Business environment for rail freight is ‘unfriendly’, say ERFA members

The ‘unfriendly’ business environment for rail freight and the weak state of the industry have been highlighted at a summit of private rail cargo companies, as part of the European Rail Freight Association’s (ERFA) annual strategy workshop. Rail’s failure to make any ‘significant gains’ from modal shift was described as a ‘key symptom’ of weak competition in the market.

Julia Lamb, Secretary General of ERFA, said that as rail did not have a competitive market, it was not in a strong position to compete with road on price, quality or innovation. “In most EU Member States one dominant market player, normally the state-owned company, trounces the competition, with the nearest, biggest competitor trailing far behind,” she added. “The monopoly situation fosters pricing distortion; limited customer-orientation and unsustainable business models.”

Poor data availability

The summit emphasised how the lack of crucial and complete data – readily available in other industries – regarding finance, industry, customer ratings, pricing and performance of rail, is a clear weakness for the sector. The poor data availability, particularly regarding the finances of the dominant players on the market, the state-owned companies, hinders any pressure for vital restructuring to support sustainable growth. What was not in doubt was how the crucial role of national governments and infrastructure managers in supporting the competitiveness of rail freight, particularly in view of the Rastatt incident and the resulting loss of customer confidence in rail.

Among those present at the summit was Hector Rail, which is based in Sweden but also operates in Norway, Germany and Denmark. CEO Joakim Landholm said: “There is no rationale from the taxpayers’ perspective of financing the continuous losses of state-owned rail freight companies. This is not where public investments should be directed if national governments are serious about supporting rail’s sustainable growth and meeting modal shift targets.

Boosting rail’s competitiveness

“We need to get rail into a position where there is a return on profit that is sustainable. As a first step the vital restructuring of state-owned companies to end market distortions is needed, along with an improved framework for boosting rail’s competitiveness vis-à-vis road transport. Concretely that means mandatory data provision, improved production factor mobility and stimulating private investments in rail.”

Julia Lamb added: “National rules and requirements continue to block rail’s ability to offer any real competition to road – infrastructure managers must offer a standardised service across the European network. Rail companies, who have to adapt to different operational rules, signalling systems, language requirements, technical requirements for their equipment each time they cross a national border can never deliver a competitive offer.”

The German Master Plan, a collective effort by the German Government and rail industry to cut road traffic and air pollution – including halving track access charges – was described as a ‘welcome initiative’, and one which ERFA intends to build on and use it as best practice in other EU countries in order to foster modal shift. 

Increase the quality

Developing international rail traffic must be a central part of any national Government’s support for rail freight, as too must a plan for either reducing rail access charges or increasing road user charges to a comparable level with rail and an RU compensation scheme in order to minimise the impact of disruptions on rail services and thereby increase the quality of the rail offer,” said Julia. 

ERFA maintains that ongoing different charging policies for rail and road continue to distort the price signals in favour of road transport. While it welcomes the European Commission’s revision of the Road Charging legislation, it is calling for more support from national governments, infrastructure managers and rail regulators to keep the costs and prices low for rail and also to implement sustainable, fair and efficient charging schemes for road.

Author: Simon Weedy

Simon is a journalist for RailFreight.com - a dedicated online platform for all the news about the rail freight sector

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