Nuovo Trasporto Viaggiatori is to date the only private high speed rail company in Europe. Created in December 2006 by three entrepreneurs coming from the industrial world, it was bought in February 2018 by the GIP fund, which offered €1.94 billion to hold 100% of the Italian private carrier’s capital. Unlike Britain, NTV does not operate in Italy on the basis of a franchise or a delegation of public service, but in open access. The company was from the beginning confronted with the incumbent company Trenitalia.
After its creation in 2006, Banca Intesa Sanpaolo and the French public operator SNCF take shares in the company: the choice of SNCF was very controversial, because the French system was always closed to foreign operators. By retaliation, Trenitalia stopped the railway cooperation Artesia with SNCF and replace this by the new entrant Thello, which provides services to Nice, Marseille and Paris.
The start of NTV-Italo traffic only came in April 2012 and was quite difficult, particularly because the regulation of rail governance was still very vague. This one caused the very fast bankruptcy of Arenaways, another entrepreneur who tried the private train a little too early … « In Italy the independent regulator didn’t begin work until the end of 2013, after the arrival of Italo, which operated for a year-and-a-half in an environment where there was no proper regulatory authority overseeing the market », told Andrea Giuricin, special advisor at NTV-Italo and CEO of TRA Consulting, at International Railway Journal.
In addition, Italo put into service a new train never sold by Alstom, the AGV (in french Automotrice à grande vitesse – high speed Emu). A new high-speed train that the SNCF did not want, preferring large capacities. It is distinguished by the engines that is implanted all along the train, unlike traditional TGV with semi-permanently coupled articulated un-powered coaches and power cars at each end, thus losing seats for sale. Another innovation has been to provide four different classes: Club, Prima, Comfort and Smart-on Italo. The goal was to reach all segments of the clientele.
With all these innovations, we can better understand the significant risk that entrepreneurs took with a start-up investment of nearly 967 million euros, which needed to be secured. Giancarlo Scolari, editor of the specialized site Ferrovie.it, reminds that NTV’s departure problem was that the company had chosen to compete frontally with the ‘fatty material’ of Trenitalia, the high speed service. It was to dare.
In October 2013 the Italian Competition Authority ruled that FS subsidiaries Trenitalia and Italian Railway Network (RFI) had deliberately attempted to exclude NTV from the market. While NTV has a net loss of 62 million euros in 2014, the SNCF shareholder ‘leaves the ship’.
At the worst of its short history, however, NTV received unexpected assistance: the transport authority, finally defined as railway authority with great prerogatives thanks to the government of Matteo Renzi, decided to halve the toll for the use of railway lines. The toll went from 13 euros to 8.7 euros per kilometer, a decision valid for both NTV and Trenitalia. It was a decision both economically and politically: if NTV had failed, RFI would have lost a significant source of revenue. At the political level, the image of Italy would have been strongly affected and many people would have attributed the failure of NTV to Trenitalia’s unfair competition practices. The image of Italy would have been a country in which it is difficult, or impossible, to invest successfully in rail renewal.
Matteo Renzi had simply demonstrated that the role of the state was to provide a solid foundation for companies that bring more to the Italian economy, rather than strive to maintain monopolies and destroy any form of initiative. Yes, it was political. And for once, in the right direction…
After a restructuring of the debt and a recapitalization of 100 million euros in 2015, NTV-Italo was able to make its first profits in 2016. The new operator has finally found its place against Trenitalia and a real competition has been established between the two operators, thanks mainly to an extension of the prerogatives of the national regulation. NTV-Italo now has access to Milan-Central and Rome Termini stations, which are the object of a bad dispute in 2012 about access to essential facilities in the first years of operation.
NTV today
Today, NTV-Italo have 1,200 contractual jobs created (2018), a turnover of 454 millions euros (net results 33.8 million in 2017) and a traffic of 17 millions passengers (more twice of Thalys, more than Eurostar). The average load factor on its services has grown from 47% in 2012 to 78% in 2017.
To operate its train service, which linked 25 stations in 21 cities, NTV-Italo has 25 AGV trains and 17 Italo Evo train sets ordered and which must be delivered by October 2019, NTV having an option to buy five more. The purchase of this rolling stock was the first capital expenditure item for NTV. This is due to the absence of ROSCO, which is a renter of rolling stock. To date, there is no ROSCO for high-speed equipment in Europe, while there are some for locomotives and certain DB Intercity cars (see Flixtrain). NTV has therefore directly invested approximately 600 million euros for the purchase of its trains.
When it comes to purchasing, not leasing, the contracts often include maintenance which, in the case of NTV, is carried out directly on the new Nola site, near Naples, by Alstom with which NTV has concluded a thirty-year contract. Since 12 December 2015, Alstom has also been maintaining the AGVs at the Fascio San Rocco plant in Milan, where RFI has made this infrastructure available. In November 2017, the maintenance depot in Venice was also commissioned, mainly dedicated to the maintenance of the Class 675 Evo trainsets.
Commercial policy
In Italy, with the arrival of the private NTV-Italo, prices has falling down by half on the Milan-Rome route. The public service of Trenitalia has been able to keep up and this fall of prices has paradoxically caused a sharp rise of its own passengers flow ! NTV holds about 1/3 of the traffic on this main route. With both companies NTV and Trenitalia, it is counted a departure from Milan to Rome every 20 minutes on average …
Costs have gone down when many services aboard the NTV trains have been removed, to allow more competition on fares. « The company’s managers realized that passengers preferred to spend five euros less on a train ticket than to receive a welcome cocktail on board, » explains Scolari.
At the opposite, the operator Trenitalia had no trouble putting up a series of countermeasures as soon as NTV arrived. But finally, the whole Trenitalia service was greatly improved, stations like Rimini had new platforms adapted to the new trains and a very aggressive new price strategy was launched. « Paradoxically, » explains Scolari, « the arrival of NTV was very positive for Trenitalia. »
The graph above, kindly authorized by the author, shows very clearly four phenomena:
- Subsidized major line traffic (in gray) is predominant until the end of the 2000s with the arrival of low-cost aviation;
- The non-subsidized high speed (in green), but in monopoly, makes it possible to fight against the low cost aviation, without however stopping the decline of the shares of the rail;
- The share of high-speed train, non-subsidized, becomes preponderant as of 2009 without however being able to stop the fall of the traffic, following the crisis of 2008;
- In 2012, the arrival of NTV-Italo (in red) is combined with a rise in high-speed traffic from … Trenitalia!
In 2017, NTV entered € 354.9 millions for transport tickets and had 4,8 billions passengers.km, so it charges an average of 7.4 cents of € per passenger and km (10 cents in Spain´s AVE). Trenitalia entered € 4,044 million for transport tickets in the long distance commercial market and had 16,022 thousand million passengers.km, so it charges an average of 25.2 euro cents per passenger and km, more than triple that of its competitor. But these are global figures for the entire network, and Trenitalia is still receiving subsidies on some major line sections where there is no high speed.
>>> See also : The Spanish high speed officially liberalized
Comparing the same network for both competitors, « the most striking result of Italo’s arrival is the average 40% decline in ticket prices and the high-speed market in Italy which doubled between 2011 and 2018, which is good for all » explains at IRJ Andrea Giuricin.
This phenomenon is also visible on lines that have not high speed at full length, as in Lombardia. « The most interesting thing, is that the main share of the benefits is not due to the increase of speed and the demand generated by it, but by the new demand, to the reduction of tariffs and the quality of services. All effects are attributable above all to the competition », explains Paolo Beria, professor of Applied Mathematics at the Polytechnic School of Milan.
In terms of modal split, during the first six years of operation of the Milan-Rome route, the percentage of passengers using the railways rose from 36 to 80% and aviation, the most energy-consuming mode and the most polluting, fell from 50 to 14%. By this, NTV participated in part of the modal shift, which proves that the liberalization of the rail is also beneficial for the climate.
A model for Europe?
This seven-year adventure now allows Italo to have good arguments to make abroad. « There are big risks in other countries, and you have to establish whether the market is open for real or just on paper. The Italo business model could be very positive for the Spanish market with a similar effect on prices to what we have seen in Italy », explains Andrea Giuricin. No « adventure » is mentioned at the moment in other countries, for example in Germany or France.
NTV-Italo’s industrial model, however, has shown that with well thought-out policy and state support, the railways can progress for the benefit of everyone. If necessary, by killing of certain ideologies …
References :
2012 – Mediarail.be – L’Italie, berceau de la libéralisation du rail
2014 – La Republicca – L’Autorità taglia i pedaggi per i treni dell’alta velocità: -37%
2016 – Andrea Giuricin – CEO di TRA consulting – I benefici della concorrenza nel settore ferroviario
2017 – il Post – Come va Italo ?
2017 – La Voce / Paolo Beria – Ecco quando conviene l’alta velocità
2017 – Mediarail.be – NTV bien installé dans le paysage italien
2017 – Skyscrapercity – #2130
2017 – Business Online IT – Italo Evo al via dal 7 Dicembre con nuove tratte e assunzioni
2018 – Mediarail.be – Les entreprises ferroviaires privées en Europe : état des lieux 2018
2018 – Mediarail.be – Un nouvel actionnaire unique pour NTV-Italo
2019 – Italo – Nuovo Trasporto Viaggiatori
2019 – Mediarail.be – Oui, la libéralisation du rail est bénéfique pour le climat
2019 – International Railway Journal / Keith Barrow – Exporting the Italian recipe for high-speed success
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