Operail: ‘Further cuts would compromise rail safety in Estonia’
The Estonian national rail freight company, Operail, has been experiencing drastic disruptions since the beginning of the Russian invasion of Ukraine. Despite significant cuts to operating costs, the company “continued to operate at a loss in the third quarter” of 2023. Operail’s chairman Raul Toomsalu highlighted that more reductions might hinder safety along Estonian railways.
Concerning volumes, the company said that, throughout the first nine months of 2023, it transported 1,5 million tons of cargo. This is a 68 per cent drop compared to the same period last year and might be a sign that things are worse than expected. Operail estimated it would move 2,2 million tons by the end of 2023. The initiative was on par up to the first six months of the year, during which Operail handled 1,1 million tons. Thus, the company should increase its volumes for the last quarter of the year to reach its goal.
The decrease in volumes also translated into a significant revenue reduction fro Operail, which fell by 43 per cent in the first nine months of 2023. Toomsalu pointed out that the decrease in volume was linked to “sanctions against Russia and the termination of the transport of non-sanctioned Russian goods”. The decrease in revenue, on the other hand, was attributed to the rise in prices for rail freight services, especially compared to road freight rates. A prime example of this trend in Estonia is the grain industry. As Operail’s chairman mentioned, this year’s harvest was too small to fill up trains, thus all of it was transported via the road. In order to get back on track, Operail is looking to expand its business outside the Estonian borders.
Operail’s downfall
Problems for the Estonian rail freight company started already in 2022, when it claimed it lost over 20 million euros due to EU sanctions on Russia and Belarus. Other than halting many of Operail’s services, Estonia experienced issues on many infrastructure projects which needed to be delayed. Operail had to half its workforce, laying off over 100 employees. At the beginning of 2023, the company decided to stop transportation services of Russian and Belarusian goods. Shortly after, it sold its Finnish subsidiary Operail Finland to Nurminen Logistics and over 800 wagons belonging to Operail Leasing. In March, the last wagons were sold and all regular rail freight services were halted, in favour of a shift towards project-based initiatives.
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