Changing Trains

An inevitable consequence of the economic downturn has been a demand for trade barriers and the protection of home markets. Politicians spending taxpayers' money to stimulate the local economy and create or protect jobs want to see the benefits accruing to their constituencies. 'Local jobs for local people' is the rallying cry.

At the behest of Congress, the US$787bn stimulus bill signed by President Obama on February 17 includes a clause to strengthen the 'Buy America' procurement rules, although he insisted that it will be consistent with international trade agreements. 'One of the most important things during a worldwide recession is that each country does not resort to "beggar thy neighbor" policies, protectionist policies, that can end up further contracting world trade', he said.

The rail industry has moved a long way from the days of national suppliers - or even local as in Australia where rolling stock builders had to have assembly plants in each state. Last year's UNIFE/Roland Berger study of the global market found that around 70% was 'accessible'
to inter-national competition, and the proportion was growing steadily.

Open markets provide more than just a competitive supply environment; they encourage the exchange of ideas and the spread of technology. The past 20 or 30 years has seen a welcome 'convergent evolution' between once-distinct North American, British and European railway practices. Europe's drive for interoperability is not just about overcoming differences in cross-border operation, it is also about opening up a competitive single market for suppliers no matter where they are based.

The biggest question about protectionism is where it would end. Should 'Buy America' be limited to US suppliers, or the North American Free Trade Area? For many years the US transit sector has been dependent on Japanese and European suppliers, but conversely most locomotives in Australia use US technology. Most countries no longer have home suppliers with the capacity for complete production. Fortress UK would not be sustainable, but what about Fortress EU? Mergers in the supply sector and a focus on standard modular products have seen the bigger firms developing integrated supply chains with centres of excellence in many countries.

Some commentators in the UK were quick to criticise the announcement on February 12 that the new Super Express Train fleet would be supplied from Japan, albeit with the promise of a new local assembly plant (p12). This ignores the reality that the UK's only remaining 'traditional' rolling stock plant in Derby is run by a Canadian group with its rail business headquartered in Berlin. And it relies on components sourced from other plants and sub-suppliers across the world.

Earlier this year, EU Transport Commissioner Antonio Tajani called for opening of the Japanese rail market as Japanese suppliers were competing in Europe. By contrast Alstom Transport President Philippe Mellier suggested that western markets should be closed to Chinese companies because the local market was being closed to international firms - a claim that the Ministry of Railways strongly denied.

Mellier's concern focuses on a different problem. In recent years, China has developed a strong domestic industry through localisation and technology transfer, requiring international suppliers to work through subsidiaries, joint ventures or partnerships. The companies accepted this requirement to break into the Asian market. But they also recognised the challenge of protecting their intellectual property rights in countries where issues such as patents are not so clearly understood or enforced.

In recent weeks we have heard reports, from other sectors as well as rail, of transferred technologies being offered for sale in markets not covered by their licence agreements, sometimes in competition with the original supplier. And of public-sector bodies seeking technical assistance to re-engineer proprietary systems. Such practices are clearly unacceptable, and play into the hands of the protectionists.

Railway Gazette International has long supported the exchange of technologies across the world, as this can only help to strengthen the rail mode and its contribution to a sustainable transport mix. But a true exchange of technology demands that intellectual property rights are fairly respected by all parties, or suppliers may legitimately refuse to co-operate, and users will not get the benefits of the technologies on offer. Rail will become less competitive, and the whole world will suffer.

The decision to rebrand the Channel Tunnel Rail Link as High Speed 1 appears to be starting to pay off. Quite intentionally, the name created an assumption that the UK’s first 300 km/h railway would in due course be followed by more.

Not that there has been any shortage of proposals. Lobby group Greengauge 21 put forward a suggestion for High Speed 2 between London and Birmingham in June 2007. Network Rail has a working group looking at options for increasing network capacity, with a brief that includes examining the case for high speed lines. And last year Greengauge 21 put together a consortium of businesses and local authorities to fund a feasibility study of five potential corridors.

At long last the Department for Transport seems to be starting to recognise that high speed rail may have a role in the UK. With the multi-modal ‘national networks’ steering group convened by Transport Minister Lord Adonis expected to report shortly, Secretary of State for Transport Geoff Hoon announced on January 15 that a company called (surprise, surprise) High Speed Two is being formed to consider options for a new line between London and Birmingham, as the first step in a route which could later serve Manchester, Liverpool, Leeds and Scotland. High Speed 3, 4, 5 and 6 may follow, we hear.

At first glance, Hoon’s announcement was more about mitigating protests against government backing for a third runway at London’s Heathrow airport and further expansion of motorway capacity than a specific endorsement for high speed rail. But with decades of experience to draw on from countries such as Japan, France, Germany and Spain, where construction is still proceeding apace, the main question to be addressed is how any new lines could best fit into the UK transport mix.

The opposition political parties and many other bodies believe high speed rail could avoid the need for the third runway at all, as rail could substitute for short-haul domestic and international flights. But with or without the extra runway, there is little doubt that Heathrow needs to be properly plugged into the inter-city and international rail networks in the same way as rivals such as Schiphol, Frankfurt, Paris or Zürich.

Hinting at an announcement later this year about electrification of the Great Western Main Line between London, Bristol and South Wales, Hoon suggested that HS2 and Crossrail could converge at a new Heath­row International hub on the GWML. Given that this line passes about 4 km north of Heathrow, a better option might be to copy what the Swiss did at Zürich 20 years ago and re-route the railway under the airport.

One problem is that the volume of air traffic which could be diverted to rail is not enough in itself to justify a new line. Most rail business would still be city centre to city centre, unless the proposed hub can attract large volumes of connecting traffic from the surrounding region. And a 20 km westward kink to serve Heathrow would add a significant time penalty for passengers between London and the north. So there will be plenty of topics to debate at our forthcoming conference on Growth & the Capacity Challenge, being held in London on March 10-11.

London & Continental Railways has already demonstrated with HS1 the benefit of having a dedicated company to champion a high speed rail project. Let us hope that HS2 will have the same effect, although at this stage there seems little urgency. There are suggestions that work is unlikely to start on the ground before 2015, with opening dates of 2027 or later being floated.

A reminder of what can happen without clear leadership is painfully apparent in the Netherlands, where there are still no services running on HSL-Zuid long after the original planned opening date of October 2006. With a multitude of different companies responsible for building, equipping and operating the line, not to mention commissioning ETCS Level 2 equipment on both track and trains, target after target has been missed. There have been acrimonious claims for compensation, and regular ministerial statements to parliament.

We reported in Railway Gazette International last April that NS Hispeed was hoping to ramp up services during 2008, starting with an interim Amsterdam – Rotterdam shuttle using leased Traxx locomotives pending delivery of the 250 km/h Albatros trainsets from AnsaldoBreda, followed by diversion of Thalys and Benelux services to the new line this year.

On December 19 the concessionaire announced the fares for its shuttle service, revealing yet ano­ther target date of July 1. A further two years may elapse before the whole Thalys fleet has been retrofitted with ETCS, and there is still no indication of when the Albatros sets might be ready.

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.

Labels: railways economy efficiency competition

Amid all the coverage of the US Presidential election on November 4, and the victory of Democratic candidate Barack Obama, there has as yet been little focus on the implications for the rail sector. When Americans turned out in record numbers, they also approved most tax increases and bond issues that appeared on local ballots to fund rail and public transport projects, despite the faltering economic conditions.

California led the way, approving four out of five rail-related votes. Biggest by far was the proposal for the state to issue $9·95bn in bonds to help fund the $30bn first phase of the proposed high speed rail network linking the Los Angeles and San Francisco regions. Proposition 1A was supported by a 52% majority. However, before construction can begin, another $10bn must be found by the federal government and a similar sum from the private sector, which may not be easy.

Voters in Los Angeles, West Sacramento, and Marin and Sonoma counties north of San Francisco all backed sales tax increases to fund metro, light rail and commuter rail projects, whilst King, Pierce and Snohomish counties overwhelmingly endorsed further expansion of Seattle’s Sound Transit, including another 55 km of light rail lines. Honolulu residents backed proposals for a $5bn steel-wheeled heavy metro, whilst voters in Rhode Island and Albuquerque approved tax increases to help fund commuter rail.

With such clear signals from voters in a country once notoriously wedded to the private car, we can only hope that rail investment will feature in the stimulation packages which many governments favour to rebuild confidence and revitalise the flagging global economy.

Meeting in Washington DC last month, representatives from the G20 leading nations largely backed the idea of using public sector spending on major infrastructure projects to help get their economies moving again. There have been calls — which we would endorse — for investment to be targeted at building a more sustainable global economy, developing ?renewable energy sources, and investing in ‘green infrastructure’ such as public transport and transit-oriented development.

Last month the Chinese government confirmed that it was stepping up road and rail spending to stimulate its national economy. On October 27 the State Council approved a total of 2 000bn yuan for railway construction over the next 12 years, as envisaged in the Ministry of Railways’ medium and long-term plan prepared in 2004. Some of this is now to be brought forward, with suggestions that the 2020 target of a 120 000 km rail network could be reached as early as 2015.

Chinese railway investment is already running at record levels, as CR races to catch up with an average 8·7% annual increase in freight tonnage between 2003 and 2007. With a total of 1 250bn yuan approved for the 2006-10 plan period, spending is expected to reach 342bn yuan in 2009 and 334bn in 2010, compared with 245bn being spent this year.

In Germany, the federal government announced on November 5 that an extra €1bn per year will be spent in 2009 and 2010 to tackle bottlenecks in the country’s road and rail networks, creating an estimated 40 000 jobs. However funding for other rail projects may be tight, with the postponement of the DB Mobility Logistics flotation reported to have left a €1bn hole in the railway’s budget (p941).

With President-Elect Obama apparently indicating that he would favour a public works approach, US lobby groups are already lining up for federal handouts. The American Short Line & Regional Railroad Association says its members have capital projects worth US$500m ready to start, and the States for Passenger Rail Coalition wants Congress to earmark $250m for inter-city rail improvements. Such schemes surely make more sense than simply propping up the ailing car manufacturers now knocking on President Bush’s door.

Rail industry suppliers continue to report substantial orderbooks, but we are still at an early stage in the recession. Global trade volumes have been hit by the lack of liquidity, and around 80% of res­pondents to a recent poll on railwaygazette.com believed that the economic crisis will impact on rail traffic volumes. This will hit revenues and profitability, although strategic investment and the longer term demands for modal shift suggest that future prospects remain good.

Uncertainty is stalking the corridors of operators and suppliers around the world, as they try to assess the potential impact on the rail sector of the current crisis in the global financial markets. With huge sums of state funding being pledged to rescue the banks, liquidity for private-sector investment disappearing and share prices plummeting, the omens do not look good at first glance.

Perhaps the most high-profile casualty so far is the partial flotation of DB Mobility Logistics, which was postponed indefinitely on October 9. There is clearly a risk of a downturn in traffic. UK franchisee c2c, which serves London's financial districts, is reported to have seen a 7% fall in commuting during September, although SNCF President Guillaume Pepy said passenger traffic in France was holding up well. UK freight operators reported that the usual pre-Christmas surge in containers of seasonal goods from the Far East is much depressed this year.

And then there is the question of investment, with the prospect of projects being cancelled or postponed to relieve hard-pressed state budgets. Nevertheless, at the InnoTrans trade fair in September there was a widespread view that investment would continue at a high level, and this optimism has been reflected by almost everyone we have spoken to in recent weeks.

As Ireland's Transport Minister Noel Dempsey explained when confirming the retention of rail spending in the Irish budget cutbacks, railway investment today is all about 'sustainable transport for the future'.There seems to be a recognition at political level - certainly in Europe - that the current modal balance is not sustainable, and there still needs to be a substantial transfer of traffic from road and air to rail for environmental reasons. Even if the economic downturn manages to halt the seemingly-inexorable rise in demand for transport, modal shift will continue to put pressure on rail networks with limited spare capacity.

Rail investment is also seen by politicians as an economic stimulus. Arguing in favour of continued spending on modernising the London Underground and the £16bn Crossrail project, the right-wing Mayor of London Boris Johnson suggested in the Daily Telegraph on October 14 that 'we will beat this recession more speedily, and emerge in far better shape, if we make sure we put people to work in projects that boost the long-term competitiveness of the country'. He concluded 'this is one of those rare moments when the sound advice to someone in a hole - especially a hole as big as Crossrail - is that they should keep digging'.

Meanwhile, there is an emerging crisis in engineering and technical skills. Many exhibitors at InnoTrans exp-ressed concern about recruiting and training sufficient staff to meet the levels of spending projected by the UNIFE/Roland Berger market study and a similar report prepared by German consultancy SCI Verkehr.

CEO of Thales Rail Signalling Solutions Dr Alfred Veider gave one example. Advanced train control systems can boost line capacity, improve produc-tivity and eliminate unskilled tasks. But they are dependent on technical expertise. Whilst design and manufacturing can be done off-site, or subcontracted to low-cost countries, installation and maintenance requires local engineers and technicians. He pointed out that Europe's skilled workforce is ageing, and a bulge of retirements will aggravate the problem over the next few years.

Several railways have expanded their graduate recruitment and apprenticeship programmes, but operators and suppliers are competing for a declining pool of talent as young people are lured to jobs in other sectors. US railroads are working with universities to establish courses in railway-specific engineering skills, and similar programmes are emerging across Europe and Asia.

Noting that 'Crossrail plans to set up an academy for tunnelling', because it would need 28 000 workers by 2013, 'and these will be skilled, high-end, engineering jobs', Johnson claimed that 'for the first time in decades, we can tell our sons and daughters that they have a future in engineering'.

The biggest challenge, perhaps, is to overcome rail's popular image as an outdated 19th-century mode and demonstrate that it is re-inventing itself for the future. As Veider said, 'we have to tell people what we are doing, and give engineering a new image - today's railway is all about cutting-edge technology'.

What are we to make of the tragic head-on collision between a Metrolink commuter rail service and a UP freight train at Chatsworth in California's San Fernando Valley on September 12, which killed 25 people and injured 135 in the worst US passenger train accident for more than 15 years?

As is all too common, the simple cause appears to be that Metrolink train 111, outbound from Los Angeles Union Station on the Ventura County line, passed a signal at danger. It forced the blades of a locked turnout to enter the occupied single line instead of waiting at Chatsworth, where the two trains regularly passed each day, accelerating to around 65 km/h before meeting the double-headed freight train on a blind curve.

Such was the force of the collision that the Metrolink loco was driven three-quarters of the way back into the leading bi-level car, causing most of the fatalities and serious injuries. The entwined vehicles toppled over, but the other two coaches remained upright.

After testing signals, brakes and other equipment, National Transport­ation Safety Board investigators determined that the signal had been working correctly. NTSB calculated that the trains would come into sight of each other just 4 sec before the impact; the UP crew braked, but Metrolink driver Robert Sanchez, who was among the dead, did not.

Federal regulations require drivers who are alone in the cab to report every signal aspect by radio to their conductor, but NTSB member Kitty Higgins said the last two signal calls from train 111 were missing from the data, video and audio recordings recovered from the shattered loco. It was subsequently confirmed that Sanchez had been sending a text message on his mobile phone shortly before the collision.

Southern California Regional Rail Authority had already ordered a fleet of new coaches with Crash Energy Management following the 2005 Glendale collision, which led to questions over the safety of push-pull operation (RG 8.06 p440). However, the severity of the Chatsworth crash suggests that CEM might not have had much effect.

With much more intensive passenger services, European and Japanese operators have focused heavily on preventing collisions through the use of automatic train protection or similar technology to prevent trains passing signals at danger. Questions are being asked in California why Metrolink has not adopted Positive Train Control, although it is not clear whether this is yet sufficiently developed or reliable for widespread install­ation. According to an SCRRA spokesman, the sprawling five-county com­muter network is too complex, and much of it is shared with heavy freight trains operated by UP and BNSF.

Nevertheless, California's US senators Barbara Boxer and Dianne Feinstein introduced draft legislation to Congress on September 16 that would require the installation of PTC on all mixed freight and passenger routes, with planning to be completed a year after the bill becomes law. Lines designated as 'high risk' by the Department of Transportation would have to be equipped by the end of 2012, and all other major routes by December 31 2014.

Several variants of PTC are under dev­elopment, and widespread install­ation of a compatible system across the USA is estimated to cost up to US$2·3bn. But as the 1999 head-on collision at Ladbroke Grove in London showed, technology such as ATP is rendered useless if not all the trains oper­ating on a line have been equipped.

Whilst every accident is a tragedy, it provides valuable opportunities to learn. Eurotunnel staff and fire crews dealing with the September 11 fire in the Channel Tunnel (p779) were able to draw on the experience of a similar fire in 1996, evacuating everyone from the train within 8 min. And the spectre of the horrific derailment at Eschede in 1998, caused by a broken wheel, led Germany's Federal Railway Office to intervene decisively when an ICE3 axle broke under a slow-moving train at Köln in July. Fortunately neither of these high-profile incidents resulted in any fatalities.

The railway industry enjoys a deserved reputation for safety, which compares well with the estimated 1·2 million deaths on the world's roads every year, causing a knock-on loss of economic productivity valued at US$100bn or more. This reputation has been hard earned over almost 200 years, as operators, authorities and regulators have sought to learn from successive incidents with different causes. Safety management regimes are improving all the time, yet accidents still happen. When one does, it remains as important today as ever before to challenge established practices, and consider whether technical advances offer opportunities to enhance safety at an acceptable cost.

September 1 saw the official publication of a new study of the world railway market, conducted for UNIFE by Roland Berger Strategy Consultants and produced by Eurailpress. Updating an earlier study, the report finds that ‘the industry has grown tremendously’ since 2006.

Driven by several large orders in the rolling stock sector, the average annual volume of the world market has increased by €19bn in two years, or a nominal growth rate of 9%. And despite worries about a global economic downturn, the consultants predict that ‘robust growth will continue for the foreseeable future’. From today’s estimated €120bn a year, the market is expected to grow by between 2·0 and 2·5% per annum to reach €154bn in 2016. Within this, the 'accessible' element will grow by between 2·5 and 3% a year from €86bn to €111bn.

According to Roland Berger, Europe, NAFTA and the Asia-Pacific region remain the dominant markets, with Asia-Pacific expected to overtake NAFTA to become the second-largest ‘accessible’ market by 2016. Eastern Europe and the CIS region will also see above-average growth.

As an example of the current optimism and buoyancy in the rail sector, we need only to look at the forthcoming InnoTrans trade fair in Berlin on September 22-26, which has attracted more than 1900 exhibitors from 41 countries. And this is not to mention the REMSA and RSI events taking place in the USA at the same time.

I have remarked before on the fact that major investors are taking a greater interest in the rail sector, notably amongst the US Class Is as highlighted by the public battles between CSX and its activist shareholder TCI. But the phenomenon is not confined to the USA, nor to the bigger railways. Private-sector investment is flowing into many other railways, notably those serving mineral resources. When I talked discussed with him about the forthcoming sale of Central East African Railway, Railroad Development Corp Chairman Henry Posner commented that ‘the value of railways is significantly greater than it was’.

It is a far cry from a few decades ago when the very existence of railways was under threat. The death at the end of July of Sir David Serpell – at one time a senior civil servant in the UK’s Department of Transport – reminds me that it is 25 yeas since he chaired the Review of Railway Finances. This suggested - in all seriousness, that the British Rail network could be slashed from 16 000 to little more than 5 000 route-km in order to achieve profitability. Serpell never understood why his report was so roundly rejected, but the economic model he used was ‘pure’ to the point of lunacy. And although Serpell is reported to have recognised personally that rail offered wider social and economic benefits, they were not considered because they were not in his terms of reference.

Today almost all governments recognise that railway investment brings wider economic and societal benefits, which David Burns explores in the September issue of Railway Gazette International. It may be wishful thinking to believe that rising oil prices and environmental concerns are having a significant impact on modal choice, where the main drivers remain cost and quality of service, but looking further ahead, it seems likely that the rationing of carbon emissions and pressure on energy sources will have a fundamental effect on transport policy at the political as well as economic level.

Just how this will play out is by no means clear, but the scenarios developed by RSSB’s groundbreaking Foresight Studies project unveiled at the World Congress on Railway Research earlier this year present some possible directions. For rail to prosper, it needs to form part of a balanced transport strategy, and as the ongoing debate about the use of very large lorries in Europe highlights the risk that attempting to optimise each mode separately risks a seriously sub-optimal overall result.

Nevetherless, with market optimism and investment both running at high levels, it is, as Posner and others have remarked to me recently, ‘a good time to be in the rail industry’.