The economic crisis hit train leasing companies both in terms of supply and demand. Alpha Trains CEO Shaun Mills tells Keith Barrow how the company has acclimatised to the change in conditions.

LAUNCHED at the beginning of this year, Alpha Trains is a relatively new name in train leasing. However, beneath the fresh branding is a company that has developed over more than a decade to become the largest train leasing business in Europe supplying state-owned and private operators in 14 countries.

Formerly known as Angel Trains International, Alpha Trains was born in the demerger of the Angel Trains group, which saw its British and European operations go their separate ways. Alpha Trains is based in Luxembourg with 400 locomotives and 240 passenger trains currently on its books. The average age of these fleets is just seven years, a reflection of the high level of rolling stock investment in Europe over the last 10 years.

Together with the new brand, Alpha Trains has a new CEO. Prior to assuming his new role on September 1, Mr Shaun Mills was CEO of German train and bus operator Abellio, and before that finance director of former British train operating company GNER. As such, he has seen the leasing business from both sides of the table. "Our role is to procure, finance and lease trains, and our approach to the business is very engineering-focused," he explains. "We don't just maintain our rolling stock assets, we protect and enhance them, which is why we have more engineers than other leasing companies."

The economic crisis has made financing new trains more challenging, and the collapse in railfreight volumes in late 2008 and early 2009 had a dramatic impact on the demand for locomotives, forcing Angel Trains Europe to adapt quickly to this sudden change in the market. "On the freight side our main aim was to ensure the work was still out there for our locomotives and that meant sharing the risk with our customers," says Mills. "We allowed contract durations to shrink in line with demand because operators needed that extra flexibility. Now the market is recovering we're trying to extend contract terms as confidence returns."

Mills says this strategy was successful, and utilisation of the Alpha Trains freight locomotive fleet remained high throughout the crisis. At the time of writing, the electric locomotive fleet is fully deployed, and most of the diesel fleet is in use. Indeed, as volumes recover Mills says operators will need to think carefully about their longer-term traction requirements, particularly as securing finance remains difficult. "Operators could get caught out if they don't take locomotives for longer," he warns. "We are not planning to increase the supply of locomotives in the near future."

The downturn led some larger freight operators to put their own locomotives into storage, and in some cases, these operators have been unable to resurrect traction to meet short-term increases in volumes. This has created an interesting business opportunity for Alpha Trains, which is able to offer traction resources that are ‘ready-to-go.'

Mills is frustrated by the often-protracted certification of new locomotive types, and the national variations in this process. "Certification is still a lottery," he asserts. "You can approve an aircraft and fly it anywhere in the world faster than you can approve a locomotive to operate in two European countries."

Increasingly, freight operators also require locomotives equipped with ERTMS, and Mills is concerned about national variations in the application of the technology. "ERTMS is getting contaminated because countries make their own changes to the specification," he says. "In the short term it will drive up the cost of locomotives and I can't see infrastructure managers compensating for this through lower track access charges."

The concessioning of regional services has driven demand in the dmu and emu market, not least because many of the contracts specify the provision of new trains. In Germany this trend has reduced the average age of regional trains substantially in recent years, and in areas where new operators have taken over from DB, brand new trains have often superseded relatively youthful rolling stock.

This has been necessary to allow new operators into the market, but Mills believes the current level of orders cannot continue indefinitely. "You cannot continually buy new trains with a 30-year lifespan when concessions have a duration of 10 or 15 years and as this market matures the situation will change," he explains. "I think this will lead to more fluid train use in 10-15 years, with rolling stock transferring between operators."

This process will take longer in markets where liberalisation of regional passenger services is less advanced, and Mills believes significant new opportunities will emerge in countries such as France. However, Alpha Trains is unlikely to venture into the market for high-speed trains, where liberalisation is expected to attract new entrants. "High-speed is not our area of expertise and not something we're currently considering," Mills explains. "This is a market that will be dominated by state-owned operators such as DB and SNCF, and I expect they will generally choose to procure their own trains."