However for Sweden's newest open-access passenger operator MTR Express the prime target is not the incumbent operator but competing modes, as Keith Barrow reports from Gothenburg.

HAVING dominated long-distance passenger operations on Sweden's Western Main Line for 150 years, national train operator SJ lost its monopoly of the country's busiest inter-city route last month, when MTR Express introduced its first services between Stockholm and Gothenburg. MTR Express is the first open-access venture to be launched by Hong Kong's MTR Corporation, which entered the Swedish market in 2009 when it took over operation of the Stockholm metro network under an eight-year contract.

"Open-access is the next logical step for MTR in Sweden," explains MTR Express CEO Mr Johan Söör. "Sweden is one of the most mature markets in Europe in terms of rail liberalisation and there are no unfair advantages for the incumbent - the playing field is level for all players, which makes it very attractive."

Having gone from conception to operation in less than 18 months, MTR Express launched its initial timetable of four services per day on March 21 serving intermediate stations at Södertälje, Skövda, and Herrljunga with a journey time of 3h 19min for the 455km trip. Over the next few months the delivery of the remaining trains will enable operations to be stepped up to eight services per day.

SJ currently operates 18 services per day with a journey time of 3h 1min for the fastest services, which use SJ2000 tilting trains. But while the existing service is fast and frequent, rail's share of the market compares poorly with competing modes - 30% of journeys between Stockholm and Gothenburg are made by air and 50% by road. Competition may be one factor in air's success on this route, with three airlines currently offering up to 25 flights a day, and Söör believes liberalisation can tip the balance in favour of rail. "We believe rail's share of the overall market can grow with competition," he says. "The beauty of this route is that the travel time is short enough to compete with air but long enough to make rail an attractive alternative to road."

MTR-SwedenAs a former consultant to the airlines, Söör has sought to draw on best practice from the aviation industry with the aim of giving MTR Express a commercial advantage over its rivals. "We have a dynamic yield management system, which is more advanced than the system used by SJ," he says. "The benefits of this are clear from a revenue perspective - good yield management is vital to a successful open-access business."

Elsewhere in Europe opening of the long-distance sector has often been accompanied by a bitter struggle between operators, which in some cases has led to a sustained drop in average fare prices. In Italy average fares fell dramatically and remained low when NTV entered the high-speed market. Austrian Federal Railways (ÖBB) flooded the market with discounted fares on Vienna - Salzburg, its most profitable route, when faced with competition from Westbahn, while the rivalry between Czech Railways (CD), Leo Express, and Regio Jet on the Prague - Ostrava route quickly spiralled into a destructive price war.

Söör suggests that with significant potential to draw ridership from other modes, SJ does not need to sacrifice revenue to defend its market position. "We haven't seen aggressive pricing from SJ," he says. "I think they understand that we have an efficient cost base and more opportunities to cut fares if we need to. This is also a very important route for SJ from a revenue point of view so they'll be careful not to take unnecessary risks."

MTR Express is able to keep costs down by exploiting synergies with MTR Stockholm, and functions such as human resources, finance and IT are shared between the two companies. MTR Corporation in Hong Kong has also provided resources for the project, carrying out safety and financial audits and recommending areas for improvement.

MTR Express will operate a fleet of six 200km/h Flirt 3 EMUs ordered from Stadler in November 2013 at a cost of $US 90m and three sets are required to operate the initial timetable with one maintenance spare. The train is derived from the Norwegian State Railways (NSB) class 74 regional EMU, which was introduced in 2012, and MTR Express wanted a design which was proven in service in Scandinavia to minimise lead times and ensure a smooth entry into service. The first set arrived in Sweden in November 2014 and the final train will be delivered in August, enabling MTR Express to introduce its full timetable of eight services per day. Stadler will maintain the fleet at Jernhusen's Hagalund depot near Stockholm under a 10-year servicing contract.

Each five-car train seats 244 passengers and seating configuration is uniform throughout with the level of service differentiating according to ticket type. With no fixed first or second class accommodation, MTR Express has the flexibility to respond to fluctuations in demand for different ticket types which optimises yields.

Fix is the cheapest type of advanced fare with prices starting at SKr 185 ($US 21) and these tickets are only valid on a specific train. Flex fares start at SKr 395 and allow the passenger to choose a seat, while fully-flexible Plus tickets start at SKr 595 and include at-seat service and meals. Plus passengers can also book an adjacent seat if they require more space and seats are selectable when booking online using a seat map. All three fare types include free Wi-Fi access and a full refund is available on any ticket cancelled within 24 hours of booking - a first for a Swedish rail operator and another reflection of airline practice.

MTR Express has signed retail agreements with external partners to sell tickets at stations and travel agencies. However, at least 80% of passengers are expected to book online, and with half of these bookings expected to come from portable devices, MTR Express has focused on optimising its website for smartphones and tablets. Fares are also available through national intermodal travel planner, which integrates 37 different rail, bus and ferry operators on a single booking platform, and MTR Express is present in several international distribution systems.

Business travellers are a key focus for MTR Express and are expected to account for around 25% of ridership. Six of the eight services in the full timetable will be peak departures from Stockholm and Gothenburg and MTR Express has signed travel agreements with large corporate customers, some of whom are transferring their business from the airlines. "Many corporations have introduced a policy to use low-carbon transport for journeys of less than five hours, and this is an important cultural shift in the business market," Söör explains.

While the business market is primed for growth, leisure travellers are another important focus accounting for around three quarters of traffic. MTR is also aggressively targeting this segment of the market with special offers for off-peak services and discounted fares for students and pensioners. "Being a small company we can easily launch a promotional campaign when demand is low," says Söör. "This is a cornerstone of the MTR Express business model. A small, efficient operator can make decisions quickly. We keep costs down and offer a premium service - that's how you win in this market."


While Sweden is a mature market for open-access operators, Söör stresses that new entrants continue to face structural challenges. New operators enter the market without the reassurance of a long-term track access agreement, and infrastructure manager Trafikverket allocates paths on an annual basis. The Swedish government will publish a report later this year on the future of train path allocation and Söör is a member of the committee looking into how capacity is assigned.

"We have put a lot of effort into analysing the process for train path allocation and renewal, and we are confident that we can retain the timetable we have now," Söör explains. "The current system takes up a lot of management time - we apply in April, paths are allocated in September and the timetable starts in December. The market would really benefit from some long-term stability in planning."

With its first services up-and-running, an obvious closing question is whether MTR Express sees the potential for expansion in Scandinavia. "A handful of Nordic routes could be relevant, but it's important to stress that it is only a handful," Söör concludes. "This is the first time MTR has launched an open-access service with the commercial freedom to set everything on its own terms, and there's a lot of interest in how it could develop, but for now, we are entirely focused on Stockholm - Gothenburg. We want to be seen as a high-quality operator, and we have a very talented and committed team who want to make MTR Express a long-term success."