European Waves

Soul Searching in the European Railways, between low-cost competition and reliable public service

Travelling by train is fun, sustainable and socially enriching. This is no longer only the opinion of a small number of railway enthusiasts, but that of the European Commission and governments across Europe. The Commission wants to create a ‘European railway network’ by establishing more high-speed rail connections across borders, increasing technical and legislative interoperability, and pushing for on-track competition. The results so far have been mixed, at best. Particularly on the issue of on-track competition, many member-states are somewhat hesitant to follow the Commission’s lead. So what is the state of the European railways today? And is the Commission’s Ryanair on Rail approach really the way to go? EPS train enthusiasts Gergő Illés and Ruben Sansom investigate.

 

Czech Republic

The Czech Republic has found itself among the frontrunners in Europe so far as on-track competition is concerned. On-track competition is present when multiple companies operate on a single line, directly competing with one another for the same set of passengers. Besides state-owned České Dráhy (ČD), since 2011, the country’s East-West mainline between Prague and the Silesian industrial centre Ostrava is serviced by two other open-access private carriers, Leo Express and RegioJet.

One of the effects of this policy is particularly evident already: prices are low, very low. Full-price tickets for the 356-kilometre-long journey between Prague and Ostrava are sold for as low as 229 CZK (an equivalent of 8.75 EUR), almost halving the pre-competition price. As an EPS student, you are also eligible for a 75 percent student discount, which further reduces the price to 57 CZK, a little more than 2 EUR for a cross-country ticket to Ostrava. No wonder that Gergő wrote a couple of his papers on board of RegioJet trains, enjoying both the views and surprisingly good cakes on the way to Moravia.

Consequently, depressed prices have led to booming passenger numbers, more connections, and better service quality on the line. A 2018 study by Zdeněk Tomeš and Monika Jandová found that 7.1 million passengers chose to travel by train between Prague and Ostrava in 2016 – nearly double the 3.6 million that made the same journey in 2010. The number of daily connections also increased from 23 to 36 by 2018. The biggest winners of on-track competition therefore are both the passengers and the environment –more people are choosing less polluting, less expensive rail travel over individual transport.

The unlikely losers, however, were the competing rail operators. With the entry of RegioJet and Leo Express, ČD has started a price war amid fears of losing market share to new competitors. By 2018, an estimated 59 percent of all passengers on the line opted for one of the private operators. After several complaints by RegioJet and Leo Express, the European Commission declared that ČD has engaged in predatory pricing between 2011 and 2019 on the line, which goes against EU competition law.

The price war has meant that, despite rising passenger numbers and market share, the carriers struggle to make a profit between Prague and Ostrava anymore. While RegioJet could compensate for the losses from its lucrative long-distance bus business and its other train connections towards Austria, Slovakia and Croatia, Leo Express was struggling to stay afloat: in March 2021, half of the company’s shares were acquired by the Spanish state operator RENFE.

As the Czech example showed, the appearance of on-track competition brought mixed results. While it certainly can reduce prices and win back passengers for the rail, an overcrowded market and – more importantly – the anti-competitive behaviour of state-funded monopolists can deter entrants from competing in a new market.

The Netherlands

One can also question whether a multitude of companies servicing the same line will be beneficial to customer experience in the long run. One party which has formulated an argument against on-track competition along these lines is the NS or Nederlandse Spoorwegen: the Netherlands’ main passenger railway operator. Most of the Dutch lines are serviced by their unmistakable yellow trains, with the exception of stop train lines dotted around the country, which are serviced by either Arriva (a daughter company of the Deutsche Bahn), Blauwnet or Connexxion. When switching between companies when changing trains, passengers must remember to check out and check in again. Forgetting to do so can result in a fine, somewhat hindering the simplified experience that the Dutch single travel card or OV-chipkaart was supposed to offer to passengers.

This year, the Dutch government announced its intention to prolong the NS’s monopoly position on the country’s core network. The parliament has signalled approval of this proposal, citing a possible decrease in the ‘trustworthiness of the timetable’ as its core objection to allowing other companies to service the network. This concern is due to the density of the Dutch network: in few parts of the world do as many trains run in so small an area and so congested a network. If one train is delayed, a solution must be found quickly in order to avoid a pile-up of delayed services. In many cases, this means cancelling the next train. This is easy to do if that train is another NS train, but one can imagine how difficult it would be to cancel an Arriva train because an NS train was running late.

Moreover, Dutch trains, for all their flaws, running at satisfyingly regular intervals: every 10, 15 or 30 minutes. If one compares this to the jumble of services that run in most parts of the United Kingdom, it is easy to see why the Dutch parliament is sceptical of on-track competition. For example, three different companies operate services on the short stretch between Cambridge and London, each charging different prices and running services at different intervals. As in the Czech Republic, on-track competition might be able to drive down the prices of Dutch train tickets, but it is also likely to decrease the simplicity of travel upon which many commuters rely.

It is difficult to have things both ways: a reliable network for daily travel (in which many of the tickets bought are financed by employers, who also benefit from this reliability) or lower prices through on-track competition, which will help convince holidaymakers to choose the train over the plane. Although the Commission’s attempt to make railways competitive is admirable, it must take into account the fact that railways often serve a very different purpose compared to that of planes. This matter is further complicated by the differing roles that railways play in European member-states.

Therefore, it can be of little surprise that Commission’s Fourth Railway Package, which is supposed to help open European railway networks up to competition, still allows national governments considerable leeway in the matter. It is indisputable that European railways must integrate and strive for greater interoperability, but a one-size-fits-all approach is unlikely to be either effective or desirable.

 

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