January 16, 2018

Green shoots of a rail recovery on the Emerald Isle

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David Franks, Irish Rail (IE) chief executive, talks to Keith Barrow.

THIS year marks the 10th anniversary of Ireland’s descent into an economic crisis that brought the boom years of the Celtic Tiger to a crashing end. In the grip of a collapsing property bubble and a deep financial crisis, the government sought an €85bn bailout from the European Union and the International Monetary Fund, leading to a period of biting austerity and spending cuts.

For Irish Rail (IE), the economic downturn dealt a double blow as ridership contracted and government support withered. Key capital projects such as Dublin’s Dart Underground commuter rail link were deferred, and infrastructure maintenance was cut back as the squeeze on departmental budgets continued to tighten. Annual public service obligation payments to IE fell by 49.5% between 2007 and 2015, when IE received €96.7m for the operation of these services.

David FranksMeanwhile revenues plunged, falling from €230.9m in 2007 to €185.6m in 2011, and assets have continued to deteriorate, pushing the state-owned railway to the brink of insolvency. In a bid to weather the storm, IE has implemented a broad cost reduction programme, with measures including cutting train lengths to better reflect demand on off-peak services. In recent years the government has released limited additional funding, but IE continued to walk the financial tightrope in 2017 with an accumulated deficit of nearly €160m.

Nonetheless, despite its financial struggles and a pay dispute which culminated in industrial action by all 3800 employees at the end of the year, IE chief executive Mr David Franks is encouraged by the company’s performance in 2017. “Revenue is ahead of budget, growth on the commuter network is more than 5% in terms of passenger numbers, and costs have been kept tightly under control,” Franks says. “Our new revenue management system has helped us to drive revenue through variable ticketing pricing on inter-city services. There will be a small loss to the company for 2017, but it’s better than what we budgeted - we were expecting to double the loss for the year. Our focus now is on securing the additional funding we need to address the lack of investment in key assets over the last eight-nine years.”

The 2016 Rail Review, an independent assessment of IE’s financial situation, laid bare the funding challenges facing the organisation. Aecom calculated that IE would need €102.9m in additional funding in 2017, €116.7m in 2018, and €113.1m in 2019 to address the backlog in infrastructure spending, fleet heavy maintenance, fleet capacity, and reductions in PSO payments. Over the last year the exchequer has released funding for specific investments such as heavy maintenance, but at the start of 2018, IE still lacks the financial capacity to bring infrastructure up to an acceptable standard and sustain network quality at what the Aecom review deems a “steady state.”

“We can’t maintain a steady state, that’s for sure,” Franks says. “We’ve been managing this problem since 2007, and we’ve had to respond with all sorts of draconian measures. I firmly believe there’s nothing like a crisis to spur innovation, and we’ve seen a lot of that, but it can only get you so far. A lot of assets have not been maintained to the expected standard. The result has been speed restrictions, signal failures, and we’ve been relying on people, not systems, to ensure safety. It has taken a lot of human intervention to keep the railway running during this time.”

Surprisingly, given IE’s parlous financial situation, the size of the network has remained stable throughout the downturn, and passenger services continue to operate on several heavily-loss-making routes as 2018 dawns. The Rail Review suggests that tackling the legacy of nearly a decade of accumulated losses is likely to require increased exchequer grants, closure of loss-making lines, or a combination of the two. “Two or three of our routes may be better served by alternative public transport,” Franks says. “Each passenger journey on the Nenagh branch consumes €850 of public subsidy. Limerick Junction - Waterford, the [Ennis - Athenry] Western Rail Corridor (WRC) and Wexford - Rosslare have very little revenue.”

Franks acknowledges that the future retention of these routes is very much a political choice, but he argues that a decision needs to be made on how to properly fund their operation and maintenance if services are to continue.

Across much of the network, however, the story is one of growth as the economic recovery and promotional activity have driven an increase in passenger numbers. After falling from a peak of 45.5 million in 2007 to 36.7 million in 2012, overall ridership began to grow again in the first half of 2014 and has continued to increase strongly ever since, reaching 42.8 million in 2016.

During the economic boom in the 2000s, IE invested in the renewal of its rolling stock and now has one of the youngest inter-city fleets in Europe, but demand is starting to outstrip supply. IE is planning to launch 10-minute interval services on the Dublin Area Rapid Transit (Dart) network in the first quarter of this year but any further improvements and extensions beyond this will depend on the expansion of the rolling stock fleet. “We’re predicting current growth levels will continue in 2018, and our budget assumes 3.5% volume growth,” Franks explains. “Beyond that, capacity is constrained until we get new vehicles.”

A short-term increase in capacity will be achieved by reinstating the fleet of 12 two-car class 2700 regional DMUs, which were built in the late 1990s but taken out of service in 2012. After undergoing heavy maintenance, the trains will return to service next year, releasing ICR inter-city DMUs to boost capacity on busier routes. The NTA is funding this project.

With the risk that fleet capacity could soon constrain revenue growth, new trains are back on the agenda. IE is currently in detailed discussions with the National Transport Authority (NTA) regarding funding for the procurement of an initial tranche of 100 bi-mode multiple-unit vehicles, which would allow Dart services to be extended north to Drogheda and west to Maynooth before these lines are electrified. If the procurement is approved, the trains could be in service within four years.

Around 83% of rail journeys on the IE network take place in the Greater Dublin Area, and expansion of infrastructure capacity in the capital remains a priority for IE. The opening of the Phoenix Park tunnel to passenger traffic in November 2016 created a new cross-city link between Grand Canal Dock and the Kildare line and the e120m City Centre Resignalling Project is increasing capacity on the Grand Canal Dock - Howth Junction line, one of the busiest sections of railway in the country.

The Dart Expansion Programme (DEP), which was deferred during the economic downturn, is also back on the agenda, albeit in a revised form. The €4.4bn project encompasses Dart Underground, a high-capacity commuter rail tunnel under the city centre; electrification of the lines to Hazelhatch, Drogheda and Maynooth; and expansion of the train fleet and depot facilities. Several options are currently being considered to bring down the €2.65bn cost of Dart Underground, which has a benefit:cost ratio of 0.8 in its unmodified form.

A new Capital Investment Programme, due to be approved by the government as IRJ went to press, is expected to provide a clearer framework for infrastructure investment in Ireland.

In September 2017 IE began tendering for a contract to supply trackside equipment for its new automatic train protection (ATP) system. In 2011 IE awarded Alstom a framework contract to develop and supply an onboard train protection system to replace the life-expired Continuous Automatic Warning System (CAWS). IE is now planning to roll out this technology, dubbed the Irish Rail Hybrid System (IEHS) across the network, and is seeking a supplier for the trackside element of the project, with the aim of awarding the contract by April. “Ireland is one of the few countries in Europe with no form of ATP and we’re totally reliant on drivers obeying signals,” Franks explains.

Planning is also underway for a new National Train Control Centre, which will integrate all traffic control functions for the entire IE network at a single location. The project, which is being co-funded by the European Union (EU), will replace the life-expired Centralised Traffic Control Centre at Dublin Connolly, enabling IE to unlock the benefits of infrastructure investments made over the last decade and improve real-time passenger information and management of service disruptions.

Freight

Although it only has around 1% of the inland freight market, rail freight volumes are rising as the economy improves and IE is seeking to grow its business by focussing on niche point-to-point markets. “Container traffic is increasing and we see a big potential opportunity coming up in the form of imported biomass,” says Franks. “We’re also looking at running longer container trains. The key there is getting the price and the access charge as low as we can to ensure our services are competitive.”

There has also been a renewed focus on customer service in the passenger sector through the Customer First programme, which has been implemented with a new integrated ticketing management and distribution system at its core. “On the basis of new technology we want to move more ticket office staff into onboard roles,” Franks says. “We have Driver Only Operation (DOO) on all of our trains, but we want a second person on every inter-city service. DOO is very efficient but it’s not great from a customer service point-of-view - onboard is where people spend most of their time with us so that’s where our staff need to be.”

While IE goes into 2018 facing continued financial uncertainty, Franks believes the outlook is positive with traffic continuing to increase, clearer direction at a strategic level, and sympathy among policymakers who see the value of the railway to the future of Ireland’s economy. “We’re quite fortunate because the current Taoiseach was previously transport minister, as was his deputy [the finance minister],” Franks says. “If you look at how the Rail Review has unfolded, people at a political level are doing everything they can to support us. Excellent relationships are helping us to position ourselves for a better future. The economic environment is improving, there’s a proper understanding now of our financial position, and most importantly, a desire to resolve it.”