The public railways, winners of the European railway open-access ?

Analysis of - Signalling technician
(version française disponible ici)
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Surprising? In the fall of 2013, we can already form an opinion about the railway landscape so criticized by opponents of the European Commission. And the partial result that emerges is that it is the neighboring state railway companies which have much positioned better than private companies. A little outlook.

We can start with the infrastructure. The only known example was the actual privatization of British infrastructure within Railtrack, in 1996, the disaster management has stalled and returns the rail network in state hands since 2002, via a company which is called “private” but is in fact a quasi state agency to British sauce, without shareholders and called Network Rail.

For the rest, Europe of the railway have only two private infrastructure companies throughout the Continent: Eurotunnel and TP Ferro (Perpignan-Figueras). And really : Eurotunnel is actually the only "integrated" railway private company, as operates train services, the famous shuttle in the Channel and a few freight service through its subsidiary Europorte. This is not the case of TP-Ferro which are only a concessionary. All other major expensive projects like the viaduct Öresundsbron (Malmö-Copenhagen) and the Swiss Lötschberg tunnel are pure products of public authority. Contrary to popular belief, the BLS AG company which is the owner of the tunnel is owned by private shareholders for only up to 22.5%, the rest being divided between 55.8% for the canton of Bern and 21 7% ... for the Swiss Confederation. Needless to say, the myriad of small industrial or locals networks on the continent cannot be equated to any privatization in the broad sense, because many of them live in closed system, as into steel factory or in some industrial and port areas .

BLS is largely used by many state railways, BLS, CFF/SBB or DB-Schenker, for example (photo Mike Knell)

Countries that have separate rail infrastructure from their incumbent have any form of privatization. All are 100% in the hands of state power, even if the recruitment is carried out on a new contractual basis. Social partners agree on the need to develop a modern and integrated railway sector in Europe, but unions are critical of the decline of work protection levels. Many old monopolies were turned into state-owned companies but under private law employment relationships. In this stage many opponents claim that is a tactic to weaken the relationship of power. But a transport policy must be based only on relationship of power ?

In all cases, all the infrastructure is therefore logically belong to national or regional public authority, which the European Commission has never disavowed given the capital-intensive which are required for this activity. But then, what Europe is it a gain for public railway companies?

It is therefore in the side of transport exploitation for further analyse. Until recently, cooperation regulated by COTIF (1) has a major handicap :  the responsibility, legal and financial. These two aspects do not appear as prominent in the 60s and 80s. As a network providing a train to the border, the neighbor absolutely must take over the train whatever the price. Managing its own network, the neighbor made him follow the schedule and the route that he decided himself - indeed under its responsibility - to the destination chosen by the original owner. With this fragmentation, it was impossible to establish a coherent and comprehensive trade policy : social rates of a country disappear with his neighbours ! Internally, the stakeholders maintained relations through a codified and lacking flexibility administrative process. In addition, the joint management was criticized by the very people who had created, told about many problems very difficult to justify (2). The European rail is still a juxtaposition of ultra-regulated domestic parts, like the Benelux train.

Ex Connex is now Veolia Cargo Deutschland which is 100% owned by SNCF (photo Wolfro54)

But the world has changed and the increasing of judicialization and financialization of society led companies, including state-owned entreprises, towards more transparency, more accountability in the management and protection against litigation. The railway, which is not a regal power, therefore did not escape the change, despite strong resistance. The result is that instead of cooperation, there are international companies or economic interest groups who were called to handle international traffic, such as for example Lyria Elypsos, DB AutoZug GmbH, Thalys and Eurostar.

Successive legislative developments called historical companies to adapt these parallel structures. Thus, Eurostar has gradually turned into a "Ltd" under UK law, ...55% owned by SNCF. In July 2013, the same SNCF and SNCB decided to "adapt" Thalys as a company in 2015, the Dutch and the Germans have finally withdrawn their partnership. DB has now its subsidiary "DB International" which with his ICE will compete with Thalys and Eurostar on their marketing area. They together will to confront to the Thello high-speed service, italians having the intention to expand out of the Peninsula. In all examples, we see that the locomotives cross borders and trade policy is focused line by line, depending on the user client. The staff is more specialized and placed under subsidiary, which is essential for proper management and avoid to confuse the roles. But what remains the attention is the presence exclusively of the state-owners companies, giving guarantees to those who feared the loss of state-owners railways ...

Expands to the neighbor
Open Access which spreads gradually on the Continent also makes the state-owner’s neighboring companies happy. Already mentioned in another post (3), we know that the SNCF owns 20% of Austrian private Westbahn and also the Italian private NTV, the first competitor to high-speed operator Trenitalia. This company responded by canceling its partnership in the Artesia night train Paris-Italy service in 2011 and took over the traffic through his subsidiary Thello. This Monopoly between colleagues do not stop there. It is on the field of regional or freight services that is particularly effective. As a reminder the excellent paper of Reinhard Hansen (4), in Germany, a number of public transport companies which are called “private” are in the hands of public authorities ... from neighboring countries ! 

All is said …(photo Nik Morris)

Example with Veolia Cargo Deutschland which is 100% SNCF, ITL Eisenbahn which is also 100% SNCF or TX Logistik which now owned 100% FS Trenitalia group. In 2011, the semi-public group Veolia-Transdev accounted for alone almost 34.6 million trains / km in Germany. We might think that England lives alone with her railways. Think again! Dutch Abellio, 100% NS - so Dutch State - (5) holds the majority in Great Anglia and shares in the Merseyrail. Keolis 100% SNCF, took 35% Govia (bus and trains around London) and 45% in the TransPennine Express Franchise (6). But more particulary it is Arriva, 100% Deutsche Bahn - German state – which holds shares on the Chiltern Main Line and also 50% on the London Overground and bus networks in London itself. The ultra-liberal John Major rail program in 1996 has delivered fifteen years later this paradoxical lesson that it is the neighboring public-owners services which have much positionned better, holding up to 25% shares of the British public transport. In the editorial of August of Railway Gazette International, Chris Jackson also confirmed that at least four non-British state-owned rivals are active in the UK rail sector.

We observe in passing the well-known phenomenon with freight companies : DB Schenker continues to expand and is also present in the UK while the Austrian public company RCA (Rail Cargo Austria) has swallowed his Hungarian neighbor, resurrecting inadvertently the old empire onto a Railway mode (7).

Arriva in UK. This company is owned DB AG, state of Germany (photo ndl642m)

Another unexpected public service finds a big advantage to Open Access: the city of The Hague (Den Haag)! Unhappy to be out from the high-speed Thalys network and without international connections, it just started a service request to connect to Brussels. The winner? The German Arriva, 100% DBAG, which will have maybe the honor to introduce the Stadler trains while the current public service NS merely is just aligning its poor IC3m cars which are now aging (8).

With this surprising elements, Reinhard Hanstein have fun to talk about "cross-border nationalization." All in all, this is what we might wish the best for public service: expanding its market and, if necessary, to repatriate more profits back to the parent company. A real Europe without borders for state-owners railways ? They get to a good start with this giant monopoly between colleagues, and the game is certainly not over. We stay tuned...

(1) The COTIF - Convention concerning International Carriage by Rail - is an international convention to establish common legal rules to rail transport. This formal document adopted a new version in 2006 to comply with European law. Any amendment request parliamentary approval of each member state, which is relatively heavy.
(2) For example this incident: a sleeping car with a mileage of axles which due to expire, was refused at the German border by the train’s technical surveyor, with results that the happy travelers were transferred to the remaining seats available in … a couchette-car. That happened in the middle of the night and providing 1h30 of delay to the train.
(3) Open Access, state in 2012 (only in french)
(4) "Cross-border nationalization" of railways operators? Update railway 1-2/2013 p22 to 24
(8) Since the autumn of 2013, NS and SNCB provide 10 daily-returns service to replace the deceased Fyra International Ansaldo-Breda, SNCB not doing mystery of its high preference for only a Thalys service on the route Brussels- Amsterdam. Arriva would spell definitely the end to the current Benelux trains hauled.