Rail firms struggle to get back on track

Date: 04/05/2000

By Bruce Barnard

AFTER a decade of political horse trading, the rail freight industry is almost free to behave like any other business. But after more than five decades of stultifying state ownership and monopoly power, it cannot grasp the new freedoms.

Rail companies, including private operators, can now run freight services where they want, with the notable exception of France, which remains hostile to market-opening measures. Prime Minister Lionel Jospin's reluctance to support calls at the recent Lisbon summit for a cut-off date for the complete liberalisation of transport reflected the political necessity to protect his country's state-owned railway SNCF.

After many years of tortuous negotiations, a single European rail market is now in sight which should, in theory, allow the railways to claw back traffic that has deserted to road and inland waterways, slashing rail's share of Europe's freight market from more than 30% in 1970 to around 11% - and falling - today.

Formidable obstacles remain, not least the differing technical and safety standards across the Union, but the key point is that the political battle for liberalisation has been won. Even in France, the government faces mounting pressure from ports and exporters for a more open market to prevent rivals in other countries from gaining a competitive edge because they have more efficient and flexible rail services.

Supporters of a totally-liberalised, privately-owned rail sector point to the UK, where the US-owned company English Welsh and Scottish Railway (EWS) has not only reversed rail's loss of market share but has also moved into sectors where trucks have long dominated.

Continental Europe is not impressed: while former Soviet republic and aspiring Union member Estonia is preparing to sell off its railways, possibly to a US firm, most Union governments have not even discussed privatisation. Running locomotives and freight wagons remains mainly a state-owned activity apart from a few private firms in the Netherlands and Germany operating short-haul shuttles.

But the industry is undergoing change as it launches an 11th-hour bid to win back markets. A great deal is riding on the performance of Railion, Europe's first cross-border rail freight firm, which is 94% owned by Germany's state-owned DB Cargo and 6% by NS Cargo of the Netherlands and began operations in January.

Sceptics claim the joint venture is simply a ruse by DB Cargo to gain access to the huge port of Rotterdam and customers fear the 2 billion-euro-a-year giant will squash the fledgling private companies trying to break into the market.

Few doubt that Railion can create a genuine trans-European railway. It has put out feelers to other national operators to join and has done its homework, spending a year adapting locomotives and training engineers for cross-border operations.

Railion chairman Eberhard Sinneker has sought to allay customers' fears of monopoly and assure them that service standards will improve. He has also admitted that railways cannot meet shippers' demands on their own and must team up with logistics specialists, truckers and barge operators.

In time, he says, there will be a maximum of three or four companies running European networks with most railways relegated to national and regional routes, feeding freight into them. These pan-European companies will join forces with six to ten 'mega' freight forwarders.

Shippers remain sceptical, not least because of DB Cargo's indifferent service standards in the past. But industry watchers say the group, facing a fast-approaching future without handouts from its parent company or the German government, is a changed animal.

The demoralised railways have two things going for them: increasing road congestion which enhances their appeal to vote-chasing politicians and pent-up demand from shippers who would switch from road en masse if they could trust the railways to deliver on price and service.

And unlike trucks, the railways can also look forward to brand new routes which will sharpen their competitive edge in key markets. Scandinavia will be joined to continental Europe in July with the opening of the Oresund fixed link between Malmö and Copenhagen, work is proceeding on schedule on the dedicated Betuwe freight corridor between the port of Rotterdam and the German rail network and €7 billion has been earmarked for a 1,025-kilometre railway joining Liverpool and Lille via the Channel Tunnel.

The politicians have almost done their job. Now it is the turn of the railways.

Article forms part of a survey, 'Industrial liberalisation'.