More operators are needed to contribute to more modal shift

16/08/2020 – By Frédéric de Kemmeter – Railway signalling and freelance copywriter – Suscribe my blog
(Version en français)
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The railway is not able to cover a maximum of our mobility needs. Not really because there are other modes of transport, but because there are not enough operators and innovation.

Don’t think you’re going to read an ode to the competition here. But rather a questioning about the so low use of rail in our mobility, when we look at the overall figures. Fortunately, there are cases where rail is used intensively, for example in Tokyo or other large cities, or in rail freight transit in Switzerland.

The nationalisations of the railways in Europe between 1880 and 1947 had several causes. The most important was that this transport was strongly dominant for strategic reasons: transporting the coal that supplied industry and heating for citizens, transporting military troops at a time when Europe was going to war every twenty/thirty years. At this time, the railways were operated ‘as one complete unit in the best interests of the state’ and an increased volume of traffic was handled by an intensive labour force. It was also well established that many of the smaller companies would have been unviable of cost. Why? Because the idea was to integrate de facto the very expensive infrastructure into the operation of the trains. Replacing a bridge could take 20 years of revenue! Many small networks would probably have been able to survive on a state contract, had they not also had the network charges, and in particular the many short local lines that still provoke so much debate today.

The 1950s and 1960s announced major societal changes: the end of the first industrial revolution (the end of coal, steam locomotives and the mining job), the end of the European wars and the rapid introduction of the second industrial revolution, that of oil. Oil makes it possible to manufacture bitumen and build a road network cheaper than a railway line. Since this road network serves everyone, including farmers, it is the state that takes care of it, to the delight… of the voters. We have here the first ingredients of a major distortion between rail and road:

  • on the rail network, a single operator on the entire national territory and very heavy infrastructure costs;
  • on the road network, millions of private individuals, that is you and me, with no timetables to draw up. « The car, my freedom’ has become the way of life for the entire population.

As always, the war technologies have led to civilian use: increasingly modern road vehicles and aviation accessible to all. The rest is well known: the railways dramatically decreased while their mode of operation has remained more or less the same as in the 1930s. Meanwhile, the industry was also changing in favour of smaller companies that no longer filled one wagon a day. The most serious thing in the 30 years after the war was that the railways were burdened with a lot of tasks that the states could no longer afford to pay for. A railway policy was pursued as if the second industrial revolution did not exist!

Advertising of the 60s in Germany. The train has disappeared from the landscape…

What makes the volume today?
We can see some observations of transport:

  • the « millions of private people » that we are have generated a massive development of trips every day of the year, allowing us to make lots of activities (holidays, city-trips, business …);
  • No national airline company owns « its » airport, although it dominates the acquisition of slots. Airports are managed by independent institutions, which rent the space to everyone, not just one company.

The common with these two examples is that the diversity of operators has built up a volume of activity that drives an entire economy, not only in tourism, but also in business and industry. Of course, this strong growth in travel has given rise to mass consumption and increased air pollution, already well under way with industry. But why has the railways stayed away from this movement? For several reasons:

  • the persistence of the political idea that the railway must remain « another world »;
  • the persistence of the idea that the railway is an armed arm of the state, or even for some, a social service;
  • the observation, over the last 150 years, that the State has always felt obliged to pay, no matter what, implying that there is no need to rethink the role of rail transport and redefine its link to the country;
  • The long life span of the assets, between 30 and 40 years, which covers almost two generations of railway workers, limiting research and innovation.

All these elements show that, a priori, there was no reason to accept other operators. The railway is part of the long time and planned economy. But is this long time still the time of today? During that time, the automotive, aviation and logistics industries bring us new products almost every year. As an isolated company, the railway could no longer reach the entire population and thus became marginalized, including among the industry.

What new operators bring
The development of multiple operators obviously generates competition, but it is not the most important. It is above all a question of innovating in terms of commercial policy, technology and making the train more attractive. The freight and long-distance passenger train sectors have been able to demonstrate that it is possible to attract more traffic to the railways. For example, the Austrian company Innofreight has developed multi-purpose freight wagons, that avoids empty runs. The State has been able to rely on industrialists, who have their own financial resources, to ensure that innovation is more vigorously pursued in the railway sector.

(photos Innofreight)

Today, operators prefer to own their own fleet of rolling stock. Why? Because they no longer depend on a large public compahttps://www.innofreight.com/en/ny and use their wagons only for their own business. They can therefore better meet their customers’ requirements. The operators have thus removed the « long time » we were talking about above.

It is also new operators who are helping to better develop seaports. For example, Hamburg has its own rail operator, Metrans, and no chancellor imposed Deutsche Bahn, which would have been considered serious state interference. The Swiss shipowner MSC, the second largest in the world, now has its own rail operator, Medway, in Portugal, Spain and now in Italy. The Swiss incumbent SBB Cargo now can operates his own business outside Switzerland, which was inconceivable twenty years ago. How do all these operators get there? By renting approved rolling stock and recruiting driving staff, with their license.

>>> To read: When Hamburg has its own railway company to the hinterland

Italy, currently the only country with two high-speed train operators, has shown that traffic, which was declining before 2012, has been able to recover with the arrival of a new operator. Studies have shown that the « novelty » attracted air travellers who had not been in a railway station for a very long time. Again, it was not the State but innovation that brought about a modal shift. The State has simply built a « favorable political environment » for innovation and the entry of new operators, which is its essential role.

Trenitalia and NTV-Italo together at Rome-Termini, April 2017 (photo Mediarail.be)

Spain, to reimburse its network of high-speed lines, can no longer rely solely on Renfe, the incumbent operator. The network manager is therefore free to find other operators in order to make it profitable. The Spanish system, which advocates a structured approach, is interesting because it shows that the State, owner of the network, is still present in railway policy: framed competition, « without killing » the incumbent operator. First effect: competitor ILSA has just ordered 23 high-speed Frecciarossa trainsets for 797 million euros , which would never have been possible without an alternative operator (with however support of the italian incumbent Trenitalia).

Some criticise the multi-operator rail system, arguing that despite the liberalization, rail utilisation figures are still as low as ever. The same critics tell us that the money goes to shareholders rather than to users, who overpay for their tickets. We can easily answer that:

  • Even though they are still in the minority, private operators have been able to maintain the level of a sector which, without them, would have lost even more market share to road and air transport;
  • Several operators are in fact subsidiaries of public companies, which means that the shareholder is often a neighboring state;
  • The criticism of shareholding is often that of anti-capitalism. This means that critics still see the railways as a political tool, while it is a transport tool that needs large amounts of money;
  • Public service is not an end in itself or an ideology. Even if it is delegated, the public service has never disappeared from the railway, especially in the local and regional segment. This eternal loss-making sector is the one most in need of operators capable of containing costs, so that the railway does not become a tool with disproportionate expenditure. If an operator can offer what a region wants, why should they do without?
  • The English system shows that passengers finance 66% of rail costs themselves, compared to 44% in 2010. Great Britain alone cannot serve as a benchmark for the whole of Europe, as it does not have a social system comparable to the rest of the Continent. Moreover, the British system is likely to migrate towards a German-style policy, with public service contracts for pricing and regional services;
  • The railway is an expensive object in terms of technology (purchase and construction). It is therefore useful, when public finances are constrained, to look elsewhere for other sources of funding, at operators who may have certain additional financial means at their disposal.. Today’s zero rates do not mean unlimited indebtedness to be handed over to future generations;
  • It is not competition that is important, but opportunities to make things happen, especially in a sector that is very resistant to change. Many internal opinions point out that it is not always money that is lacking, but new ways of working. The right people at the right places;
  • Despite criticism, the State is still very present, through access authorizations, control of operators, ownership of the network and numerous technical standards (electricity, security, PRM access, etc.).
  • Finally, when it is proclaimed everywhere that there will be a new world tomorrow, why then come back with solutions from the 1930s?

A utopia of some political groups is to pretend that the railway will be saved by restricting other modes of transport. We must always be wary of people who believe what is good for you, because this hides the establishment of an authoritarian policy which always starts with a control of our movements then of our freedoms.

No government succeeded in banning the second industrial revolution in 1950, which relegated the railways to a minority status. A third revolution, the revolution of data and disruptive technology, is looming, which we cannot yet fully imagine. And we see that no government is going to ban this new era. It is too late to turn back. If someone creates an application that allows you to compare travel prices, if there is parallel information, no one can forbid it. The danger is that our politicians will be seduced, tomorrow, by other forms of travel that large global companies, with unlimited resources, will have developed. It is therefore necessary that the railroad continues to progress to avoid an even more intense marginalization.

The last thing to say is that the current rail policy will be faced with the new challenges of the pandemic, and it is not known when this will ever be a normalised situation. If a government helps airlines as much as it helps a baker or a museum, it seems only natural that the same government should help the entire railway sector, including alternative operators. Rather than relying on a single entity, it is better to mobilise all available energies and funds to attract more people to our trains and accelerate transition and innovation.

 

16/08/2020 – By Frédéric de Kemmeter – Railway signalling and freelance copywriter
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