The last two years have been characterised by European rail freight carriers as particularly harsh because of the economic recession which affected each and every economic sector. The reduced demand, lack of public infrastructure modernisation projects especially in Eastern Europe and the major tax policy changes have forced companies to reduce their activity. As a consequence, in 2010 the investments were blocked and the acquisition of new rail cars became more and more of a problem.
That is why the answer to the following questions: “Next year should we acquire rails cars in leasing? Is it more profitable?” has become more and more complicated in a market suffocated by debts and reduced profits. At least for now, when both those who provide leasing and those who use it have to face high costs. According to the information provided on the Romania market, since the beginning of 2009, private rail freight carriers faced issues regarding the leasing payment for rail cars, caused mainly by the depreciation of the national currency as opposed to the Euro currency.
Even so, in many cases, the investments plans for the respective year were not postponed. “This is a general phenomenon. We haven’t yet calculated any percentage, but we estimate that the loss will be equivalent to the Euro growth percentage. Although our profits have diminished, we will not postpone our investments”, said at that time Sorin Chinde, General Manager Grup Feroviar Român (GFR), one of the largest private rail freight operators in Central and Eastern Europe. In 2009, GFR owned locomotives and rail cars for which the operator paid a lease calculated in euros, and, as expected, the currency fluctuations have caused an increase in expenses. However, GFR had allocated a 14% turnover increase for 2010, meaning approximately EUR 115 Million. Now, GFR owns 160 locomotives, 6200 rail cars, of which 3200 tank cars. From this total, a significant part is leased for rail freight transport. Rail freight carrier Servtrans had to face a more difficult situation. Having leasing contracts for the rail cars owned, the operator feared that they wouldn’t be able to pay for them on time. According to Sorin Zbengheci, Marketing Director, traffic has significantly diminished since the beginning of 2009, and the oil and tax increase have affected the leasing payments. Servtrans is part of International Railway Systems (IRS), a group which manufactures freight cars, controlled by businessman Cristian Burci. What is very interesting is that the group has signed contracts with companies such as GATX Rail Europe, a major European player, who owns rails cars that are then leased to major railway companies. The economic recession caused unexpected changes for railway manufacturers. A few months back, Romanian manufacturers Astra Vagoane, Meva and Romvag (which are also part of IRS) demanded liquidation.
Under these circumstances, resorting to bank loans, a method which could prove to be effective, is no longer a solution. Let’s bear in mind the investments made by Valer Blidar, owner of Astra Vagoane Călători Arad, for the Romanian Railway Commercial Bank (‘Banca Comercială Feroviară’), a bank which he likes to say meets the needs of those who run businesses in the railway industry. “I wanted to have a bank”, is his answer when asked about the connection between rail car manufacture and the banking system.
This move may prove to be very profitable in the following years if investments were made in the railway infrastructure. These investments could surely re-launch the activity of those who buy or take on rail cars in leasing. In figures, around EUR 500 Million should be allocated per year for the development, maintenance and modernisation of the Romanian rail infrastructure. This could, by far, improve railway traffic.
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