The race is on as European open access laws attract new operators

On January 1st 2010 the European market for international rail passenger services will be opened to competition. Britain and Germany already have examples of domestic open access services and other member states are planning to open up competition on domestic inter-city networks.

New private operators keen to take advantage of open access laws are emerging across Europe: in Italy, Austria and most recently France. The European Union has led the way in encouraging structural change within Europe’s railways, kickstarted in the early 1990s with Directive 91/440/EC, which was designed to initiate liberalisation. Over a 10-year period freight was progressively liberalised and now freight operators can operate throughout the EU.

With the introduction of the Third Railway Package it is the turn of the passenger businesses. The expansion of Europe’s high-speed rail network has also provided new opportunities for operators to exploit reduced city-to-city journey times and increased capacity, link key cities across international borders. Ten European countries already have high-speed rail lines; when current projects are completed there will be 7,500km by 2010 and over 14,000km by 2020. In recent months at least four new prospective ‘open access’ rail businesses have emerged, with plans at various stages of development:

NTV (Nuovo Trasporto Viaggiatori) is probably the most ambitious. In January 2008 this new private Italian operator placed orders for a fleet of 25 Alstom AGV1 high speed trains. NTV plans to start services on the newly built highspeed rail corridor between Turin, Milan, Rome and Naples in 2011. Rail Holding AV last month unveiled plans to run services in competition to Austrian Federal railways, also in 2011. The new Austrian operator is ordering seven double-deck trains to serve the Salzburg – Vienna corridor and then onto Munich and Bratislava.

The threat high-speed rail poses to short haul airline traffic in Europe persuaded Air France to enter into a strategic partnership with Veolia. They have shown interest in operating international highspeed services, primarily connecting Paris CDG with Schipol Amsterdam (the home of their partner KLM). They have also been talking about Paris-London on CTRL. To this end they are in discussion with Alstom to buy AGV1 train sets.

French energy group Poweo has also announced ambitions to compete with SNCF, in the first instance on international services, but the main prize long term is to compete in the domestic market. At the moment its plans are only at the feasibility stage.

These new open access 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 their most profitable routes, as well as offering road users an alternative rail product.

However, the state-owned railways are showing themselves to be equally keen on responding to the challenge. France’s stateowned railway SNCF has acted quickly and recently acquired a 20% stake in NTV. It has also been suggested that Deutsche Bahn is considering launching further international services out of Cologne and Frankfurt.

These changes will bring their own challenges both to Infrastructure Managers in the allocation of scarce capacity between key European destinations and on 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 EU’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.