AFTER a record year in 2017, Sweden’s national passenger operator SJ is poised for further market growth, buoyed by a strong outlook for the country’s economy. SJ ticket sales grew by 2% last year to reach 30 million for the first time.
After a challenging start, SJ executive vice-president and head of the product division, Ms Caroline Åstrand, says 2018 is shaping up to be another good year, with continuing strong demand. “We had a rough start compared with 2017 because of the severe winter, especially in the first quarter, and there were a lot of problems for infrastructure and rolling stock,” she explains. “You can see this in both revenue and costs for the first quarter, but we still had a 1% year-on-year increase in passenger volume, and 2017 was a strong year. In April and May we have been picking up well and we’re back to normal operations and normal business. Demand is definitely there for the coming months.”
Looking further ahead, SJ’s business plan is predicated on the assumption that ridership will continue to grow, reflecting both sustained underlying demand in the travel market and the enhancement of its offer to stimulate a shift from other modes. “On all major routes we operate on today we are planning for higher volumes,” Åstrand says. “To support this, we are investing in rolling stock, and we need to invest in our products and services to ensure we continue to have happy customers. We are also investing in things that will help us to maintain a competitive cost position, such as planning systems.”
SJ is currently implementing a SKr 9bn ($US 1bn) fleet upgrade to modernise its inter-city trains and provide the additional capacity required to accommodate growth. This includes SKr 3.5bn for the refurbishment of its fleet of 36 X2000 tilting trains, which were built from the late 1980s onwards by Asea/ABB.
In April, 2016 SJ awarded Knorr-Bremse subsidiary Swedtrac an SKr 1bn contract for the interior refurbishment of 227 X2000 vehicles. All seating, carpets, interior panelling, and luggage racks are being replaced and the bistro area is being redesigned. The electrical upgrade involves the replacement of traction converters, battery chargers, train control systems, passenger information systems and entertainment equipment. This work is being carried out by ABB under a contract awarded by SJ in January 2014. SJ says the first modernised X2000 will be unveiled at the end of this year or the beginning of 2019.
Seating capacity has been increased as part of the refurbishment, but Åstrand insists comfort will not be compromised. “Passengers will have the same amount of space,” she explains. “We have thought a lot about seat development, and we’ve been working with that to ensure we have a good customer experience. Infrastructure capacity is limited, so it’s important for us to have enough seats on each train, but this will still be a premium product with emphasis on comfort.”
Looking beyond the refurbishment programme, an even larger commitment for SJ is the procurement of a new fleet of high-speed trains. An international tender was launched in September 2017 for 30 250km/h sets, each accommodating 350-400 passengers. SJ says it expects to sign a contract at the end of the year, although it has declined to name the shortlisted bidders.
SJ is already working to increase capacity on its key domestic inter-city routes. In April SJ submitted a track access application to infrastructure manager Trafikverket for additional paths on the Stockholm - Gothenburg corridor, where it competes with open-access operator MTR Express. Eleven new services a week will be introduced from December 2018 as part of a long-term plan to increase seating capacity on the route by 50%. The conclusion of a programme of infrastructure works on the corridor will enable SJ to cut journey times for non-stop services from 2h 56min to 2h 50min in 2019.
SJ has also applied for additional paths on the Stockholm - Malmö - Copenhagen line with the aim of offering a consistent hourly X2000 service pattern between the Swedish capital and Malmö from December. With demand for rail travel between Stockholm and Copenhagen continuing to rise, SJ is planning to increase services from six to seven trains per day southbound and from five to seven trains per day northbound. The route will benefit from the introduction of new trains from 2022.
“In the long term we want to have a more-or-less hourly service,” Åstrand says. “Once we have upgraded the X2000s and received our new high-speed trains we will have more rolling stock capable of operating across the [Øresund] bridge. We really see this as one region and to be able to compete with airlines we need to focus on travel times. The increased ID controls that came in during 2016-2017 have now gone and we saw a positive effect on the market when those obstacles were removed.”
Åstrand also sees potential for more services between Gothenburg and Copenhagen. SJ currently operates eight services a day between Gothenburg and Malmö, and the long-awaited opening of the Hallandsås Tunnel in 2016 reduced the fastest journey time between Sweden’s second and third-largest cities to a “competitive” 2h 15min for SJ’s limited-stop services. With the accelerated services proving popular, Copenhagen is seen as a natural next step. “To develop the Copenhagen market we have extended a Gothenburg - Malmö train to Copenhagen in the summer, but we want to offer a year-round service,” Åstrand explains. “Once we have the refurbished [X2000] trains it will be possible to do that.”
Another Nordic capital firmly in SJ’s sights is Oslo. Between 2000 and 2004, SJ and Norwegian State Railways (NSB) operated an X2000 service between Stockholm and Oslo under the Linx brand. This fell victim to competition from low-fare airlines, but SJ revived X2000 services under its own initiative in 2015, offering three services a day in each direction with a journey time of 5h 3min for the fastest trains on the 572km route.
“This market has great potential,” Åstrand says. “Track works are taking place on the Norwegian section, which means that we don’t have an offering that’s as large as we would like right now, and those works will go on for another three years, but in 2022 we plan to be back with a high-speed service, eventually with up to eight round trips. It’s one of our highest-priority markets.”
According to an outline business case published last month by Oslo - Stockholm 2.55, a group of councils and other stakeholders along the route campaigning for faster services, 1.4 million people fly between Stockholm Arlanda and Oslo Gardermoen every year, but only 200,000 travel between the two cities by rail. Currently, airline SAS operates 15 direct flights per day and Norwegian runs seven, while SJ runs four trains per day. Furthermore, the business case also identifies a significant untapped market for travel from other towns and cities between the two capitals - around 3.4 million people live in 50 municipalities along the route.
The 2.55 proposal, which was developed with the support of SJ and other international rail operators, envisages services operating at up to 250km/h. Trains would largely use existing lines with new infrastructure on the Örebro - Kristinehamn and Arvika - Lilleström sections to bring the Stockholm - Oslo journey time down to less than three hours. Estimates calculated by Sweco indicate that the project could generate SKr 67bn in economic benefits from passenger transport alone. Oslo - Stockholm 2.55 is now calling on the two governments to appoint a coordinator to work with the company and other regional stakeholders to further investigate the viability of its proposals.
In addition to its commercial ventures, SJ is looking to extend its Nordic rail activities by participating in competitive tenders for public service obligation (PSO) contracts in neighbouring countries, building on its success in this sector in Sweden. Norway’s Railway Directorate plans to award the country’s first competitively-tendered concession for passenger rail services in October (Traffic Package 1) and two further concessions will be awarded next year. Finland is preparing for market opening and competitive tendering will start with PSO concessions for Helsinki suburban services and regional services in the south of the country.
“We look into every passenger rail tender in Sweden and there are a lot of interesting opportunities coming up here in the next few years,” Åstrand explains. “If you take a broader perspective on where growth might come from, you can look at a larger geographic area. Markets in Norway, Denmark and Finland are opening up for competition in different ways. As we already have services to Oslo and Narvik in Norway and to Copenhagen, expansion into the other Nordic markets makes a lot of sense for us, and we are actively looking at those opportunities.”
Another key focus for SJ is harnessing digital technologies to enhance the customer experience. The operator’s website, SJ.se, attracts a million unique visitors a week and SJ’s app has 150,000 daily users, with 97% of tickets sold through online channels. Earlier this year SJ.se was voted Sweden’s top website and the country’s best travel website in the IDG/ Internetworld awards.
“We are already one of Sweden’s most digital companies, that’s something we are very proud of,” Åstrand says. “If you look at customer demand it’s largely about how we can meet expectations in digital channels. Both in terms of sales and communication, we want to be able to do everything relating to our journeys on our mobile phones. The key is to stay ahead and keep developing - we put a lot of effort into ensuring we have consistent traffic information in every channel and improved services.”
Since April, it has been possible for passengers to purchase tickets for local transport connections via the SJ app and early adopters are invited to test beta versions of new online services through the SJ Labs app, generating useful feedback for developers. This was recently used to test the use of augmented reality for wayfinding in large stations.
However, as well as praise, SJ’s online activities have recently drawn criticism. In April MTR Express filed a complaint with the Swedish Competition Authority claiming SJ was abusing its market position by preventing the sale of tickets for open-access operators’ services through SJ.se. In June Saga Rail suspended operations and lodged its own complaint against SJ.
The fares of MTR Express and Saga Rail are not shown on SJ.se, although those of some other open-access operators such as Snälltåget are displayed.
A previous investigation by the competition authority in 2014 - the year before MTR Express started operating - concluded that SJ was not abusing its dominant position in the market. Åstrand says SJ is supporting the authority in its investigation but believes the outcome should be consistent with the previous inquiry. “Competition has been in place so it’s possible to do some proper analysis,” she says. “Our view is no different now from what it was then - the website is a part of the competition and we do sell tickets for train companies that we feel offer a different product from our own.”
Despite this ongoing dispute, Åstrand believes that competition has strengthened the inter-city rail market. “The supply has increased, so the customer has more choice, which is good, and there has been a positive overall effect on fares,” she says. “In those markets where there is competition, rail has gained market share from the airlines. We have made improvements to face the competition and that has been good for SJ, and it’s good for the environment if we can challenge the airlines. So far, so good.”
The publication in June of the 2018-2029 National Plan for the Transport System has brought welcome clarity on key infrastructure investment decisions, which will help to align capacity with demand on heavily-used sections of the network. Notably, the government has committed to building the Järna (near Stockholm) - Linköping high-speed line for 320km/h, rejecting a cheaper option for a 250km/h design speed.
With Sweden’s population forecast to grow by 20% to 12 million by 2035, Åstrand argues that optimising the capacity of the new railway will be crucial to the value of the project. A 320km/h line can bring most air travellers down onto the rails and create one big region across the south of the country, which will increase the competitiveness of Sweden and Scandinavia as a whole. If and when these lines are built, we will have the financial resources to invest in the rolling stock required. We have done simulations on the kind of offering we could provide and there would be demand for a departure every six minutes going south from Stockholm in peak hours. You would have a travel system that is very different from today, a real step change.”
With the continuing development of its offer and high underlying demand at home, and opportunities for expansion abroad, SJ is well placed for further growth as it pursues its aim of becoming Scandinavia’s leading passenger rail operator.