First RailwayPackage had to be implemented by the oldMember States from 15 March 2003 and inthe new Member States from 1 May 2004. In fact implementation took place only to A new passenger operator has come to the Czech Republic in the form of RegioJet. This is RJ locoa certain degree in some Member States – 162 114 (delivered to Czech Railways, but then sold to FNM in Italy and recently repatriated) plusmany dragged their feet in order to protect former ÖBB coaches forming train IC 1010 Havirov– Praha at Horany on 16 June 2012. Quintustheir incumbent monopolies. Following Vosmanlengthy discussions, the EU Commissionfinally started infringement proceduresagainst some Member States on this issue state plus a pan-European register managed corridors, international freight trains shouldwhich are still pending at the EU Court of by ERA. be offered pre-programmed paths, whichJustice. Most of them concern the lack of There is a complementary set of EU have priority over other train services. Theindependence of the path allocation body documents for: main idea is to cut border crossing times forand/or of the rail regulator, as well as the • a common format for safety certificates international freight trains, increase the useinsufficient separation of infrastructure and and application documents – Commission of existing capacity and remove infrastructuretrain operating companies within a holding Regulation (EC) No 653/2007 bottlenecks. The co-operation of national railstructure. • a common safety method on risk evaluation regulators is also to be intensified. The first and assessment – Commission Regulation corridors will be operational in DecemberSecond Railway Package (EC) No 352/2009 2013 with the rest to follow two years later.In 2004 the EC added the Second Railway • a common specification of the national There are currently two more initiatives onPackage (Directives 2004/49/EC, 2004/50/ vehicle register – Commission Decision railway-related legislation in the EU. The firstEC and 2004/51/EC). This covers unified 2007/756/EC of 9 November 2007 is the recast of the First Railway Package. Thesafety standards for RUs, interoperability Also, Directive 2009/149/EC updated the various Directives will be merged into oneof rolling stock, creation of the European Appendix I of Directive 2004/49/EC. Directive which also contains clarificationsRailway Agency (ERA) in order to provide and adjustments of existing legislation.technical support for the development of Third Railway Package Amongst these is better access for RUs tocross-border interoperability, and total The Third Railway Package was introduced rail-related services (such as fuelling points),liberalisation of freight transport, including in 2007 (Directives 2007/58/EC and 2007/59/ independence of the rail regulators as wellcabotage, by 2007 instead of 2008. The EC , Regulations (EC) 1370/20 07 and as more competence, plus separation ofPackage also introduced common procedures 1371/2007). It opened international passenger accounts between IMs and train RUs, andfor accident investigation; this includes a services to competition from 2010, introduced also between freight and passenger services.requirement for the establishment of a Safety a European driving license, brought new The recast is at present under discussionAuthority in each Member State, conceived rules for Public Service Obligation (PSO) and will probably be approved by all relevantas an independent investigator on safety contracts and introduced regulations on European institutions at the end of 2012.matters. passenger’s rights and obligations. Another initiative is the so-called Fourth This led to the present situation with Safety Regarding PSO contracts, tendering Railway Package, a draft of which should beCertificates, which are issued by the safety became obligatory, but with a transition published at the end of 2012. This shouldauthority. Safety Certificate part A covers the period of 15 years. This has allowed national cover total liberalisation of rail passengergeneral internal safety management of each incumbents to “hold on” until 2024. services (so far only international servicesRU whilst part B covers safety management New regulations on passenger rights are liberalised) as well as stricter rules onin line with operating rules for each IM. A require compensation payments in case separation of IMs and train RUs.RU wishing to operate in several countries of major delays as well as information and The latter issue will no doubt lead tohas to apply for Part A in its home country assistance to passengers affected by delays or discussions of holding structures and willand Part B in each country where it wants to cancellations. Regional, suburban and urban also be affected by the results of the ongoingrun trains. services are not covered by the regulation, procedures at the EU Court of Justice on this Another result of the Second Railway but these can be included through national issue.Package was the introduction of European legislation of each Member State.Vehicle Numbers (EV Ns) and Vehicle The latest regulation (913/2010) dealsKeeper Markings (VKMs) to harmonise with rail freight corridors. So far nine suchnumbering of rolling stock and the creation corridors have been defined, each coveringof national vehicle registers in each member at least three member states. Along theseTODAY’S RAILWAYS EUROPE XXX 25
  • Open access, franchises and(lack of) competitionFreightOne major difference between rail freight andpassenger operators is the lack of subsidy tothe former. The few subsidies going to freightare usually for infrastructure, or launching anew type of service and can be granted to anycompany. Freight services are provided onbehalf of a customer, almost always a privateone nowadays, as most formerly state-ownedutilities have been privatised. As mentioned above, freight services werethe first to be liberalised in Europe andare now completely open to competition,in principle. Some countries have “playedthe game” and made it easy to enter themarket, despite the odd dispute. Germany, inparticular, has seen the number of RUs reachabout 300, although many are very smalland offer limited services. Once the marketopened up in Germany, traffic boomed, by High speed rail competition in Italy. A Trenitalia ETR.600 Frecciaargento tilting train set passesabout 60% in less than a decade. In contrast, NTV Italo set 07 standing at Roma Tiburtina station on 20 April 2012. Mathias Rellstabin southern Europe, including France,governments have done everything they canto protect the incumbent, few competitorshave started up, and rail’s traffic and marketshare are still falling. government “dividends” but most are still revenue abstraction from local services and In most countries, long-distance passenger subsidised. stopped stations from selling tickets. All oftrains are not subsidised, but most regional Most “franchises” contain a form of these “dirty tricks” were eventually stopped,and commuter passenger trains receive income protection which makes it harder but only after two years.subsidy, usually from local authorities – for new companies to offer services over the In this case, the competitors were wellotherwise ticket prices would be socially same routes. In the UK, Heathrow Express capitalised. But when Arenaways tried tounacceptable and severe road congestion is the only non-franchised “open access” set up services in Italy, severe restrictionswould result. operation. Wrexham & Shropshire (W&S) imposed by the rail regulator at Trenitalia’s was a commercial failure, Hull Trains was request put the company out of business.Long distance passenger bought by First Group and Grand Central These are still no examples of long-termIn most countries, long distance passenger Railway was bought up by Arriva, now part success in long-distance passenger operations.services have been retained as a single of DB. All of the latter three started to WESTBahn launched services in Austria innetwork, operated by the incumbent. This serve large towns which were ignored by the December 2011 and is suffering from thecan lead to much haggling, many politicians franchises. The main element in their failure incumbent dropping fare levels. NTV startedbelieving that the incumbent should run was their inability to stop at intermediate high speed services in Italy in spring thisnon-commercial services... but usually not stations towns already served by incumbents, year. We have reported extensively on “dirtybeing willing to pay for them. DB caused a and the launch of competing services by tricks” by the incumbent which controls bothmajor fuss when it dropped its InterRegio incumbents. the competing passenger operator and theservices as they were loss-making. Some Although most franchises run their course, infrastructure manager.states (Länder) paid for partial replacements and without major problems, some run intoto be launched whilst Veolia and Arriva (now trouble. In the UK, several franchises have Local passengerNetinera) launched their own services. But failed financially (mostly those which involve Contracts to operate local or regionalthe latter did not bloom; they still operate the gradual fall in subsidies then the payment passenger services are often tightly-drawn,but are very marginal. Private operators of dividends) with the incumbent allowed to as services must fit into a network timetable,have been very slow to launch services in continue on a sort of “cost plus” basis. One companies must charge “tariff union” faresGermany. On 23 July, HKX should launch company with several franchises complained and local authorities often also choose rollinga Hamburg–Köln service – just three times recently that its margins would be squeezed stock (often new trains built locally).a day. In contrast, there have been high- from a comfortable 12% to 8%. The major incumbents also do well fromprofile launches of private passenger trains in The British taxpayer is now paying about these services. The accounts of both DB andAustria (WESTBahn) and Italy (NTV), both five times more compared to the (supposedly SNCF, nowadays broken down by “productof which are supported by SNCF, incidentally. inefficient) state railways, and that with much group” show that city and regional passenger In France, SNCF has pushed non-core higher standard fares. However, the average trains produce the biggest surpluses, whereasservices into the Intercités category and age of rolling stock has fallen considerably long distance passenger has tighter marginshas managed to persuade the government in this period and the state of infrastructure and freight is often close to break even or into finance them – and not to open them to has improved. the red.competition, despite French company Veolia In Italy, when Trenitalia was replaced Details of margins are rarely revealed butoffering to run some services at lower cost (through lack of interest) by partners DB an example occasionally arises. The Bayernwith better services. and ÖBB in the operation of EuroCity region of Germany managed what must In the UK, all passenger trains, including services, the bad loser tried every trick in the be a record for the reduction of passengerlong distance, are operated by “franchises” book to block the ECs – which were almost rail subsidies when a new contract for thewhich are subject to competition every 10–20 unchanged in nature. The incumbent booked München–Passau line (190 km) came up.years. In the case of long-distance services, train paths then did not use them, claimed The subsidy of €8.50 per train-km was cutsome contracts see the winner paying the to €0.75 per train-km. In 2003 there was no26 TODAY’S RAILWAYS EUROPE XXX
  • competition and DB Regio received a large Only one really big multinational has joined (which itself had bought rail4chem) andcontract for several routes. This time, there the fray – Veolia of France. This company ITL; Trenitalia buying TX Logistik; andwas a stiff competition for the contract... and took over local German passenger operators of course Deutsche Bahn buying EWSDB Regio won again. in 1997, developed them and their freight in the UK, DSB Gods (Denmark), NS As Danish State Railways’ adventures activities, expanded into international freight Cargo (Netherlands), Strade Ferrate delin Sweden have shown, it is possible for operations as Veolia Cargo then decided top Mediterraneo and Nordcargo (60%) in Italy,a company to bid too high a price for a sell this “non-core activity” to Eurotunnel BLS Cargo (45%), METRANS (CZ 35%),franchise, and find oneself losing money. and SNCF in 2009. TR EU would also remind PCC Rail (Poland), TRANSFESA (Spain,We reported in TR EU 199 that Keolis is readers of the efforts by US railroad CSX to 55%) and so on.having the same problem in the Netherlands set up intermodal services in Europe together(see News pages). Our investigations of this, with NS Cargo and DB Cargo. The joint Success, failure, and the law ofhowever, revealed that Keolis’ margins on bus venture was announced in 1996 but quickly unintended consequencesoperations in Belgium are enormous. became ancient history. Both the regional vertically-integrated T he other side of th is c oi n is that An unlikely pioneer in European open monopolies (like JR Group companies)incumbents, especially state-owned, can access freight was IKEA Rail, a subsidiary and the vertically-separated franchiseuse their financial might to undermine new of the well-known blue-and-yellow furniture model have shown positive results. A largerentrants with little capital. WESTBahn has company. The company was founded in number of passengers travel by train, andaccused ÖBB of price dumping. Another April 2001, with the aim of distributing the major investment in the network have been(hidden) case of this is Fret SNCF. The IKEA products in Europe. Its first train undertaken by regional government – in theFrench incumbent has been making massive ran on 27 June 2002 using Class 66 diesels European model, regional government islosses for at least a decade (totalling s2–3 between Älmhult in Sweden and Duisburg forced to pay for its part, as the train operatorsbillion) but is still in business. Clearly, the in Germany (1044 km via three countries). externalise as many costs as possible. Inmoney is coming from somewhere and must The train ran 90% on time and averaged addition, many new operators have enteredrate as a subsidy. And despite another loss in 70 km/h, with five journeys per week equaling the railway scene – no less than 315 RUs2011, SNCF’s competitors say they are being 300 trucks. A major problem was the lack of involved in freight existed in Germany inbeaten to contracts by the incumbent offering return loads so, since 2004, IKEA has been 2000. Not all companies will survive for very“surprisingly low prices”. served by other operators. long, and market consolidation has started, There is also the matter of access to Since the start of 20 07 freight train leaving only the best-capitalised privateterminal and service facilities – often refused operators have run in “open access” mode companies and state railways still standing.or priced in a prohibitive way by incumbents. Europe-wide, but they are exposed to A major problem with the franchise modelThese facilities were often transferred to intense competition, not only from trucks is when passengers want to make transfersthe incumbents, making impossible for new and ships but other operators, without from one operator to another, with a complexentrants to serve the market. having the secure income of a franchise. ticketing regime which is not user-friendly, as Then there is the case of infrastructure The resulting thin margins mean that very the UK case has shown. In addition, the costmanager DB Netz having a pricing structure few private RUs make enough income to to the taxpayer has not been reduced – aswhich favoured large operators such as renew assets, so these become easy prey to promised by the supporters of privatisation.(surprise!) DB AG. Similar complaints were state-owned companies with deep pockets Passengers even have to pay higher fares.raised over the high energy electricity costs – and the silence of antitrust authorities is As the Just the ticket column in the sisterpaid by private companies in Germany and deafening. Examples include SNCF buying magazine TR UK shows, the situation isthe rebates applied for large amounts by the non-French operations of Veolia Cargo becoming a bargain hunt instead of a stress-operators such as (who else?) DB AG. Instead of reducing bureaucracy, there Where do new operators come from? Rurtalbahn was formerly known as Dürener Kreisbahn,are multiple actors in each scene now: the a small company running local passenger lines from Düren, between Aachen and Kölnincumbent RU, the IM and the new RUs, in Germany. The company started with local freight and is now operating across Europe.plus rail regulators and safety authorities, Rurtalbahn Cargo 185.684 (leased from Railpool) is seen at Komárom with the first freight traineach with its own agenda. Paperwork has operated by the company from Budapest towards Austria on 17 April 2012. Ferenc Némethreached new heights, as the difficulties forloco approvals in multiple countries show,although EU authorities are trying to pushcountries into “mutual acceptance”.Who are the new operators?The answer to this is anyone and everyone.A few examples are start-ups with privatecapital (DLC in Belgium, which becameCrossrail), preservation groups branchingout to serve local industry (TPCF Fret inFrance, now Regiorail), local authorityrailways going national (Wiener Lokalbahnin Austria), large companies wanting tocontrol their own logistics (CFL cargo is part-owned by ArcelorMittal and rail4chem byBASF, Colas Rail in France), shipping lines(Maersk set up ERS in the Netherlands), andlocal mining networks going national (RAGin Germany). Private track maintenancecompanies with spare locos have often startedwith spot traffic then developed from there.The national incumbents have also takenover local companies and developed them,examples being VFLI in France (SNCF) andMEG in Germany (DB Schenker).TODAY’S RAILWAYS EUROPE XXX 27
  • free trip. It is not certain how the incumbents willrespond to the changing market, where the incompatible with other versions A large number of TSIs (Technical Specifications for Interoperability) have CASE STUDYtrend according to observers is to “privatiseprofits, socialise losses”. Italian Railways already been published (more than 12 000 on the ERA website) and these are expected by David Haydock In TR EU 126 (June 2006) we reportedCEO Mario Moretti recently declared that to be complete by 2013. However, there are how EWS was about to enter the FrenchTrenitalia runs about 400 long-distance trains still differences of interpretation between rail freight market. The company Carrièresdaily, including the high-speed services at national authorities. du Boulonnais (CB), a family firm with theits own risk. Of these, around 100 operate Another problem slowly being tackled is biggest limestone quarry in France (500at a loss because they run on routes with of international train paths. If a RU wanted hectares) at Ferques between Calais andlow population density. Today these losses to run a train through multiple countries, Boulogne, called a press conference to explainare cross-subsidised by profits from the it had to contact each national IM and its decision to contract EWS subsidiary Eurohigh-speed services. If competitors only suffer a complex bureaucratic process. Cargo Rail (ECR) instead of Fret SNCF –operate on the profitable routes, they reduce RailNetEurope (RNE) was created in order at the time a controversial decision. CB’sTrenitalia’s ability to make up these losses. to harmonise this process and operate as a owners explained that they wanted to moveThe consequence could be abandonment of “one stop shop”, plus streamline other parts more stone by rail, particularly to the Parisloss-making routes. (standardised Network Statements, real time region, but that Fret SNCF said that this was Indeed, in France SNCF is now clearly exchange of train delay information, etc.). not possible. In addition, the Poulain familyshowing government its responsibility by were somewhat fed up with SNCF’s servicemaking it clear which passenger routes First Package recast – 20% of CB’s requests to run trains werelose money. Some have been transferred to On 31 May, the European Parliament’s turned down by SNCF and CB told the pressregional responsibility while others are to Committee on Transport and Tourism that it was never sure whether the four sets ofbe subsidised from a new tax on profitable (TRAN) held its second reading vote on wagons it needed each day would all turn up.routes – including private services. For now the Commission proposal to recast the So EWS stepped in. After operating a firstSNCF has been handed operation of these first railway package. Strengthening of test train in December 2005 and a second inservices but Veolia is pressing to take some the national regulatory bodies has been January 2006, the company started regularover by showing government how savings can confirmed. The duration of pluri-annual trains in March 2006, initially with a pair ofbe made. contracts between governments and IMs Vossloh G1206 diesels – at the time Class 66 In freight, former state railways are has been set at five years and clear principles had not been approved in France. The initialthrowing away the least profitable segments for the calculation of track access charges ECR service was three trains a week and(wagonload traffic, short trains) and focused have been outlined. Another part deals with in the first year or two ECR had problemsas much as possible to unit trains. Few private the rail financing and ETCS-differentiated expanding because the company was toldfreight operators are able to provide low- charging – levying lower access charges on by wagon lessors in France (subsidiaries ofvolume services, as these are staff-intensive RUs using ETCS to encourage its use and SNCF) that no bogie hopper wagons wereor irregular. And bureaucracy (when an offset the cost of installation in trains. available. In the end EWS ordered 150operator wishes to serve a customer, it must The complete unbundling of the IM from wagons, to form seven rakes, from Arbelarrange train paths with the IM) means that RUs is expected to become law. Negotiations Fauvet Rail in Douai.short-term traffic is problematic to serve. In among EU institutions are taking place and All this is now behind the company, whichsome cases, these developments have made the agreement to be reached during these has since been taken over by DB Schenker.the rail system less attractive for customers, talks is likely to be put to a vote in a plenary ECR now operates all of CB’s trains and thewhich vote with their purses for trucks and session while you are reading this article. number of trains has risen from around 20 totheir flexibility, despite the cost. 30 per week. The growth has all come from the extra trains CB wanted to launch to theInteroperability – still a problem Paris region for the building industry. TheA major problem for rail operators is company still dispatches two trains a dayinteroperability... or rather the lack of it. for steel maker ArcelorMittal in DunkerqueDespite the train builders’ efforts to create (the 13 2600 tonne trains a week has recentlyinternational locos (see below), the various fallen to ten due to economic conditions),national rail authorities are repeating the but the number of trains carrying aggregatesauthorisation process for each country. This has grown from two to five on a typical day.has forced manufacturers to go to the great These operate to nearby Picardie (Amiens,expense of building multiple prototypes Grandvilliers), the Rouen area (Abancourt,(e.g. the Vectron nine locos fleet) and run Serqueux, Gravenchon, Gaillon-Aubevoye,the process in parallel in multiple countries. Pont de l’Arche, Elbeuf Saint Aubin), andAt a UNIFE meeting on 14 June, it was said the Île-de-France (greater Paris) regionthat it took an average of 600 days to get (Batignolles, Creil, Limay, Valenton, Mitry,new vehicles approved. The head of Siemens Longueuil Sainte Marie). SNCF subsidiaryRail Systems department Dr Hans-Joerg VFLI’s brief incursion on some services hasGrundmann said equipment valued at €1.4 now ended, but the company still trips rakesbillion was currently awaiting acceptance in of covered hoppers carrying quicklime fromGermany alone, incurring capital servicing another nearby quarry to Caffiers, where theycosts of around €100 million a year. are attached to one of the ECR Dunkerque The multiple signalling systems in the EU trains. ECR’s reputation clearly went beforeare another serious problem, and ETCS/ it as the company has now won all of FretERTMS have added more complexity instead SNCF’s traffic from the adjacent Carrièreof simplifying things. The European Rail de la Vallée Heureuse, which is served fromAgency (ERA) is trying to play a major Marquise-Rinxent station and serves severalrole here, moving all the EU testing and Lafarge plants in Île-de-France.authorisation tasks under one roof – similar The upshot of all this is that in just overto the FRA in the US. The problem is that five years, ECR has elbowed Fret SNCF outnational governments all seem to want their of the area – completely. CB is ECR’s second“own” version of ERTMS, which will be28 TODAY’S RAILWAYS EUROPE XXX
  • biggest customer (GEFCO is the biggest)with 2.1 million tonnes a year. More detailsof how ECR did this, plus photos and a mapwere included in TR EU 160 in April 2009. And what does CB think of the service itis now receiving from ECR? Owner GillesPoulain told Today’s Railways Europe thattrains are now reliable, costs are lower, andthe company has been able to transfer trafficto rail as it had hoped – the company nowgenerates 15% of the French aggregatescarried by rail. Can any more of the 6 milliontonnes produced at Ferques be transferred torail? 4.7 million tonnes still go by road, mostlyover short distances. Certainly, traffic willincrease in the near future as CB increasesthe frequency of trains to Limay, west ofParis, where the company has invested ina new terminal. A test run to Béthune, notmuch more than 100 km from Ferques, wascarried out recently and was successful.However, the branch into the canal port,which CB wishes to serve, is in poor conditionand the local Chamber of Commerce does nothave plans to upgrade it in the near future.Another source of traffic, lost to rail in thepast decade, might be seasonal traffic to thenumerous sugar refineries in northern France– but the owners will need to be persuaded toreturn to rail, having been put off by SNCF. CB and ECR are certainly confident of thefuture. Together with wagon lessor NACCO,the two companies have recently investedin a further 144 new bogie hopper wagons(seven more rakes) for aggregates traffic anda further eight rakes are on order. The newwagons were built by Greenbrier in Polandand have two compartments instead of threein the classic wagons used for aggregatestraffic in France. Not only does this designreduce the number of moving parts andtherefore maintenance costs, it is also quickerto unload and carries a little more – 69.5tonnes compared with 67 – in a slightlyshorter length. CB is financing 44 of the newwagons as well as renewal of the 4 km branchfrom Caffiers station to the quarry whichwas built in 1974. Most of the finance fortrack renewal will come from infrastructure other builders to enter the market in the UK Liberalisation and the locomotive and continental Europe.manager RFF, however. The new order will allow ECR to escape market The other US company dominant in dieselfrom hire contracts with SNCF subsidiary locomotives is General Electric, which didSGW, all of the new wagons being with Class 66: off to the races not succeed with its “Blue Tiger” built inNACCO. ECR also intends to become Diesel locos have been popular with open cooperation with ADtranz. The company isindependent in wagon maintenance by access freight operators which need reliable, now setting its store on an order from UK-adding a new building to its Alizay depot near inexpensive, go-anywhere locos which have based Freightliner for the 2848 kW Class 70,Rouen. The company stresses that 90% of all to operate over non-electrified stretches of and intended to follow it with an EU version,wagon maintenance is already carried out by track and do not want to buy two locomotives but the loco is still suffering severe teethingthe company, on site by a “man in a van”. where one will do. They were also necessary troubles. Unsurprisingly, nobody is yet DB Schenker commanded 16% of the due to the initial lack of electric locos which interested in buying the loco in continentalFrench rail freight market in 2011, and aims could run on the various voltages in European Europe except TCDD, but then a Turkishto reach 20% by the end of this year. countries. company is helping built the loco... The EMD JT42CWR “Class 66” with Many private operators initially optedTop right: Euro Cargo Rail loco 77024 heads 2385 kW and 129 tonnes on six axles proved for the robust Ukrainian-built Class 232a train of the new hoppers down the branch a major hit with continental Europe operators “Ludmilla” 2200 kW Co-Co locos whichfrom the CB quarry at Ferques to Caffiers on after they proved their excellent reliability were available from eastern Europe and27 June 2012. and pulling power in the UK with EWS after had “grandfather rights” for running over the giant order for 250 locos. The drivers were German tracks due to their extensive use inAbove right: One of the new hopper wagons unhappy with the noise and lack of comfort East Germany.built by Greenbrier in Poland. David Haydock in the cab, however, and the locomotive lacks Strangely, diesels from the major builders of(2) rheostatic braking. More than 650 of the type electric locos (Siemens, Alstom, Bombardier) were sold up to 2009, making it difficult for are not very popular with freight open accessTODAY’S RAILWAYS EUROPE XXX 29
  • operators. Some reasons cited are highprices, inadequate horsepower and tractiveeffort, plus unimpressive reliability. A major player in this market is Vossloh,which moved from the diesel-hydraulicG2000BB 2240 kW four-axle to the six-axle diesel-electric Euro 4000 platform,which could provide better tractive effortand an EMD 16-cylinder 3178 kW primemover. Vossloh went this direction after theacquisition of Macosa in Spain from Alstomand abandoned the development of a heavydiesel-hydraulic six-axle locomotive withVoith Turbo components. The latter decidedto develop its own heavy diesel loco, and thusVoith Maxima 40CC was born. The Maxima40CC has suffered poor sales so far. It is a little surprising to find so manylarge diesels on the market with emergenceof multi-system electric locos, plus thecontinued bridging of electrification gapssuch as A achen (Ger many) – Mont zen(Belgium). Both EMD and GE have declaredan interest in making continental Europeversions of the Class 66 (Class 66EU) and of Skandinaviska Jernbanor is a private company operating passenger trains in Sweden formed ofthe Class 70. “classic” coaches. It is reportedly not doing too well. The loco, 185 707, is a standard Bombardier TRAXX AC 15/25 kV AC which, with the right signalling, can operate in all countries from Sweden,Standardisation comes to Europe Norway and Denmark through Germany to Austria, Switzerland and Hungary. The loco is ownedHistorically, loco orders came from state by Railpool and is seen at Virsbo, Sweden on hire to SJ with the “Blue Train” forming SJK Railtourrailways, and were custom-built according from Stockholm to Falun-C on 26 May 2012. Iain Scotchmanto their specifications. SNCF, for example,had a bureau which would design trains thencontract companies to build them. The holy loco. This lower-cost approach gained loss by fettling, then leasing, the locos.grail of loco builders from the 1970s was the many buyers, with AEG/ADtranz (later This venture expanded, and Dispolok was“universal locomotive” which could haul Bombardier) using a logistics-based approach eventually bought in 2006 by Mitsui Railpassenger trains in the day and freight trains for series production of the TRAXX loco Capital Europe (MRCE), a banking branchat night. The use of AC traction motors and family (descended from Class 145) to of the Mitsui empire. Similarly, companiesadvanced electronics resulted in the creation reducing costs through standardisation. such as Beacon Rail and Alpha Trains areof true universal locos such as DB Class 120 Siemens has now followed the Bombardier owned by banking institutions. The leasingand culminated in the Siemens Eurosprinter lead with the unification of its disparate companies push for the standardisation ofClass 1016 “Taurus” for Austrian Railways lines (Eurosprinter, Eurorunner, etc.) into locomotives, as they retain more of their(ÖBB). There were drawbacks, though, the Vectron platform, which includes electric residual value after each lease – with onlyespecially with the cost – even when ordered and diesel variants, while Alstom followed a repaint or vinyls, they are ready for thein the hundreds, as in Austria. And when suit with the PRIMA II platform. next customer. In rare cases these may needanother customer wanted more locos, the One minus for freight haulers is the move a change to signalling equipment, which ismanufacturers had to make yet another to four-axle locos, which cannot provide the available from the manufacturer.customised version. Even Siemens had to tractive effort of a six-axle loco. Supposedly,create a freight-oriented model, in the form the advanced traction control can provideof the ES64F variants. equivalent tractive effort, but in practice In reality, there was also a practical heavy trains require two electric locomotivesproblem with this, as passenger locos had – raising sales is a nice side benefit for thedifferent origins and destinations from manufacturers.freight, and it was not always feasible torun light between passenger and freight From state- to leasing company-depots. Management reorganisations in ownedsome countries, then the liberalisation of EU Instead of private investors risking capitalrailways meant a break-up of ex-state railways in creating new train operating companies,into separate divisions (in general long most financial institutions (banks, venturedistance passenger, commuter and freight), capitalists, etc.) focused on the leasing ofnegating the need for a universal locomotive locos and rolling stock. This is the sameand the economies of scale possible. Freight business model as one during the Goldoperators, in particular, wanted a cheaper Rush: you sell or rent spades and tools toloco and in France the Alstom Prima was prospectors, and if they default you resellthe result. So, the manufacturers moved them to the next customer.to the “modular platform” concept, with a The first leasing companies were thefocus on keeping the cost down. When DB ROSCOs in the UK, which took the least riskycreated its freight division after German parts of British Rail. In continental Europe,reunification (DB Cargo), the company Siemens Dispolok came into being as trainordered the Class 145 (derived from AEG builder Siemens found itself with locomotives12X prototype) with axle-hung motors such as the ME26 diesels returned by theadequate for the lower speeds of freight original buyers; Siemens could avoid a totaltrains, and thus cheaper than a universal30 TODAY’S RAILWAYS EUROPE XXX