January 19, 2016

Europe's open-access passenger operators gain momentum

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THE story of the liberalisation of Europe's long-distance passenger market has long had something of a Wild West flavour - a handful of pioneers setting out to find their fortune in an often hostile and unchartered environment, where big commercial risks were often taken in the face of inadequate or incomplete regulation and anticompetitive behaviour. In this fledgling market, the headlines were dominated by accusations of price dumping and disputes over access to infrastructure and facilities.

However, the market is maturing. Regulators and infrastructure managers have adapted to the multi-operator scenario; incumbent operators have begun to realise competition can grow the market for everyone, responding to the newcomers with service innovations; and most of the early operators are still there today, which means there is increasing management experience of how to run an open-access business effectively.

 

 

This year at least two new operators will enter the German market. Locomore is pioneering the use of crowdfunding to finance a Stuttgart - Berlin service, which is due to begin in September. Locomore refers to the initiative as "crowd ticketing" - each backer of the crowdfunding campaign will effectively be purchasing a ticket which can be used flexibly without restriction on its services.

This cooperative structure totally changes the relationship between operator and passenger, who also stand to benefit directly from the venture's commercial success. By December 14, Locomore had secured €283,175 towards its €460,000 target with 47 days of the campaign remaining. In addition, the company has raised €150,000 from other sources and expects to obtain a further €60,000 in loans.

Another start-up, DerSchnellzug, plans to launch services from Stuttgart to Hamburg via Würzburg, Hannover and Bremen, a route not currently served by DB. HKX expanded its network on December 15 when it extended selected Hamburg - Cologne trains to serve Bonn, Koblenz, and Frankfurt.

Elsewhere in Europe, the prospects look good. In Austria, Westbahn has increased capacity on its Vienna - Salzburg services, and is planning to extend some trains west to Innsbruck, while in Italy NTV has restructured its debts, increased its capital, and ordered eight Pendolino trains from Alstom to expand its network and increase frequencies on existing routes.

A new long-term track-access agreement has enabled Britain's Hull Trains to order five new bi-mode trains from Hitachi Rail Europe for its London - Hull services while in August the Office of Rail and Road (ORR) approved an application by Arriva subsidiary Alliance Rail Holdings for a new open-access inter-city service from London to Blackpool North.

This is all positive, but there are still challenges. The extent of market opening varies between countries and so do infrastructure access charges - a major consideration for start-ups and a factor which often puts rail at an immediate disadvantage compared with other modes such as long-distance buses. The shortage of suitable rolling stock - and the time it takes to get new trains into service - capacity constraints, and finding skilled staff are also factors.

The Fourth Railway Package will lay the foundations for further liberalisation and should make life easier for new entrants. However European legislation alone will not guarantee on-rail competition and commitment is needed at a national level to achieve success.

Infrastructure charges, which represent a big chunk of costs, need to reflect rail's superior environmental performance - why should rail pay a higher proportion of its infrastructure costs if it generates lower carbon emissions than other modes? A more progressive attitude to infrastructure charging is needed to spread the benefits of open-access across the continent.

Keith Barrow

Keith Barrow joined IRJ as News Editor in 2006 and was promoted to Associate Editor in 2008. He was previously editor of employee publications for the Welsh Assembly Government, G4S, and Thomsonfly, and has written for a range of other publications including the Derby Telegraph. He graduated from Lincoln University in 2002 with a degree in journalism.

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