1.
Compete to Win
Sven Gossel – CEO Trans Metropolitan
Amadeus Rail Innovation Forum 2017
13th June, Prague

2.
1. This is our about passenger traffic only
2. I may step on a couple of toes here…

3.
My gosh – are you serious?

4.
Plane? Train? Car? Bus?
• when do I depart?
• when do I arrive?
• when do I have to leave home or office?
• how long is the trip vs. how long I stay?
• what is my preference?
• am I able to fly?
• do I need to work while traveling?
• may I miss a football match?
• when am I finished with my meetings?
• can I still see my kids?
• can I use my preferred loyalty cards?
• what is the total, total price?
• how to get to my final destination?
• can I get enough rest during the trip?
• do I have internet access?
• will I arrive on time?
• can I get food and of decent quality?
• I hate airport security!
• do I have access to a rental car?
• or: I need my own car!
• can I combine train and plane travel?
• does it support a multi-stop-trip?

5.
European Market De-Regulation
• Good.
• Bad: ownership structure of incumbents represents conflict of interest
• often private operators need to go to court to claim for their granted rights
• but: the smaller the better
• Railway industry appears to be where the airline industry was in 1995
• EU still needs to do a lot of homework
• Market power of incumbents remains too large to really compete against
• Private companies mainly in freight and niche markets as of today
• or they are active in government controlled markets

6.
Licencing
• Oh my God.
• Granularity of sand? Life fire extinguishing tests?
• NSAs in bigger EU member states need to improve
• by dimensions.
• customer focus – except for their experience of no help to newcomers
• capacity – application schedule too long and too complex for smaller players
• bandwidth – their (or ERA’s?) rule shouldn't be to just passively OK the material
• ERA’s executional power too weak to help private competition to rise
• The goal: standardized production rather than building custom equipment

7.
Cost of material
• Airlines pay EUR ~300.000 for wet leasing an A320 per month
• 180 legs @ 180 people @ 150+ bucks: around EUR 5M+ revenue
• The A320 can fly practically fly to everywhere (up to 6 hours ‘airtime’)
• One new ICE train set costs around EUR 30.000.000 for ~650 people
• 2000 people per day yielding EUR 32/leg: around EUR 2M revenue per month
• Hardly any leasing or financing option for new-comers
• Although train revenue is less than airline revenue, the material is more
expensive and way less fungible
• Tons of new airlines but hardly new px rail operators
• Private operators usually enter the market with used material
• Only a European product standardization will open-up markets in full
• Also: taxpayer’s check book isn’t too far off at many times

8.
Cost of material

9.
Network Access, Schedules and Tolls
• Big players yet to locking-up most of the attractive slots
• airport-like situation with limited regulatory power
• often only court decisions will path your way as a newcomer
• Still used to protecting markets from outside competition
• Brennero, Eurotunnel, network access exceptions in general
• Fee over-charge, long distance tolls influenced by PSO markets
• European Patchwork Rail
• Engines being licensed to more than 2 countries practically don’t exist
• ECTS doesn't really play (yet?)
• Network access should be organized vertically, not regionally
• Even smaller network extensions take sometimes a decade to build
• A change in schedule may still take ages to be published to customers

10.
Shunting is really cost intensive

11.
Sales Channels
• As a newcomer your are just not taken seriously
• “if I knew it was about that, I wouldn't have picked up the phone”
• sometimes months in response time or no response at all
• exceptions: rail co-operation partners, public transportation
• Bigger travel agencies are simply not answering your inquiries
• GDS is nice, but is a strong limitation for product differentiators
• ICAO legacy turns out to be a barrier for inter-modality products
• AccessRail makes this a business case
• Cost.
• You’ll end up in building your own website – not good

12.
Last: Working Capital
• Financial entry barriers are unreasonably high
• EUR 50-100M are difficult to find
• non-standard carriages and build-to-order engines push-up costs
• delivery time and licensing requirements are killing business models
• The Venture Capital and Private Equity market is small
• A general issue across all industries in Europe
• A specific issue for transportation as to the market structures
• Main issues:
• Government ownership in key market players
• Unhealthy market shares of >90%

13.
Identified mistakes of private operators
• too little working capital
• bad yield management
• too little market research
• missing customer focus, addressed markets to small, weak preparation
• product needs to provide real customer value
• irregular train schedules
• no integrated product offer
• hardly acceptable co-operation concepts
• emotional start-up concepts aren't necessarily successful

14.
What did WE learn from that experience?
• Doing our homework. And this takes time.
• Rail operation is much more than running some trains
• Sales, sales, sales
• Transportation is a commodity - A difference in painting doesn't make a difference.
• We understand our business as an IT service with outsourced production
• It is not: a train service with a connected website
• We imagine ourselves using our product from a first customer contact
to reaching a destination fully satisfying his expectation
• Product image – Reliability – Experience
• The big guys are super tankers. We are designing a speed boat.

15.
Questions?