Wed Jan 11th, 2012 at 04:58:02 PM EST
Last month I took on the subject of rail privatisation and deregulation in the EU in The Dawn Of Open Access (1/2) and (2/2). In the January 2012 issue of International Railway Journal, there are feature articles about two of the new private long-distance passenger operators bringing competition to the former state monopolists. In line with my gravest predictions, one of these articles includes a quote in which a manager calls for the privatisation of profits and the socialisation of losses. The other includes a quote providing some insight into why the most new ventures have it so difficult to launch.
The first article discusses RegioJet, the Czech open-access operator which competes with former state monopolist CD on its busiest line, from Prague to Ostrava, since 26 September last year (and reaches ilina in Slovakia since December). The service, which offers locomotive-pulled trains with longer travel times but lower fares than the incumbent, is reported as a success, with near-full trains (no financial numbers given).
The article also mentions progress for the prospective third competitor I mentioned in my diary, Leo Express, which will operate modern EMUs now in production. The RegioJet manager asked by IRJ believes the market won't support three players – and thinks CD will be the one to bow out. Then adds this:
The CEO of CD has publicly declared that the need to focus resources on one route where there is competition can damage service quality elsewhere. If this is the case, we should question the role of CD. Is it to overservice one line with no evidence that this strategy will generate a profit, or is it to provide citizens with a consistent level of service over the whole country? The regions and the state pay a lot of money to CD for the services it provides, so they should think about what they want CD to focus on.
In other words: he tells the state to leave the busiest line to them to reap the profits, and subsidize CD's operations on less busy lines.
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Hamburg-Köln-eXpress (HKX) is a venture intent on competing with German Railways DB between the cities in its name (one of the busiest long-distance relations in Germany), with plans in perpetual delay. Last December was the third time they failed to launch at the announced date, and the second time they did so without any prior public announcement. Now the company COO discussed reasons with IRJ. The interesting part is that he sees three of the common problems I mentioned in the diary forming a catch-22 situation:
The real challenge is getting investors, trains and access rights converging at the same point in time. If one is missing, the others will not help you. We first evaluated possible routes and timetables with [infrastructure manager] DB Networks as we need track access rights as a guarantee for investors. To be granted a 15-year track access agreement, you have to start operations within 18 months. If you don't own trains, this is simply impossible. It takes around three years from ordering new trains to receiving them, and you need investors to help pay for them. But how do you convince investors to pay without a framework contract?
He then says that that's why they chose to refurbish used trains. However, I have my doubts about the business model of this venture. They want to offer a higher level of service than DB at lower fares. This includes layout: even the second-class cars were refurbished with 2+1 seating and more legroom than DB's, that means significantly less passengers for the same mass to be moved.
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