THIS is a time of transition for Spain’s national passenger operator Renfe. With the country’s recovery from the 2008-2014 economic crisis, passenger numbers and revenue are growing strongly and the operator is preparing to make long-awaited investments in new rolling stock.

Digitalisation promises to lift operational efficiency and strengthen customer service, while liberalisation brings opportunities abroad, albeit with the prospect of greater competition in the domestic market.

Passenger numbers increased 4% last year to reach 507 million, the first time since 2008 the figure has exceeded 500 million. Ridership on the high-speed network reached 38.5 million passengers, including 21.3 million on Ave long-distance services, an increase of 3.7% compared with 2017. Avant regional high-speed services carried 8.7 million passengers, a 6% year-on-year increase.

Ridership on Cercanías (suburban) and Media Distancia (regional) services increased by 4.1% to 474 million, including 276 million passengers on the Cercanías network, an increase of 6% compared with 2017. Renfe anticipates further growth in 2019, with revenues forecast to rise 5% to €4.22bn.

The Fourth Railway Package was transposed into Spanish law at the end of 2018, enabling market opening for domestic passenger services in December 2020 and ending Renfe’s monopoly of commercial and Public Service Obligation (PSO) rail services.

Last year Renfe ridership exceeded 500 million for the first time since the global financial crisis.

“Renfe is addressing liberalisation as an opportunity, and it’s a big opportunity,” Renfe CEO, Mr Isaías Táboas Suárez, said at Terrapinn’s Rail Live conference and exhibition in Bilbao on March 6. “We’re not afraid of competition. Liberalisation is like the launch of the high-speed network in 1992 because it allows us to take a big step towards greater internal efficiency and higher quality. We’re moving to a model that will allow us to better meet market demand. Competition brings down prices and generates improvements for customers.”

Preparing the organisation for this radical change is the core objective of the 2019-2023 Strategic Plan, which was developed with the support of McKinsey and approved by Renfe’s board of directors in January. The plan draws on feedback from more than 30% of the Renfe workforce and aims to strengthen the company’s position as an integrated mobility operator and international logistics business.

The plan has three core objectives:

  • putting customers at the centre of the business
  • advancing internationalisation, and
  • focussing on continuous improvement in safety and efficiency.

Renfe plans to achieve this with a two-pronged strategy. In parallel with a digital transformation to improve customer service and boost efficiency, Renfe will pursue with a cultural transformation with the aim of making the organisation more responsive to changes in the market.

The plan envisages revenues reaching €4.6bn in 2023 and €5.3bn in 2028, a 30% increase compared with 2018. International activities could generate €220m, or 5% of turnover in 2023 and €550m (10% of turnover) in 2028, helping to offset the impact of competition in the domestic market.

With a rapidly ageing workforce, recruiting Spain’s next generation of railway professionals is a priority of the new plan. The average age of employees is 52 and only 12% of staff are women, a proportion Renfe aims to increase to 50% by 2028. The workforce is expected to grow to 15,700 in 2019.

Renfe’s 2019 investment budget has been set at €855m, a 122% increase compared with 2018, and includes €838m for improvements to passenger comfort and customer service. The main objective is to expand and improve the train fleet, while improving accessibility and passenger information systems. €408m is allocated for the acquisition of new trains, including a payment for Talgo Avril high-speed trains ordered in 2016, with a further €281m for improvements to the existing fleet. The budget also includes funds for improvements at suburban stations (€40m), operational safety enhancements (€58m), depot upgrades to improve fleet productivity and availability (€17m) and modernisation of passenger information systems (€34m).

Renfe is preparing for competition on its flagship Madrid - Barcelona route. Photo: David Gubler

Renfe plans to invest around e€3bn in new trains over the next few years with the aim of renewing 50% of the Cercanías and Media Distancia train fleets. The first order, which has an estimated value of €287m, will be for 31 multiple-units for metre-gauge lines in Murcia and Cantabria. The programme also includes the purchase of high-capacity suburban trains for the Madrid Cercanías network and bi-mode multiple units for regions including Extremadura and Aragón.

While the passenger business returns to pre-crisis levels of activity, the same cannot be said for Renfe’s freight operations, which face a less certain outlook. During 2016 and 2017 the financial performance of Renfe’s rail freight subsidiary Renfe Mercancías improved, defying the generally lacklustre performance of the Spanish rail freight market, but the picture for 2018 looks less rosy. According to figures released by the National Commission for Markets and Competition (CNMC) in February, Spain’s rail freight market contracted by 3.1% in 2017 (by net tonne-km) and rail’s share of the overall freight market was just 1.9%, the third-lowest in the EU after Greece and Ireland.

Preliminary data for 2018 released by the Ministry of Development on March 11 shows Renfe Mercancías carried 18.3 million tonnes of freight last year, a 6.7% decline compared with 2017. All traffic segments witnessed a contraction, with the exception of intermodal, which grew by 2.4% to 3.8 million tonnes. Domestic operations accounted for 84.7% of freight movements in 2018.

As part of its management plan, Renfe Mercancías has disposed of redundant assets, including surplus locomotives and wagons, and implemented a reorganisation of the business, with some staff accepting voluntary redundancy or moving to other Renfe subsidiaries.

Renfe Mercancías continues to diversify its offer with the introduction of new services. In February it revealed plans to launch a “high frequency” intermodal service between Madrid and the port of Valencia. The service will operate three times a day with each train accommodating up to 70 TEU.

Looking ahead, the Spanish rail freight market faces several structural challenges that might limit the potential for future growth. Notwithstanding the interoperability issues arising from differences in track gauge, signalling and electrification systems, the CNMC notes that road freight operators only cover 20% of their external costs, compared with 43.6% in France and 45.5% in Germany. Furthermore, infrastructure charges for freight trains will be increased incrementally over the next decade to cover around 30% of directly-attributable costs, compared with 2% currently.

A driving car for an Avril ES high-speed train on the production line at Talgo's plant in Madrid. Photo: David Burroughs

The CNMC warns “the asymmetry in the treatment of infrastructure costs” is a potential threat to rail’s ability to compete in the Iberian freight market, although the risk could be “mitigated or even eliminated with a significant increase in the activity of the sector.”

Under the previous government Renfe had initiated plans to find a strategic investor to partner in Renfe Mercancías. However, Suárez confirmed in January that the company currently has no plans to sell a stake in its freight unit, although it will seek to build an alliance with an international partner.

Indeed, a strategic approach to developing international opportunities is key to the 2019-2023 plan. In this regard, Renfe is looking to build on its success in Saudi Arabia, where as a member of the Saudi-Spanish Al Shoula consortium it plays a central role in the operation of the Haramain high-speed line.

“When the market has to deal with competition, Spanish companies naturally look abroad, and we have to take that path. This is not new for Renfe or the Spanish rail industry,” Suárez says. “We’re trying to become more proactive to create alliances with other Spanish and international companies to look for opportunities. We want to develop products that can compete with incumbents elsewhere. This is a completely new proactive approach for Renfe. We’re not just looking at open-access high-speed but bidding for PSO contracts across Europe as well, making use of the expertise and knowledge we have built up in Spain.”

In October 2018 Renfe and Adif were selected by Texas Central as strategic partners for the operation and maintenance of the Dallas - Houston high-speed line (December 2018 p30). In Britain, Renfe has joined forced with MTR Corporation to bid for the West Coast Partnership (WCP) franchise, which encompasses Inter City West Coast services currently operated by Virgin Trains and shadow operations on Phase 1 of High Speed 2, which is due to open in 2026.


Since the early 1990s Spain has invested heavily in high-speed rail infrastructure and today the 3000km network is the world’s second largest behind only China. Both the government and infrastructure manager Adif see liberalisation as an opportunity to maximise the return on their investment and maximise utilisation of this key public asset to the advantage of society and the economy.

Suárez says the early target routes for competition should be obvious. “New entrants can look at where the incumbent is making money and consider how a new product might attract market share,” he says. “As our figures are public it’s easy for other companies to look and see where the money is being made: on Madrid - Seville, Madrid - Valencia and Madrid - Barcelona. I think competition will develop on those corridors, primarily Madrid - Barcelona. We are preparing for this and we will be ready to go when the time comes - ready to fight for market share.”

According to Renfe, around 11 million journeys are made between Madrid and Barcelona annually, with rail accounting for 39% of the market, followed by car (33%), air (23%) and bus (5%). “Four million people are making a six-hour drive,” Suárez says. “Many people are still happy to drive because its cheap. We must address this.

“Driving costs about €55 if you don’t use the toll roads. We’re looking at how we can achieve a product with lower operating costs to deliver pricing at or below this level.”

Renfe hopes to emulate SNCF’s success with Ouigo, by launching its own low-fares service on the Barcelona - Madrid corridor in 2020. The Eva concept has been developed to offer “more personalised and innovative services” with the aim of making high-speed rail an attractive option for passenger types who still tend to favour the car, namely small groups, young people and families. Fares will be up to 40% lower than the equivalent Ave ticket, which averages €52 on this route.

Renfe is planning to offer low-fares high-speed services under the Eva brand.

Eva will offer a door-to-door service with first and last-mile services included. All ticketing infrastructure will be digital, and passengers will be able to use biometric identification.

The first competitor to show its hand is Intermodalidad de Levante (Ilsa), an open-access operator established by Spanish airline Air Nostrum with the objective of launching Montpellier - Barcelona - Madrid high-speed services. According to Ilsa’s 2017 submission to the CNMC, these services will be 10% faster than those operated by Renfe with lower fares than the incumbent.

In December 2018 Spanish infrastructure group Acciona reached an agreement with Air Nostrum to take a controlling stake in Ilsa, giving the newcomer the necessary capital to move forward with its plans. Meanwhile, SNCF Voyages Développement has registered the Rielsfera trademark in Spain, indicating that SNCF may also be preparing to enter the Spanish long-distance market.

In January, infrastructure manager Adif and its high-speed subsidiary Adif AV approved proposals to cut track access fees on high-speed lines by 9.2% with the aim of stimulating competition (IRJ February p8). A 16% reduction is planned for international services.

Track access charges already compare favourably with other European countries: in 2017 Adif levied a fee of €16.78 per km on the Madrid - Valencia line and €18.92 per km on the flagship Madrid - Barcelona route. By comparison, French infrastructure manager SNCF Network was charging €27.98 per km for Paris - Tours and €30.68 per km for Paris - Lyon.


Digitalisation plays a key role in the strategic plan, supporting both the drive for greater operational efficiency and a more customer-centric approach to the market. Suárez believes collaborative research arrangements, both within the rail industry and beyond it, will be crucial if rail is to fully exploit the latest technological innovation. “We want to do more to promote railway R&D,” he says. “Renfe will provide funding and we want to support SMEs - that’s part of the company strategy. Renfe must collaborate to defend the overall health of the rail sector, which the company benefits from.”

To support its digitalisation goals, Renfe has established the TrenLab global accelerator programme in partnership Telefónica’s start-up accelerator Wayra. TrenLab seeks “disruptive technological solutions” that will drive the digital transformation of Renfe, help to solve internal business challenges, and improve the passenger experience.

TrenLab opened its second call for start-ups on February 28 with a deadline of April 28 for submissions. The global call seeks start-ups in the seed or early stage of development and aims to address three themes: digitalisation of operations, integrated mobility, and new communications channels with the passenger.

More than 240 startups registered for the first call last year, 27% of them from outside Spain. Three winning start-ups were chosen in December. Each will gain access to Renfe and Telefónica business units, which will support project development and pilots, as well as a 6-9 month mentoring programme and a cash prize of up to €50,000 for investment in their business.

Renfe faces a race against time as it prepares for a radical reshaping of the rail market in Spain and the decisions the company makes in the next three years will be critical to its fortunes over the coming decade. By streamlining its core domestic activities and aggressively pursuing new opportunities abroad, Renfe is to build firm foundations for its transition from a monopoly train operator to a competitive international mobility provider.