March 14, 2016

“Cultural changes” spark turnaround at Israel Railways

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Once the butt of jokes for its poor reliability and slow journey times, Israel Railways is undergoing a radical transformation which promises to turn it into a competitive and viable means of transport for more and more people. CEO Boaz Tzafrir outlines to Kevin Smith how the company is delivering these improvements.

TEL Aviv central station at rush hour is a hive of activity. Trains arrive every few minutes from cities all over Israel dropping off smartly-dressed commuters ready for work in the city's central business district while picking up students and more professionals bound for study and work in other areas.

The situation is a far cry from the railway of old. With the network geared towards freight, only a skeleton passenger service was available, which was unreliable and unsuitable for commuters on a tight schedule. But since the railway split from Israel's port authority in 2003 to become its own company, it has undergone a stark transformation.

IsraelFrom six lines carrying 201 trains per day and 12.7 million passengers per year in 2000, it carried 53 million passengers on 460 daily trains and nine lines in 2015, which is expected to increase by a further 10% this year, with the aim to serve 65.7 million passengers on 860 daily trains on 16 lines by 2018.

Projects to deliver new lines, network-wide electrification and ERTMS are all underway and will provide IR with the capacity to achieve these targets. However, according to IR's CEO Mr Boaz Tzafrir, a change in management culture in the past four years is the key to delivering the current level and future improvements in service.

"Our company used to be heavily influenced by the union, by politicians, and single officials in the government, but it is not anymore," Tzafrir says. "As of the last four years, the management is running the company. The managers, the ladies and gentlemen who are sitting on our board, have the skills to learn and study the railway business, to take decisions and follow them, which has enabled us to achieve what we have today. We are very proud of the fact that in 2011-12 we had 140,000 passengers per day and four years later we have now 240,000 rides per day."

As well as ridership, improvements in punctuality are a barometer of the enhanced level of service now available in Israel. From exceeding the company's target of 92% with 93% for the first time in 2013, it continued to improve to 95.6% in 2014 and 95.4% in 2015.

Tzafrir says this success is down to shifting the company's philosophy from focusing solely on operations to emphasising quality of service. Subtle changes like introducing new smart uniforms have proven successful by restoring an element of employee pride while IR staff earn on average double the average salary in Israel, making a job on the railway a prestige position and one in which employees will want to perform well.

"I, and most of my colleagues who are sitting on the board, did not start our careers in this company, and we will not go on our pension in this company," Tzafrir says. "We came from different disciplines in the private sector - I came from energy, others came from the food sector, the financial sector, and the army. We know what is good management and we quickly understood that if we did not change the company's culture we will not achieve our targets."

Tzafrir adds that by changing its company philosophy, IR is better placed to successfully deliver the government's rail infrastructure investment plan, which is budgeted at €13bn. Indeed transport minister Mr Israel Katz is firmly backing rail, and IR, to provide an alternative to the country's congested roads. From this IR is set to receive Shekels 28.3bn ($US 7.24bn) in 2016, its largest ever allocation, which will go a long way to funding ongoing infrastructure projects. The government also provides a substantial subsidy - 60% of IR's income - in order to reduce the cost of living for Israeli citizens, and reduced ticket prices by 25% in the last quarter by introducing a new zonal tariff system.

In addition, IR is engaging several alternative means to raise capital. It became one of the first state-owned companies to issue a bond on the Israeli stock exchange in 2015 raising Shekels 1bn. A second phase is due to take place this year, which Tzafrir says will be worth a further Shekels 2bn. The funds will provide equity for IR's real estate subsidiary business, which it founded in 2015 along with a freight subsidiary.

The real estate business will develop land adjacent to and above passenger stations for businesses, offices, shopping centres, and apartments, and Tzafrir says the railway has potentially 4 million square metres of land available for development. "We expect by 2020 that it will generate €100m annually and this will be used to develop passenger services and stations, new rolling stock and infrastructure," Tzafrir says. "It will be used for new investment projects not to cover daily costs, and three tenders will be published in the second half of this year."

For now the government is directly funding the construction of new stations and enhancements to existing ones as well as the upgrade of depots to the tune of €1bn. However, with a budget of Shekels 12bn, electrification is IR's most important current project and according to Tzafrir second only in national importance to the development of the new F35 aircraft.

Sociedad Española de Montajes Industriales (Semi), Spain, was selected as preferred bidder for the contract in December. Work was due to begin last month and encompasses electrification of 1080 single track-km (420 route-km) at 25kV 50Hz ac as well as design and construction of 14 substations, catenary and control systems.

In addition, IR selected Bombardier in a Shekels 1bn contract in October 2015 to supply 62 four-axle Traxx AC electric locomotives. The 160km/h units will operate in push-pull mode with up to eight double-deck or 12 single-deck coaches and will have a nominal output of 6MW. Delivery of the locomotives will begin in the second half of 2017. Retrofitting of existing double-deck coaches in preparation for electric services is also underway while Tzafrir says a tender for 60 double-deck EMUs was set to be published by the end of February.

This order will consist of six and four-car trains and will be split into three tranches, with the first for 18 six-car sets. IR will decide the order quantities of the two remaining tranches at the time of purchase while the order includes an option to supply additional trains for 10 years from signing the agreement.

Electrification will help to improve capacity and network performance as will the installation of ERTMS across the existing and future network length of approximately 1500km under a €600m programme. Prequalification is now underway for a design-build contract for the trackside element, with ETCS Level 2 set to replace a legacy ATP system. The deadline for submission was February 3 and the goal is for ETCS to come into service by 2019. In addition an upgrade of relay interlockings used in the northern section of the network to ESTW L90 electronic interlockings is already underway and is due for completion by 2019. GSM-R will also be rolled out across the country in the next five years.

"We did consider other systems but we decided to go ahead with ETCS as an interoperable system that will improve safety and the number of trains able to operate through the bottleneck of Tel Aviv," Tzafrir says. "By having shorter headways we might be able to have an additional three to five trains per hour. It's an increase of about 20%."

The new 57km A1 Link between Jerusalem and Tel Aviv along with the existing branch to Modi'in will be the first lines to be electrified, with installation work set to begin by the end of the year. Construction of the A1 project, along with IR's other major new line projects, the 60km Haifa - Beit She'an Valley Line, and the 23.5km Acre - Carmiel line, is on schedule.

The first of the five new lines included in IR's development plan, the 70km link from Ashkelon to Be'er Sheva, is already in service, carrying its first passengers on September 17 2015. IR is now operating 25 trains per day in each direction on the double-track line, including two trains per hour during the peak, offering a 50-minute journey time. Work is also nearing completion on the 6km 531 project, a crucial link between Ra'anana and the Coastal Line in the north of Tel Aviv.

"We are creating new and rapid transport connections in our relatively small country," Tzafrir says. "As most of the business and most of the population live in the wider Tel Aviv area, by using the new lines and those that already exist, other metropolitan areas in the north and the south in the east will be much closer to Tel Aviv.

"For example, Be'er Sheva is 50 minutes from Tel Aviv and with other towns in the south now one hour or 40 minutes away, families can live all over the country and benefit from much lower real estate or apartment costs but still travel to Tel Aviv for work, study or entertainment."

Traditionally IR has been reliant on importing railway expertise, particularly from Germany as well as eastern Europe and the former Soviet Union. However, Israel's railway infrastructure projects are presenting it with an opportunity to localise industry and further develop in-house expertise, which is another key element of the strategy to change the company's culture.

For example civil works contracts, including tunnelling, for the A1 link were awarded to international firms working in conjunction with local partners. In addition IR has developed relationships with local universities and academies to train a new generation of managers, planners, operators and engineers while also introducing its own training centre. Tzafrir says that this growing knowledge base could help the company export its expertise, particularly in operations as well as its real estate and freight businesses, in the future.

"I have personally met some of the leaders of European countries in order to develop collaboration and interest in our company," Tzafrir says. "With some European countries privatising lines, and looking for new areas for business, we might be an alternative for their operation or a strategic alternative for their needs."

While it may be eyeing opportunities in Europe, closer to home cross-border services remain hamstrung by Israel's political situation. The country is effectively an island with very limited cross-border road links and a colonial rail network which linked Lebanon with Egypt and Saudi Arabia a distant memory.

The Valley Line, which will provide a direct link from Haifa Port to the Jordanian border, does provide a ray of hope. Freight using the line will be transferred to lorries at the border bound for Amman and other cities in Jordan. And while Jordan has yet to confirm whether it will build its own railway to connect with Israel, Tzafrir is optimistic that this link will become a reality. "I believe that one day we will have real peace with all of our neighbours and that we will have a track connection to Jordan, Lebanon and Egypt," he says.

Inevitably Israel's difficult political situation and high terrorist threat makes the railway network a potential target for attack. As a result security on the network is tight, with all station users required to pass through metal detectors at entrances, and guns a common sight across the network, with armed soldiers and plain clothed officers all regular train users.

Tzafrir says the aim is for IR to offer an atmosphere as free "as in London, Hamburg or Berlin," but that a visible security presence and systems to protect passengers and assets are unavoidable.

"Unfortunately I think that eventually most of the public transport around the world will have to take the measures we provide today because it is not just a state of Israel problem, but something other states are experiencing too," Tzafrir says. "It is a problem we now share all over the world but we feel other countries can learn from what we do and I invite anyone to come so we can share the experience we have."

With Tzafrir and IR ready to contribute to the global railway community and considering opportunities beyond its borders there is a new-found confidence at IR. Indeed rather than struggling to justify its existence and battling with political interference, the railway, backed by a strong management team, now has a clear vision for its future. And with various improvement plans gradually coming to fruition, IR is entering an exciting new era where it will play a leading role in delivering enhanced mobility and economic growth for Israel.

"The changes we are making are changes of improvement," Tzafrir says. "It is not change for the sake of making change, but to become a better company which offers better services."

 

IR eyes freight expansion

IN addition to expanding the reach of its passenger network, IR has initiated a four-year plan to develop its railfreight capabilities with the goal of almost doubling the total freight carried by the network from 7.5 million tonnes today to 14.3 million tonnes by 2020. It is also aiming to triple its current intermodal market share from 7% to 21% by the end of the decade.

To achieve this target, IR founded its Rail Cargo subsidiary in 2015, which is embarking on a four-point plan. This includes building six new railfreight terminals in industrial areas within easy reach of the existing network, and with 80% of its business either export or import of materials, developing better rail connections at Israel's two existing Mediterranean seaports at Haifa and Ashdod as well as two new ports on the Mediterranean, and a smaller facility on the Red Sea to encourage the transition to rail.

IR is also looking to eliminate bottlenecks around the network through smaller infrastructure projects such as lengthening existing passing loops and sidings, and building new passing loops. It will develop a new operations plan to use these loops and enable freight trains to operate during peak hours. Mr Harel Even, senior advisor to IR's CEO, says that in the longer term there is a plan to separate freight and passenger services on Israel's western coast. However, this is still many years away with the high cost currently prohibitive.

The final element of the plan is to procure new railfreight wagons to support the growth in traffic, and to utilise diesel locomotives currently used for passenger services for freight operations as the network is electrified. Even says the budget for the freight development programme is Shekels 2.5bn ($US 641.2m), with Shekels 700m already secured from the government.

Currently the leading commodities carried by the network are bulk fertilisers such as potash and phosphates, with ICL the railway's main client. Containers are currently second with around 200,000 carried per year, but IR is eyeing large expansion in this area. It also carries grain and building waste and materials such as sand and aggregate.

To deliver its ambitious freight growth plan, IR is actively seeking a private investor to take a 51% stake in Rail Cargo.
"The feeling is that the deal should be with a private player with experience in the logistics sector," Even says. "It is not only in our interest to increase the scope of our activities but to secure their experience in activities such as door-to-door transport, terminals and other parts of the logistics process that we do not take part in."

Since announcing its intentions in mid-2015, Tzafrir has met with freight operators in Europe, Australia and the United States in order to generate interest in IR's activities. He says he is hopeful that a deal will conclude in the second half of 2016, leaving Rail Cargo well-placed to deliver an improved freight service for Israel. "We have all the facilities to achieve [our goal]," he says. "We have the customers, and while we have to solve some bottlenecks, both operational and track connections, these are relatively small issues and easy to handle."

 

 

 

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