Italo-NTV, the world’s first open-access high-speed rail operator, took six years and an investment of €1bn to realise its dream of setting up a service in competition with Trenitalia, a subsidiary of Italian State Railways (FS). The first train departed in 2012 and the company faced a hard time battling the weak Italian economy and obstacles put in its way by FS through its Italian Rail Network (RFI) infrastructure manager.
The slow start resulted in the need to refinance the company. Nevertheless, Italo-NTV survived thanks to the tenacity of its shareholders and declared its first pre-tax operating profit of €800,000 in 2015. Since then the company’s profitability has grown steadily and it has just published an impressive set of financial results for 2017.
Italo-NTV is so confident in its performance that on January 23 it filed an application for listing on the Italian stock exchange in which the company will offer between 35 and 40% of its share capital. In its application, it says it has a 35% share in terms of passenger-km of the Italian high-speed rail market on the routes it operates. This is quite an achievement considering that Trenitalia has boosted the quality of its services since Italo-NTV entered the market and generally operates more trains.
In neighbouring Austria, Westbahn launched a service between Vienna West, Linz and Salzburg in December 2011. Last year, its managing director, Dr Erich Forster, said turnover reached €56.7m in 2016 with Ebitda of €10.6m. As we report this month, Westbahn launched a second service on the route on December 10 linking three other stations in Vienna - Praterstern, Main and Meidling - with Linz and Salzburg effectively doubling the frequency between the three cities.
Westbahn carried 5 million passengers in 2017 and revenue grew by 5%. Forster expects a 50% increase in traffic and revenue this year as a result of introducing the new service, although he says it takes between one and three years to reach full performance.
The Czech Republic has two open-access passenger operators. RegioJet, a subsidiary of bus and travel company Student Agency, launched its first service in 2011 and declared its first profit four years later, turning a Koruna 42m ($US 2m) loss in 2014 into a profit of Koruna 41m in 2015 on a turnover of Koruna 990m. RegioJet currently operates from Prague into Slovakia, and launched a Prague - Vienna service in December with four round trips per day.
Entrepreneur Mr Leos Novotny launched Leo Express in 2012 in competition with RegioJet and incumbent Czech Railways (CD) which embarked on an aggressive price war in response. While Leo Express managed to weather the storm, it has yet to make a profit, although it did manage to reduce its annual loss from Koruna 66.2m in 2015 to Koruna 38.75m in 2016 and cut its total debt by 11%.
Nevertheless, Leo Express continues to expand. It was granted approval in October to launch a service from Prague to Krakow in Poland and has ordered new trains from CRRC.
Leo Express also took over crowd-funded Locomore in Germany last year which had got into financial difficulties after launching a daily service from Stuttgart to Berlin.
So what are the main ingredients for success? Italo-NTV, Westbahn, RegioJet, Leo Express and Swedish open-access operator MTR Express, which launched on the Stockholm - Gothenburg route in 2015 and hopes to be in profit this year (IRJ October 2017 p36), have all invested in new trains to enable them to offer a high-quality service with such modern-day essentials as Wi-Fi, onboard entertainment, easy-to-use internet booking systems, and often three levels of service. Fares are competitive and frequency is sufficiently high to make the service competitive. Most of the operators have also launched long-distance bus services to expand their reach.
All of this has been achieved thanks to the opening up of national markets to competition, albeit half-heartedly, ahead of the Fourth Railway Package, and often in the face of poor regulation of the market.
Of course, success is not guaranteed, and the German market in particular has proved challenging for open-access operators. Hamburg-Cologne-Express (HKX) was forced to suspend its Hamburg - Cologne service in October after a gradual contraction in its offer since it launched in 2012.
HKX relied on a fleet of old locomotive-hauled passenger coaches and infrequent services which, despite targeting the more price-conscious end of the market, did not contrast well with German Rail’s high-frequency high-quality ICE service. The service was revived temporarily by private long-distance bus operator FlixBus for seven days between December 22 and January 2.
Nonetheless, the picture is generally a positive one and the growing success of Europe’s open-access passenger operators bodes well for Brightline, which has just launched a trial service in Florida as the first private inter-city operator in the United States for at least half a century. All Brightline has to do is overcome the general antipathy to passenger rail prevalent in North America, a challenge in itself.