1. 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 Intercités
In the beginning... passenger train 5963 Paris Bercy–Clermont Ferrand at Clémentel on 15 June 2012. Lionel Suty
In the first half of the 20th century most
countries tended to nationalise the existing 1987 into six vertically-integrated passenger Amtrak their loss-making passenger trains
private railways, often because they were companies and a nationwide freight railway. and remove this burden, for a price) and
bankrupt; cases such as Austro-Hungarian The most profitable of these (JR East, JR in 1976 the government had to nationalise
company 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 on
had to face the enormous task of rebuilding Settlement Corporation had to shoulder deferred maintenance and under-investment
themselves. In the meantime, this mode JPY 22.7 trillion of the debt, and the rest before becoming profitable, while shedding
of 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 and
the lorry, which gradually eroded rail’s modal managed to reduce their part of the debt the unions were forced to ask the federal
share. Despite system-wide dieselisation and and raise traffic, while the JNR Settlement government for more deregulation, which
electrification, 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 any
alarming rate, this problem reaching crisis had risen to more than JPY 30 trillion. Its rate for a rail service unless there was no
point in the 1980s. debts were incorporated into the national effective competition. Rail shippers and
government's general debt. carriers could establish contracts without the
An 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 as
Japan National Railways (JNR), which for network maintenance and replacing they wished. This deregulation led to both
had to rebuild its network essentially from steam with diesel and electric traction) while lower prices for shippers and railway industry
scratch due to World War II damage, plus burdened with a complex set of regulations profitability, as companies were able to
shoulder the large cost of its high speed regarding pricing and closure of redundant rationalise their systems while improving
Shinkansen 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 reduced
considerations 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 industry
in 1987 – the equivalent of s213 billion at the mostly in the northeastern states. In 1971, operating ratio (the percentage of costs in
time, 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 to
22 TODAY’S RAILWAYS EUROPE XXX

2. Text on second pair of pages is a stand-alone (but highly relevant to the rest of the article). Text on this page
continues 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, the
The Swedish experiment “franchises”. The TOCs would have virtually incorporation of Deutsche Bahn AG (DB
The first steps towards liberalisation were no own assets, since the rolling stock would be AG) was signed in Frankfurt, and four days
made in 1988 in Sweden, when the parliament leased from ROSCOs (Rolling Stock Owning later DB AG has entered the Berlin company
mandated the partial privatisation of the companies) which took over all BR passenger registry, with the federal government of
state railways, as the existing system was rolling stock. Six rail freight companies were Germany as sole shareholder, with equity of
making 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 railways
Järnvägar) lost its network, transferred to the 1996 a subsidiary of the American Wisconsin into a privately-run company was a complex
Swedish 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 network
estate. The Swedish experiment also allowed The network was handed over to the to be government responsibility
local authorities to tender local passenger Railtrack, a regulated private monopoly • government-mandated tasks (e.g. military
train 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 reductions
seven 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 passenger
Unigrid (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 Cargo
and shunting) and TrainTech Engineering. sector. Initially, the company managed to (freight, later renamed Railion), DB Netz
C 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 Station
government 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 private
Road Administration (Vägverket) in order to Ladbroke Grove (1999) and Hatfield (2000) sector and without rail experience... with
form 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 375
in infrastructure investment, mostly borne by officially a private-sector entity, but with other companies. Holding company DB AG
the taxpayer. The Swedish model, which is no debts underwritten by the government, which held a share in 80 of the 375 companies, while
longer an experiment, was very influential in also partially funds the company. NR still the rest were controlled by the five major
the 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 DB
The British were the next, but took a very Bahn arm, logistics under DB Schenker and
German reunification, then division infrastructure and operations under DB
different route. Between 1923 and 1948, the
UK’s many small railways were consolidated The German case was more complex, as Netze. There have been repeated attempts to
into the “Big Four” – the Great Western the country (and the state railway) was privatise DB AG or DB Bahn, but so far these
Railway (GWR), London, Midland and split in two after World War II, with West have been unsuccessful. DB Netz cannot be
Scottish 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, other
Southern Railway (SR). These were in turn (DR). With the German reunification of European states followed (more or less) a
nationalised as British Railways (BR) in 1989–90, DB and DR’s existing problems more typical route of separating operations
1948, which replaced all steam locos and were compounded. DR, and to a lesser from infrastructure, while opening the
closed 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 Rail
Gradually, the region-based system, which received DEM 450 billion of public money in liberalisation index tracks progress on this
was 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 system
including Railfreight and InterCity. Between middle of a power game between the federal for 20–30 years, if the infrastructure is in a
1993 and 1997, BR was privatised in an states and the federal government, while very bad state and the operator(s) have to
unusual 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 freight
how to proceed with BR privatisation. Most organisation and full coverage of costs and operators were unable to invest the agreed
argued for either a single entity or regional, as much net income as a private company. 1.2 billion Dollars as traffic fell and during
vertically-integrated companies (as in So, it was not surprising that DB’s passenger the crisis of 1999 the state stopped paying the
Japan). The Treasury view (which in the end modal share fell from 60% in 1950 to 29% agreed subsidies to the commuter operator. In
prevailed) called for the creation of seven, in 1990, while freight fell from 36% to 6% at Brazil only 60% of government rail funding
later 25, passenger railway franchises (Train the same time. Meanwhile, the accumulated went to support the public rail transport
Operating Companies or TOCs) as a way debt of DEM 13.6 billion of 1970 had reached system, the rest going to a specialised line
to maximise revenue. The Railways Act of DEM 47 billion in 1990 and was forecast to serving a steel company. Two non-mining
1993 established a complex structure for the reach DEM 80 billion in 1996. There were railways comprised more than 90% of Brazil’s
system. BR was to be broken up into over 100 16 attempts to remodel DB, but only for the rail network. The two non-mining railroads
separate 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 an
some through regulatory mechanisms. The reunification added more urgency. extension for another 30 years. One company
contracts often needed to be approved by The railway reform (Bahnreform) law was used to hold old rail debts and to hold
the 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 the
TODAY’S RAILWAYS EUROPE XXX 23

3. EU TRANSPORT POLICY
by Roland Beier and
Nick Fotis
One of the subjects mentioned in Today’s
Railways issue 1 was the EU and the rules which
sometimes caused problems. We reported that
Directive 91/440, whose effects would mean
strict rules on the type and state of rolling stock
allowed access to separated infrastructure and
the imposition of modern signalling equipment.
At the time, groups preserving locomotives and
organising railtours were starting to worry about
the effect on their activities.
One of the main tasks of the European
Union is the creation of a single market.
Such a market requires good transport
infrastructure in which railways need to
play a vital role. In order to improve the use
of railways the EU established a policy of
liberalisation which was backed by various
legislative initiatives. However, this alone
was not enough to improve the European Crossrail is one of the most successful private companies to emerge from the EU’s push to
railway system. Renewed and additional liberalise the railways. The company was founded as DLC in Belgium and later merged by former
infrastructure was required and there was Regionalverkehr’s freight arm in Switzerland. Here Crossrail 185 591 and another loco of the same
need to harmonise the various national type haul a long and well-filled intermodal service towards Italy at Mattstetten in Switzerland on
transport infrastructure improvement plans 15 June 2012. Mario Stefani
by designing a future European transport
network. 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-owned
In the 1970s and 1980s most European railway experiment of 1988 with separation of train operators. These criteria include financial
companies were state-owned monopolies operations from infrastructure. capacity, professional skill and appropriate
within 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 covered
but only used their own infrastructure, The fi rst step towards a new rai lway the allocation of railway infrastructure
complementing the state-owned railway. The policy was Directive 91/440/EEC on the capacity and the charging of infrastructure
monopolies continued to lose market share development of Community railways, which usage fees, paving the way for running trains
to road transport as their employees were would restructure railway companies to in “open access” mode. Progressively, the EU
treated as civil servants and the railways the requirements of the single market. The introduced more Directives and clarified
lacked the flexibility to compete with road Directive was based on four principles: previous ones, with the goal of increasing
and air transport. As a result increasing • independence of railway companies from competition on the rail network. These
sums of money were needed to subsidise the state directives were grouped in the so-called
the 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 ost
policy of many countries including the aim of
First Railway Package
accounting. The Directive did not include
increasing rail’s share of the transport sector. the complete separation of management On 15 March 2001 the EC introduced
Although some countries spent heavily between operations and infrastructure, the First Railway Package by publishing
to improve rail infrastructure, railways however. Directives 2001/12/EC, 2001/13/EC and
continued 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 on
Economic Community – EEC, later EC – as train operating companies (“Railway an equal basis to the Trans European Rail
it was called at that time) decided to define a Undertakings” or RUs in EU parlance) Freight Network, and subsequently to the
common railway policy. The basic idea was to which would be able to run cross-border national rail networks of Member States. The
raise 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 nt
or 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 RUs
both within rail itself and in respect of other provisions of Directive 91/440 were too vague • separation of RUs and capacity allocation
transport modes. Lower costs, better safety and so liberalisation had to be driven forward bodies; there must be a separate allocation
and lower environmental impact would favour by additional legislation. body if the IM is organisationally linked
competitiveness whilst structural limitations In 1995 Directive 95/18 was published, to a RU
and the old age of infrastructure as well as concerning the criteria for the issue, renewal • a requirement for the IM to publish a
dissimilarity 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

4. 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- step
liberalisation of freight transport – in part by
2003 and in total by 2008. The First Railway
Package had to be implemented by the old
Member States from 15 March 2003 and in
the 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 loco
a certain degree in some Member States – 162 114 (delivered to Czech Railways, but then sold to FNM in Italy and recently repatriated) plus
many dragged their feet in order to protect former ÖBB coaches forming train IC 1010 Havirov– Praha at Horany on 16 June 2012. Quintus
their incumbent monopolies. Following Vosman
lengthy discussions, the EU Commission
finally started infringement procedures
against some Member States on this issue state plus a pan-European register managed corridors, international freight trains should
which are still pending at the EU Court of by ERA. be offered pre-programmed paths, which
Justice. Most of them concern the lack of There is a complementary set of EU have priority over other train services. The
independence of the path allocation body documents for: main idea is to cut border crossing times for
and/or of the rail regulator, as well as the • a common format for safety certificates international freight trains, increase the use
insufficient separation of infrastructure and and application documents – Commission of existing capacity and remove infrastructure
train operating companies within a holding Regulation (EC) No 653/2007 bottlenecks. The co-operation of national rail
structure. • a common safety method on risk evaluation regulators is also to be intensified. The first
and assessment – Commission Regulation corridors will be operational in December
Second 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 on
Package (Directives 2004/49/EC, 2004/50/ vehicle register – Commission Decision railway-related legislation in the EU. The first
EC and 2004/51/EC). This covers unified 2007/756/EC of 9 November 2007 is the recast of the First Railway Package. The
safety standards for RUs, interoperability Also, Directive 2009/149/EC updated the various Directives will be merged into one
of rolling stock, creation of the European Appendix I of Directive 2004/49/EC. Directive which also contains clarifications
Railway 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 to
cross-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 well
cabotage, by 2007 instead of 2008. The EC , Regulations (EC) 1370/20 07 and as more competence, plus separation of
Package also introduced common procedures 1371/2007). It opened international passenger accounts between IMs and train RUs, and
for 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 discussion
Authority in each Member State, conceived rules for Public Service Obligation (PSO) and will probably be approved by all relevant
as 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 be
Certificates, which are issued by the safety became obligatory, but with a transition published at the end of 2012. This should
authority. Safety Certificate part A covers the period of 15 years. This has allowed national cover total liberalisation of rail passenger
general internal safety management of each incumbents to “hold on” until 2024. services (so far only international services
RU whilst part B covers safety management New regulations on passenger rights are liberalised) as well as stricter rules on
in 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 to
has to apply for Part A in its home country assistance to passengers affected by delays or discussions of holding structures and will
and Part B in each country where it wants to cancellations. Regional, suburban and urban also be affected by the results of the ongoing
run 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) deals
Keeper Markings (VKMs) to harmonise with rail freight corridors. So far nine such
numbering of rolling stock and the creation corridors have been defined, each covering
of national vehicle registers in each member at least three member states. Along these
TODAY’S RAILWAYS EUROPE XXX 25

5. Open access, franchises and
(lack of) competition
Freight
One major difference between rail freight and
passenger operators is the lack of subsidy to
the former. The few subsidies going to freight
are usually for infrastructure, or launching a
new type of service and can be granted to any
company. Freight services are provided on
behalf of a customer, almost always a private
one nowadays, as most formerly state-owned
utilities have been privatised.
As mentioned above, freight services were
the first to be liberalised in Europe and
are now completely open to competition,
in principle. Some countries have “played
the game” and made it easy to enter the
market, despite the odd dispute. Germany, in
particular, has seen the number of RUs reach
about 300, although many are very small
and offer limited services. Once the market
opened up in Germany, traffic boomed, by High speed rail competition in Italy. A Trenitalia ETR.600 Frecciaargento tilting train set passes
about 60% in less than a decade. In contrast, NTV Italo set 07 standing at Roma Tiburtina station on 20 April 2012. Mathias Rellstab
in southern Europe, including France,
governments have done everything they can
to protect the incumbent, few competitors
have started up, and rail’s traffic and market
share 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 of
trains 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 well
otherwise ticket prices would be socially same routes. In the UK, Heathrow Express capitalised. But when Arenaways tried to
unacceptable and severe road congestion is the only non-franchised “open access” set up services in Italy, severe restrictions
would 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-term
In 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 in
network, operated by the incumbent. This serve large towns which were ignored by the December 2011 and is suffering from the
can lead to much haggling, many politicians franchises. The main element in their failure incumbent dropping fare levels. NTV started
believing that the incumbent should run was their inability to stop at intermediate high speed services in Italy in spring this
non-commercial services... but usually not stations towns already served by incumbents, year. We have reported extensively on “dirty
being willing to pay for them. DB caused a and the launch of competing services by tricks” by the incumbent which controls both
major fuss when it dropped its InterRegio incumbents. the competing passenger operator and the
services 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 into
to be launched whilst Veolia and Arriva (now trouble. In the UK, several franchises have Local passenger
Netinera) launched their own services. But failed financially (mostly those which involve Contracts to operate local or regional
the 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” fares
Germany. On 23 July, HKX should launch company with several franchises complained and local authorities often also choose rolling
a 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 from
profile launches of private passenger trains in The British taxpayer is now paying about these services. The accounts of both DB and
Austria (WESTBahn) and Italy (NTV), both five times more compared to the (supposedly SNCF, nowadays broken down by “product
of 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, whereas
services into the Intercités category and age of rolling stock has fallen considerably long distance passenger has tighter margins
has managed to persuade the government in this period and the state of infrastructure and freight is often close to break even or in
to 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 but
offering to run some services at lower cost (through lack of interest) by partners DB an example occasionally arises. The Bayern
with 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 passenger
long distance, are operated by “franchises” book to block the ECs – which were almost rail subsidies when a new contract for the
which 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 cut
some contracts see the winner paying the to €0.75 per train-km. In 2003 there was no
26 TODAY’S RAILWAYS EUROPE XXX

6. competition and DB Regio received a large Only one really big multinational has joined (which itself had bought rail4chem) and
contract for several routes. This time, there the fray – Veolia of France. This company ITL; Trenitalia buying TX Logistik; and
was a stiff competition for the contract... and took over local German passenger operators of course Deutsche Bahn buying EWS
DB 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 del
in 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 of
however, revealed that Keolis’ margins on bus venture was announced in 1996 but quickly unintended consequences
operations 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 franchise
use their financial might to undermine new of the well-known blue-and-yellow furniture model have shown positive results. A larger
entrants with little capital. WESTBahn has company. The company was founded in number of passengers travel by train, and
accused 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 the
French incumbent has been making massive ran on 27 June 2002 using Class 66 diesels European model, regional government is
losses for at least a decade (totalling s2–3 between Älmhult in Sweden and Duisburg forced to pay for its part, as the train operators
billion) but is still in business. Clearly, the in Germany (1044 km via three countries). externalise as many costs as possible. In
money is coming from somewhere and must The train ran 90% on time and averaged addition, many new operators have entered
rate as a subsidy. And despite another loss in 70 km/h, with five journeys per week equaling the railway scene – no less than 315 RUs
2011, SNCF’s competitors say they are being 300 trucks. A major problem was the lack of involved in freight existed in Germany in
beaten 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 private
terminal 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 model
These facilities were often transferred to intense competition, not only from trucks is when passengers want to make transfers
the incumbents, making impossible for new and ships but other operators, without from one operator to another, with a complex
entrants 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 cost
manager DB Netz having a pricing structure few private RUs make enough income to to the taxpayer has not been reduced – as
which 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 sister
paid by private companies in Germany and deafening. Examples include SNCF buying magazine TR UK shows, the situation is
the 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 Köln
incumbent 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 train
each with its own agenda. Paperwork has operated by the company from Budapest towards Austria on 17 April 2012. Ferenc Németh
reached new heights, as the difficulties for
loco approvals in multiple countries show,
although EU authorities are trying to push
countries into “mutual acceptance”.
Who are the new operators?
The answer to this is anyone and everyone.
A few examples are start-ups with private
capital (DLC in Belgium, which became
Crossrail), preservation groups branching
out to serve local industry (TPCF Fret in
France, now Regiorail), local authority
railways going national (Wiener Lokalbahn
in Austria), large companies wanting to
control their own logistics (CFL cargo is part-
owned by ArcelorMittal and rail4chem by
BASF, Colas Rail in France), shipping lines
(Maersk set up ERS in the Netherlands), and
local mining networks going national (RAG
in Germany). Private track maintenance
companies with spare locos have often started
with spot traffic then developed from there.
The national incumbents have also taken
over local companies and developed them,
examples being VFLI in France (SNCF) and
MEG in Germany (DB Schenker).
TODAY’S RAILWAYS EUROPE XXX 27

7. free trip.
It is not certain how the incumbents will
respond to the changing market, where the
incompatible with other versions
A large number of TSIs (Technical
Specifications for Interoperability) have
CASE STUDY
trend according to observers is to “privatise
profits, 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 reported
CEO Mario Moretti recently declared that to be complete by 2013. However, there are how EWS was about to enter the French
Trenitalia runs about 400 long-distance trains still differences of interpretation between rail freight market. The company Carrières
daily, including the high-speed services at national authorities. du Boulonnais (CB), a family firm with the
its own risk. Of these, around 100 operate Another problem slowly being tackled is biggest limestone quarry in France (500
at a loss because they run on routes with of international train paths. If a RU wanted hectares) at Ferques between Calais and
low population density. Today these losses to run a train through multiple countries, Boulogne, called a press conference to explain
are cross-subsidised by profits from the it had to contact each national IM and its decision to contract EWS subsidiary Euro
high-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’s
Trenitalia’s ability to make up these losses. to harmonise this process and operate as a owners explained that they wanted to move
The consequence could be abandonment of “one stop shop”, plus streamline other parts more stone by rail, particularly to the Paris
loss-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 family
showing government its responsibility by were somewhat fed up with SNCF’s service
making it clear which passenger routes First Package recast – 20% of CB’s requests to run trains were
lose money. Some have been transferred to On 31 May, the European Parliament’s turned down by SNCF and CB told the press
regional responsibility while others are to Committee on Transport and Tourism that it was never sure whether the four sets of
be 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 first
SNCF has been handed operation of these first railway package. Strengthening of test train in December 2005 and a second in
services but Veolia is pressing to take some the national regulatory bodies has been January 2006, the company started regular
over by showing government how savings can confirmed. The duration of pluri-annual trains in March 2006, initially with a pair of
be 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 initial
throwing 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 problems
as much as possible to unit trains. Few private the rail financing and ETCS-differentiated expanding because the company was told
freight operators are able to provide low- charging – levying lower access charges on by wagon lessors in France (subsidiaries of
volume services, as these are staff-intensive RUs using ETCS to encourage its use and SNCF) that no bogie hopper wagons were
or irregular. And bureaucracy (when an offset the cost of installation in trains. available. In the end EWS ordered 150
operator wishes to serve a customer, it must The complete unbundling of the IM from wagons, to form seven rakes, from Arbel
arrange 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, which
some 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 the
which vote with their purses for trucks and session while you are reading this article. number of trains has risen from around 20 to
their flexibility, despite the cost. 30 per week. The growth has all come from
the extra trains CB wanted to launch to the
Interoperability – still a problem Paris region for the building industry. The
A major problem for rail operators is company still dispatches two trains a day
interoperability... or rather the lack of it. for steel maker ArcelorMittal in Dunkerque
Despite the train builders’ efforts to create (the 13 2600 tonne trains a week has recently
international locos (see below), the various fallen to ten due to economic conditions),
national rail authorities are repeating the but the number of trains carrying aggregates
authorisation 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), and
At a UNIFE meeting on 14 June, it was said the Île-de-France (greater Paris) region
that 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 subsidiary
Rail Systems department Dr Hans-Joerg VFLI’s brief incursion on some services has
Grundmann said equipment valued at €1.4 now ended, but the company still trips rakes
billion was currently awaiting acceptance in of covered hoppers carrying quicklime from
Germany alone, incurring capital servicing another nearby quarry to Caffiers, where they
costs 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 before
are another serious problem, and ETCS/ it as the company has now won all of Fret
ERTMS have added more complexity instead SNCF’s traffic from the adjacent Carrière
of simplifying things. The European Rail de la Vallée Heureuse, which is served from
Agency (ERA) is trying to play a major Marquise-Rinxent station and serves several
role 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 over
to the FRA in the US. The problem is that five years, ECR has elbowed Fret SNCF out
national governments all seem to want their of the area – completely. CB is ECR’s second
“own” version of ERTMS, which will be
28 TODAY’S RAILWAYS EUROPE XXX

8. biggest customer (GEFCO is the biggest)
with 2.1 million tonnes a year. More details
of how ECR did this, plus photos and a map
were included in TR EU 160 in April 2009.
And what does CB think of the service it
is now receiving from ECR? Owner Gilles
Poulain told Today’s Railways Europe that
trains are now reliable, costs are lower, and
the company has been able to transfer traffic
to rail as it had hoped – the company now
generates 15% of the French aggregates
carried by rail. Can any more of the 6 million
tonnes produced at Ferques be transferred to
rail? 4.7 million tonnes still go by road, mostly
over short distances. Certainly, traffic will
increase in the near future as CB increases
the frequency of trains to Limay, west of
Paris, where the company has invested in
a new terminal. A test run to Béthune, not
much more than 100 km from Ferques, was
carried out recently and was successful.
However, the branch into the canal port,
which CB wishes to serve, is in poor condition
and the local Chamber of Commerce does not
have plans to upgrade it in the near future.
Another source of traffic, lost to rail in the
past decade, might be seasonal traffic to the
numerous sugar refineries in northern France
– but the owners will need to be persuaded to
return to rail, having been put off by SNCF.
CB and ECR are certainly confident of the
future. Together with wagon lessor NACCO,
the two companies have recently invested
in a further 144 new bogie hopper wagons
(seven more rakes) for aggregates traffic and
a further eight rakes are on order. The new
wagons were built by Greenbrier in Poland
and have two compartments instead of three
in the classic wagons used for aggregates
traffic in France. Not only does this design
reduce the number of moving parts and
therefore maintenance costs, it is also quicker
to unload and carries a little more – 69.5
tonnes compared with 67 – in a slightly
shorter length. CB is financing 44 of the new
wagons as well as renewal of the 4 km branch
from Caffiers station to the quarry which
was built in 1974. Most of the finance for
track 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 diesel
from hire contracts with SNCF subsidiary locomotives is General Electric, which did
SGW, all of the new wagons being with
Class 66: off to the races not succeed with its “Blue Tiger” built in
NACCO. ECR also intends to become Diesel locos have been popular with open cooperation with ADtranz. The company is
independent 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 teething
the 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 continental
French rail freight market in 2011, and aims could run on the various voltages in European Europe except TCDD, but then a Turkish
to 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 opted
Top right: Euro Cargo Rail loco 77024 heads 2385 kW and 129 tonnes on six axles proved for the robust Ukrainian-built Class 232
a train of the new hoppers down the branch a major hit with continental Europe operators “Ludmilla” 2200 kW Co-Co locos which
from the CB quarry at Ferques to Caffiers on after they proved their excellent reliability were available from eastern Europe and
27 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 in
Above 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 access
TODAY’S RAILWAYS EUROPE XXX 29

9. operators. Some reasons cited are high
prices, inadequate horsepower and tractive
effort, plus unimpressive reliability.
A major player in this market is Vossloh,
which moved from the diesel-hydraulic
G2000BB 2240 kW four-axle to the six-
axle diesel-electric Euro 4000 platform,
which could provide better tractive effort
and an EMD 16-cylinder 3178 kW prime
mover. Vossloh went this direction after the
acquisition of Macosa in Spain from Alstom
and abandoned the development of a heavy
diesel-hydraulic six-axle locomotive with
Voith Turbo components. The latter decided
to develop its own heavy diesel loco, and thus
Voith Maxima 40CC was born. The Maxima
40CC has suffered poor sales so far.
It is a little surprising to find so many
large diesels on the market with emergence
of multi-system electric locos, plus the
continued bridging of electrification gaps
such as A achen (Ger many) – Mont zen
(Belgium). Both EMD and GE have declared
an interest in making continental Europe
versions of the Class 66 (Class 66EU) and of Skandinaviska Jernbanor is a private company operating passenger trains in Sweden formed of
the 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 owned
Historically, loco orders came from state by Railpool and is seen at Virsbo, Sweden on hire to SJ with the “Blue Train” forming SJK Railtour
railways, and were custom-built according from Stockholm to Falun-C on 26 May 2012. Iain Scotchman
to their specifications. SNCF, for example,
had a bureau which would design trains then
contract 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 Rail
passenger trains in the day and freight trains for series production of the TRAXX loco Capital Europe (MRCE), a banking branch
at night. The use of AC traction motors and family (descended from Class 145) to of the Mitsui empire. Similarly, companies
advanced electronics resulted in the creation reducing costs through standardisation. such as Beacon Rail and Alpha Trains are
of true universal locos such as DB Class 120 Siemens has now followed the Bombardier owned by banking institutions. The leasing
and culminated in the Siemens Eurosprinter lead with the unification of its disparate companies push for the standardisation of
Class 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 only
especially with the cost – even when ordered and diesel variants, while Alstom followed a repaint or vinyls, they are ready for the
in the hundreds, as in Austria. And when suit with the PRIMA II platform. next customer. In rare cases these may need
another customer wanted more locos, the One minus for freight haulers is the move a change to signalling equipment, which is
manufacturers 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 provide
of the ES64F variants. equivalent tractive effort, but in practice
In reality, there was also a practical heavy trains require two electric locomotives
problem with this, as passenger locos had – raising sales is a nice side benefit for the
different origins and destinations from manufacturers.
freight, and it was not always feasible to
run light between passenger and freight From state- to leasing company-
depots. Management reorganisations in owned
some countries, then the liberalisation of EU Instead of private investors risking capital
railways meant a break-up of ex-state railways in creating new train operating companies,
into separate divisions (in general long most financial institutions (banks, venture
distance passenger, commuter and freight), capitalists, etc.) focused on the leasing of
negating the need for a universal locomotive locos and rolling stock. This is the same
and the economies of scale possible. Freight business model as one during the Gold
operators, in particular, wanted a cheaper Rush: you sell or rent spades and tools to
loco and in France the Alstom Prima was prospectors, and if they default you resell
the result. So, the manufacturers moved them to the next customer.
to the “modular platform” concept, with a The first leasing companies were the
focus on keeping the cost down. When DB ROSCOs in the UK, which took the least risky
created its freight division after German parts of British Rail. In continental Europe,
reunification (DB Cargo), the company Siemens Dispolok came into being as train
ordered the Class 145 (derived from AEG builder Siemens found itself with locomotives
12X prototype) with axle-hung motors such as the ME26 diesels returned by the
adequate for the lower speeds of freight original buyers; Siemens could avoid a total
trains, and thus cheaper than a universal
30 TODAY’S RAILWAYS EUROPE XXX