Rail liberalisation on track

Date: 11/01/1996

By Tim Jones

AS the continent's railways go through an unprecedented round of harsh restructuring, the European Commission is pushing ahead with a second round of liberalisation measures to develop the single market in rail transport.

In France, workers at the Société Nationale des Chemins de Fer (SNCF) led the battle against the government's plans for social security reform as well as the proposed restructuring of the company.

The Belgian railways have been constantly disrupted by strikes against a plan to save 1.5 billion ecu from the company's budget.

But such industrial unrest has not deterred the Commission from introducing a proposal to enlarge the scope of an existing EU liberalisation directive, designed to allow individual railways to operate all freight transport and international passenger services.

At the same time, the proposal seeks to make it easier for new companies to win access to the rail infrastructure.

It calls for greater liberalisation of the rail sector to allow access to the freight market, combined and international passenger transport by improving access to the European network as a whole.

The overall aim of the directive is to give a push to train transport and increase its market share in the area of freight, a sector in which it has been lagging behind, and to improve combined transport services.

Adopted by the Commission at the end of 1995, the proposal will be considered by the European Parliament's transport committee on 22 January.

The railway companies' lobby, the Community of European Railways (CER), has given its backing to the idea, but insists the regulatory framework that accompanies it must ensure there is a real growth in rail freight rather than simply a shifting of volumes between existing operators.

When the last liberalisation directive was agreed by member states in July 1991, they committed themselves to a series of measures including greater management autonomy for the companies involved, the separation of infrastructure and operations, greater market access for new operators and, above all, an improvement in the companies' financial situation.

Under pressure because of this commitment, as well as from the need to rein in their budget deficits, several member states have embarked on tough financial restructuring measures.

For most operators, the burden of past debt is at the root of their difficulties, a problem exemplified by SNCF and its huge 27-billion-ecu debt burden. Hit by intense competition from road and air transport and an early decision to finance a high-speed rail link to the Channel tunnel, SNCF's burden has become all but insupportable.

In Belgium, the SNCB is edging towards a deal with its workforce to cut its budget by 1.5 billion ecu while, at the same time, injecting investments worth 440 million ecu into the company.

The UK government has gone much further. The rail system has been broken up into a separate manager of the infrastructure, Railtrack, and a series of 25 operating companies.

At the end of December last year, the first of the operating companies was sold. South West Trains, which will manage the the south-west part of the network, was sold to bus company Stagecoach for 325 million ecu.

However, the CER complains that while some member states have gone beyond the necessary requirements in the deregulation package, others have failed to introduce the national measures required to meet its key objectives.

Where the measures have helped, however, is in encouraging joint ventures between national operators. For example, an agreement between European railways enterprises on the transport of cars between factories and the German-Swedish 'Hansa Rail' venture - aimed at boosting turnover in wagon goods - has aided rail companies in their pursuit of increased freight traffic.

On the passenger travel side, Eurostar - while suffering in spades from the problem of past debt - has managed to win large market shares from the high-density London to Paris and London to Brussels air routes.

Nevertheless, says the CER, the lopsided nature of these developments means the next round of measures will have to be implemented carefully to ensure certain companies do not suffer unfair competition from other less liberalised firms.

A report drawn up by Austrian Socialist MEP Erich Farthofer ahead of this month's transport committee meeting will take account of many of these concerns.

His amendments will be put to the vote in the committee at the end of February. The draft directive will then have its first reading in the full Parliament at its March plenary session.

A final decision on the directive will not be taken by EU finance ministers until the end of the year.