Open rail access in Europe

In Europe, International passenger rail services have been opened to competition. We provide a brief background and status report.

In 1989 Sweden pioneered the concept in European railways of separating infrastructure management from operations, pursuing similar processes to other regulated industries. Sweden was then followed by the UK. Subsequently the European Commission passed legislation to push through at a European level the separation of essential functions relating to rail infrastructure management but not going as far as requiring full separation.

The aim of this separation was to split out the natural monopoly elements of the railway – the tracks – from the contestable parts – rail operations. The aspiration was that separation would lead to market competition which in turn would lead to improved services and reduced costs for passengers and freight customers thus incentivizing the use of rail over road and air transport.

In Europe, open access operators have been free to run cross-border passenger trains since January 1, 2010. In other words, if an operator believes it can make money by running trains on another country’s infrastructure, it may choose to do so.

Recently a number of open access rail businesses have emerged, with plans at various stages of development. Perhaps the most ambitious is Italy’s NTV (Nuovo Trasporto Viaggiatori). In January 2008, this new private Italian rail operator placed orders for a fleet of 25 Alstom AGV high speed trains. NTV plans to run up to 50 trains per day on the newly built high speed rail corridor between Turin, Milan, Florence, Rome and Naples by the end of 2011, in competition with the national operator, Trenitalia.

New open access rail businesses share common objectives: they are taking advantage of Europe’s deregulation laws and challenging the state-owned railways, incumbent operators and the airlines on some of key routes, as well as offering road and air users an alternative rail product.

The nationally owned railways are showing themselves to be equally keen in responding to the challenge. France’s SNCF has acted quickly and acquired a 20% stake in NTV. Germany’s DB recently bought private operator Arriva in order to expand their passenger activities internationally and expressed its intention to run high speed trains from Germany through the Channel Tunnel to London (UK). Italy’s Trenitalia recently entered a strategic partnership with Veolia to pursue rail operating opportunities in Europe.

These changes will bring their own challenges both to infrastructure managers in the allocation of scarce capacity between key European destinations and to national regulators who will need to oversee a more complicated market.

Looking ahead we can see potential for other new operators to emerge across Europe. A number may clearly not get beyond the starting blocks. For those that do, it will be interesting to observe the levels of service, pricing, customer offer and retailing strategy they adopt to compete with state-owned operators.

It will be also interesting to see the extent to which the national governments act to ensure that the European Union’s open access laws are allowed to work properly and that competition on the networks by the incumbent and new operator is fair, transparent and non-discriminatory. Experience to date has shown that some countries in Europe are more likely to favor national incumbents rather than open the market to new operators.