Monday, January 05, 2009
Doing more with less
For all the politicians’ brave words about boosting railway investment to help stave off the economic downturn, and rail’s long-term role in a sustainable transport mix, there are clear signs that times will be tough in the next few months, particularly in the freight business.
We hear reports that traffic is falling sharply as the liquidity crisis starts to bite. Already badly affected are the steel and automotive sectors, and there has been a sharp drop in the movement of raw materials, which does not bode well for railways heavily dependent on bulk flows serving traditional industries.
We can expect even fiercer competition, as road hauliers and shipping lines are also hungry for work. And these modes have traditionally demonstrated an ability to react much more rapidly to changing markets, flexing their operations and cutting rates in ways that the rail sector finds difficult to match.
Open access operators seem to be more responsive to customer requirements, but only where the legislative structure enables them to compete effectively. On December 11 the European Commission published a proposal for a ‘regulation on competitive rail freight priority’ which would give commercially-sensitive freight traffic greater rights to timetable paths and priority over passenger services on designated corridors. This is to be welcomed, but we wonder why infrastructure managers and train operators have to wait for a rigid rule to be imposed rather than taking the initiative themselves to meet a commercial imperative.
We reported in the December issue of Railway Gazette International about the glacially slow progress being made in reforming European rail freight. As for developing new lines or dedicated freight corridors, the inconclusive final report from the European Commission’s New Opera research project suggests that little progress has been made after four years of consultation, and concrete proposals are years away from any meaningful implementation.
Whilst open access competition is proving successful over relatively short distances, winnning long-haul business to rail requires operators to work together, as RZD President Vladimir Yakunin suggested in November. But co-operation should not be at the expense of a competitive ethos, and it seems that some major state railways still have little appetite for reform.
With Fret SNCF haemorrhaging business to open access players and forecasting a loss of €300m for 2008, SNCF has been pointing the finger at DB, claiming that Euro Cargo Rail has been able to poach traffic whilst its owner enjoys state support in a far from transparent home market. DB in turn lodged a complaint with the European Commission about unfair competition and a lack of liberalisation in France, and it has been joined by FS which seems to have been stung by SNCF’s decision to buy a stake in Italian high speed promoter NTV.
SNCF’s weak position was underlined on November 20 when the French finance ministry’s general directorate for competition and fraud prevention raided the Fret SNCF offices, investigating claims of anti-competitive practices in the allocation of rolling stock and train paths.
Writing to staff last month, SNCF President Guillaume Pepy implicitly rejected proposals for reforming the relationship between SNCF and RFF, claiming that the railway provided public services in the national interest and should therefore not be broken up or privatised. Pepy had pinned his hopes for staff reform on demonstrating that making Fret SNCF more competitive would create more jobs rather than putting them at risk, but the recession has clearly dealt a blow to his argument.
Railways large and small need to use this recession to streamline their activities, trim out inefficient practices and get costs under control, ready to grasp new opportunities as the economy recovers.
One thing is certain: the competition is not waiting. With effect from November 24, the Danish government has allowed the operation of 25 m long lorries on selected routes in that country, as part of a three-year trial. And a ‘blueprint’ on freight policy issued by the UK Department for Transport on December 16 revealed that DfT was studying the potential for increasing the length of lorries there too. With the European transport ministers failing to agree last month on revisions to the Eurovignette directive designed to reflect the external costs of road transport, there seems little prospect of the railways being offered a level playing field in the near future. The only way to stay in business will be to compete.
We hear reports that traffic is falling sharply as the liquidity crisis starts to bite. Already badly affected are the steel and automotive sectors, and there has been a sharp drop in the movement of raw materials, which does not bode well for railways heavily dependent on bulk flows serving traditional industries.
We can expect even fiercer competition, as road hauliers and shipping lines are also hungry for work. And these modes have traditionally demonstrated an ability to react much more rapidly to changing markets, flexing their operations and cutting rates in ways that the rail sector finds difficult to match.
Open access operators seem to be more responsive to customer requirements, but only where the legislative structure enables them to compete effectively. On December 11 the European Commission published a proposal for a ‘regulation on competitive rail freight priority’ which would give commercially-sensitive freight traffic greater rights to timetable paths and priority over passenger services on designated corridors. This is to be welcomed, but we wonder why infrastructure managers and train operators have to wait for a rigid rule to be imposed rather than taking the initiative themselves to meet a commercial imperative.
We reported in the December issue of Railway Gazette International about the glacially slow progress being made in reforming European rail freight. As for developing new lines or dedicated freight corridors, the inconclusive final report from the European Commission’s New Opera research project suggests that little progress has been made after four years of consultation, and concrete proposals are years away from any meaningful implementation.
Whilst open access competition is proving successful over relatively short distances, winnning long-haul business to rail requires operators to work together, as RZD President Vladimir Yakunin suggested in November. But co-operation should not be at the expense of a competitive ethos, and it seems that some major state railways still have little appetite for reform.
With Fret SNCF haemorrhaging business to open access players and forecasting a loss of €300m for 2008, SNCF has been pointing the finger at DB, claiming that Euro Cargo Rail has been able to poach traffic whilst its owner enjoys state support in a far from transparent home market. DB in turn lodged a complaint with the European Commission about unfair competition and a lack of liberalisation in France, and it has been joined by FS which seems to have been stung by SNCF’s decision to buy a stake in Italian high speed promoter NTV.
SNCF’s weak position was underlined on November 20 when the French finance ministry’s general directorate for competition and fraud prevention raided the Fret SNCF offices, investigating claims of anti-competitive practices in the allocation of rolling stock and train paths.
Writing to staff last month, SNCF President Guillaume Pepy implicitly rejected proposals for reforming the relationship between SNCF and RFF, claiming that the railway provided public services in the national interest and should therefore not be broken up or privatised. Pepy had pinned his hopes for staff reform on demonstrating that making Fret SNCF more competitive would create more jobs rather than putting them at risk, but the recession has clearly dealt a blow to his argument.
Railways large and small need to use this recession to streamline their activities, trim out inefficient practices and get costs under control, ready to grasp new opportunities as the economy recovers.
One thing is certain: the competition is not waiting. With effect from November 24, the Danish government has allowed the operation of 25 m long lorries on selected routes in that country, as part of a three-year trial. And a ‘blueprint’ on freight policy issued by the UK Department for Transport on December 16 revealed that DfT was studying the potential for increasing the length of lorries there too. With the European transport ministers failing to agree last month on revisions to the Eurovignette directive designed to reflect the external costs of road transport, there seems little prospect of the railways being offered a level playing field in the near future. The only way to stay in business will be to compete.
Labels: railways economy efficiency competition
