The Fourth Railway Package with its new law provisions is currently one of the most important aspects of the railway sector. The liberalisation of the domestic rail passenger transport market is an important element as well. In his interview for Railway Pro, Cesare Brand, Secretary General of the International Rail Transport Committee (CIT) talks about these provisions, but also about the insufficient infrastructure capacity, the changing character of infrastructure access charges and the lack of coherence in the legislative framework.
RailwayPRO: How would you describe the European rail passenger transport market three years after liberalization?
Cesare Brand: The market for international passenger transport services was opened in 2010. The impact of liberalisation to date is not overwhelming. The majority of international passenger transport services are still handled on the basis of cooperation agreements.
RailwayPRO: In the opinion of CIT, opening EU domestic transport markets to competition is a good opportunity? Could state-owned operators be affected in terms of competition with large European players?
Cesare Brand: The main task of the CIT is the implementation of European and COTIF international transport law for its membership of some 200 railway undertaking and shipping companies. We create the necessary legal instruments making cross-border traffic more efficient and easier. Political lobbying is not in the aim of the CIT. This task is performed in an excellent way by the CER in Brussels. The following answers represent my personal opinion and not the opinion of our members.
To your question: In those countries where the market was opened for national passenger transport services, an improvement in the quality of the services can be observed. In some cases travellers have also been able to benefit from lower fares. To what extent competitive services can be provided on a sustainable profit basis remains to be seen. The goal is to offer a better quality with competitive prices. The railway offer and the role of the state-owned operators are different for every country. There are countries with an attractive capillary system offer and countries where the service is poor. The right medicine can be different, but fair conditions established on the basis of reciprocity, must be guaranteed.
RailwayPRO: What does CIT believe about the mandatory tendering procedure of public services obligations in the railway sector?
Cesare Brand: The CIT is concerned primarily with international, cross-border services that are provided by the railway undertakings themselves, in other words with no compensation from public authorities. The political discussion on compulsory tendering is being conducted as part of the 4th Railway Package. In this respect, it is necessary to judge between establishing fair competition between the companies involved and giving public authorities the freedom to provide passenger transport services that will meet the basic requirements.
RailwayPRO: Do you think that the institutional separation (between infrastructure managers and operators) is viable for consolidating the infrastructure managers’ independence of any train
operator? Strong EU operators say that, on the contrary, the only viable measure is to maintain a holding structure.
Cesare Brand: The CIT represents the interests of the railway undertakings. The decisive factor for them in terms of competition is non-discriminatory access to foreign networks. Looking at the European rail freight market, it can be seen that various solutions designed to provide non-discriminatory access already exist and that they work. This can be achieved by institutional separation, but also by an effective regulator. What is vital for rail’s success is a modern interoperable and safe railway infrastructure that meets the needs of the market, the availability of long-term financing and train-path prices that enable the railway undertakings to be competitive with road transport. In my view, the discussion on the institutional separation of transport services and infrastructure should be conducted in a more relaxed and objective manner.
RailwayPRO: What do you think would be the reason why there are not enough new entrants in the market that could bring private capital to the sector?
Cesare Brand: Despite the liberalisation of freight transport and international passenger transport, few private investors seem interested in rail. In its implementation report on the opening of the market for international rail passenger transport published at the beginning of the year, the Commission has rightly identified many reasons (such as administrative and operational barriers and the economic crisis). As I see it, the reasons are not only to be found there. Unlike energy, telecommunications or postal services, rail business in the European countries is only able to cover on average up to 50% of the overall costs (infrastructure and transport services) and is dependent on state subsidies (for infrastructure and public service obligations). This is due among things to the capillary nature of the network and the lack of separation of passenger and freight infrastructure (mixed traffic results in higher infrastructure costs than is the case with dedicated freight or passenger routes, as in the USA or Japan). The separation model chosen in Europe is also the reason why the actual price charged for the train-path is an important cost factor exposed to strong financial policy influence either directly (where the train-path price is officially determined) or indirectly (where the train-path price is dependent on the amount of state subsidy provided for the infrastructure). For a private investor, this means that he is unable to control one of the key cost drivers himself , but is ultimately either directly or indirectly at the mercy of government policy. This is countered by the need to make very high investments and the necessity of having a long-term financial plan, which is hardly possible today, given the very different and volatile train-path prices.
RailwayPRO: What would be the steps to take in order to reach the (long-expected) coherence in the Union’s legislative framework?
Cesare Brand: A successful and well designed regulatory framework, in addition to a certain degree of permanence, requires a clear concept with regard to the object of regulation and a “technically” sound and consistent conversion into legal standards.
The regulatory concept proposed by the Commission aims to create a liberalised rail market for both international and national passenger and freight ser-vices. The current political discussions on “through ticketing” as a key interface to the customer, however, are an example of the difficulties associated with reconciling a competitive concept with the customer’s needs. As soon as decisions are taken on the interface to the customer (timetable and price information, sales), any thought of competition between railway companies tends to recede into the background, with preference given to legally enforced collaboration (e.g. open exchange of information and mutual access to sales channels).
The railway companies will ultimately have to bear the drawbacks of the inherent contradictions between competition and compulsory collaboration themselves, including the lack of coherence in the regulatory framework that comes with it. In the interests of the railway industry, it is to be hoped that in the liberalized areas it is the market and not the planned economy governed by the authorities that ultimately prevails.
RailwayPRO: As regards railway freight transport, how do you see the current profile market? Freight transport has been opened for years, but it seems it hasn’t recorded notable progress either and a series of East-European operators has had repeated attempts of selling their companies in order to revive this market segment.
Cesare Brand: The transport performance on the European rail freight market today is slightly higher than in 2000. Following the losses incurred prior to liberalisation, rail freight‘s average market share in Europe has stabilised. It is nevertheless true that the development in terms of the individual rail operators and states differs quite considerably.
The main reasons for this difference are the economy, the willingness of the individual states to invest in the infrastructure, to create favourable regulatory conditions for rail and corporate decisions.
RailwayPRO: What do you think about the establishment of the ten European freight-dedicated corridors? What about the idea of setting up a one-stop shop for allocating routes? Has this measure also proven to be controversial?
Cesare Brand: These corridors must allow high-quality train paths to be offered to freight trains to improve the quality of freight services (in terms of punctuality and transit times) by comparison with the current situation. In addition, these corridors must allow further capacity to be made available for freight by rail.
RailwayPRO: The gradual globalisation of the transport market generates new challenges for railways. The major challenge consists in providing land goods transport between Europe and Asia. What is the role of the CIM/SMGS consignment note in facilitating traffic?
Cesare Brand: The Introduction of the common consignment note CIM/SMGS is part of the process of harmonising Euro-Asian rail transport law and bring significant simplification of through freight traffic by rail from Europe to Russia and Asia especially in respect of: elimination of extra costs for activities that provide no extra value (up to €40); elimination of a source of errors by the elimination of the transcription of consignment notes CIM and SMGS on the point of reconsignment; the common consignment note CIM/SMGS is recognised as a customs transit document by the respective authorities and this saves time and costs (as mentioned here); shorter transit times by reducing the time spent at legal CIM/SMGS interfaces (40 min per wagon) and overall higher level of legal certainty for all participants in the CIM SMGS freight traffic.
RailwayPRO: In the end, can you give us details about the news with the progress of the CIM/SMGS legal interoperability?
Cesare Brand: Railway undertakings and railway organisations like CIT have been involved for some time in implementing the initiative to make use of a harmonised contractual basis for the promotion of Euro-Asian rail transport. A political declaration of the United Nations Economic Commission for Europe (UNECE) has largely supported this CIT initiative and was signed on 26th February 2013 in Geneva at the meeting of the Inland Transport Committee by the thirty-seven representatives of the participating states. Point 3 of this declaration makes an explicit reference to the CIT initiative for drafting General Conditions for Euro-Asian rail transport (GTC EurAsia).