Formation of the European Bulls alliance in January 2005 has helped its five partners to expand their open-access freight operations, but many political and technical barriers remain to be broken down before Europe can reap the benefits of a liberalised rail freight market

Rob Spierings
Managing Director, European Bulls
President, European Rail Freight Association

ACCORDING TO forecasts by the European Union, the market demand for freight transport across the continent will grow by 38% between now and 2010. With increasing constraints on road haulage, in terms of road congestion, drivers' hours legislation and environmental concerns, there is a huge opportunity for rail freight in various market segments.

But that is easier to say than to achieve, despite the successful creation of the European single market for people, goods and services. Our experience over the past decade has shown that a national 'patchwork', with differing degrees of liberalisation, is jeopardising the emergence of the urgently-needed single European rail market.

Following the first steps towards deregulating rail freight in the mid-1990s, various new operators have emerged in response to an increasing demand from industry. Manufacturers and shippers are urgently looking for alternatives to road transport that offer at least the same level of quality, reliability, and transparency throughout Europe to link their increasingly dispersed centres of production and consumption.

Rail freight is increasingly regarded as a service industry, ideally suited to small and medium-sized firms who can focus on niche markets. In Europe as a whole, SMEs today represent 90% of companies and account for 70% of GNP. But smaller operators are heavily under-represented in the rail sector.

We believe that the resistance to change can be put down to market protection, and a natural inclination of governments to favour large companies at the expense of their smaller rivals. After 10 years, the rail freight market is far from totally open. Statements at the political level supporting a modal shift from road to rail are often not being followed by concrete actions.

The EU gave its member states a relatively high degree of freedom in implementing the directives and regulations, as a trade-off for getting the concept of rail liberalisation accepted in the first place. Deregulation was not welcomed by several member states and certainly not by their national railways.

Market liberalisation has been heavily influenced by the national railways, which retain control of, or otherwise influence, many of the critical processes. These can include: the granting of licences and safety certificates; infrastructure management, including the allocation and pricing of train paths; insurance; certification and acceptance of traction and rolling stock; setting access conditions and pricing auxiliary services such as the use of terminals and marshalling yards; and supply of traction power.

Inadequate regulatory mechanisms at the national level are also contributing to the barriers that we believe are keeping potential private investment away from the rail market.

Despite all these constraints, the number of independent rail freight operators is still growing. Although it is too early to talk of a major 'revolution' on the railways, there has certainly been a small one. New operators have managed to overcome, or at least to deal with, all the financial, administrative, operational, safety, technical and social barriers. They are providing cutting-edge services to their customers, and we believe that their increasing turnover shows that they are on the right track.

Co-operation and alliances

Logistically, it is virtually impossible for a single rail freight operator to run right across Europe alone - even a big one. The state railways have mainly adopted a policy of co-operation with each other, or negotiated complicated agreements to avoid competition as much as possible. The new private operators have chosen to co-operate with other operators either for specific traffic flows, or on certain corridors or for particular customers.

Such co-operation agreements are only relevant to the shippers if they make the transport process easier, with faster communications, better quality and lower prices. There are several successful co-operation agreements between ERFA members which have taken shape over the past few years.

A very good example is the European Bulls alliance which was launched in January 2005. This alliance was born from the idea of offering rail freight customers the same performance criteria for their entire traffic flows, much like the Star Alliance founded by several major airlines.

The aim is to provide genuine pan-European rail services, developed through the alliance as a co-ordination and marketing platform and operated by one or more of the European Bulls partners. This gives each customer a single point of contact, and a single contractual partner, even if their traffic is moving through several different countries.

Clear added value for the customer comes from cross-border reliability - which has long been one of the biggest failings for European rail freight operations. In order to guarantee this, the alliance has set up a joint back office. This is responsible for the marketing and contracting processes, and for the development of internal IT systems to ensure coherent quality as well as consistent information about train and freight movements.

The alliance has five partners from five different countries (Table I). Four of them serve important corridors and industrial regions on the north-south and east-west axes. The strategy has proved very successful, and all five partners have seen a substantial increase of their turnover in the year since the alliance was founded.

To maximise seamless service, single operators run international open-access services for the alliance wherever this is technically and legally possible. For example, on the Graz - Duisburg service, LTE locos run through from Austria to Germany. On the Brescia - Rotterdam route, FNC locos from Italy run as far as the Dutch border at Emmerich. Similarly, traffic from the Czech Republic to Rotterdam is hauled into and across Germany using Viamont locomotives.

Tackling external challenges

To meet their customers' need for cross-border reliability, rail freight operators must be able to control or at least influence several factors, both internal and external. Whilst the European Bulls have successfully proved that the alliance concept allows the partners to manage the internal issues, external factors are generally beyond their control.

For example, political factors have an impact on the quality of the market liberalisation, and legal issues surround the transposition and implementation of EU directives in national law. External technical factors include the interoperability of rolling stock, and administrative factors relate to the differing procedures for obtaining licences and safety certificates. Of course, these problems are not unique to the European Bulls. Unfortunately they are common to all new rail freight operators and thus to virtually all ERFA members.

One of the principal reasons behind the creation of the European Bulls was to try and overcome some of these factors. All partners in the alliance continue to trade on their competitive advantage over other operators for genuine open-access traffic, but as partners they work together to help solve the common problems.

Take safety certification. There is still no harmonised and transparent procedure for the granting of safety certificates. The result has been long, expensive and discriminatory processes. To circumvent this problem, all European Bulls partners now have their own national licences and safety certificates and therefore do not have to go through lengthy procedures to gain access to other member states.

We believe that some member states are using the safety certification process as a barrier to market entry, by requiring irrelevant or strategic information from the applicant operator. Worse, the applications are then evaluated by the national railway, which should be a natural competitor. Last but not least, there is no guarantee that applications will be handled within a given time period. In some cases, the information provided by the national infrastructure manager is far from clear or helpful.

There is also increasing evidence that state railways applying for safety certificates in other member states are given priority. ERFA has asked the European Commission to address this problem by looking into harmonised minimum criteria and a stronger monitoring and appeal system.

Infrastructure is a major cost factor for rail operators. But within the EU, there is a huge variance in the structures used to calculate these costs. This leaves the 'customers' of the various natural monopolies with little insight on how their charges are determined. In turn, this gives rise to a potential for discrimination, especially in integrated 'holding company' models where we suspect that the national operator has the potential to influence infrastructure policy.

The result can be an unclear and unfair price and billing policy, excessive energy costs, or problems in accessing auxiliary services. This is particularly worrying in the countries of central and eastern Europe, where charges are very high (p27).

The European Bulls partners are striving to solve these problems with the support of their national rail regulators and the EU institutions. At the same time, ERFA is lobbying for more effective regulatory bodies with a rapid and non-discriminatory appeals process. We have asked the EU to monitor the member states more closely and tackle any infringements decisively in order to ensure a coherent opening-up of the market and the introduction of regulatory appeal mechanisms.

Interoperability is a widespread concern for both state railways and private operators, and one of the most urgent aspects is the acceptance and certification of traction and rolling stock.

The availability, maintenance and profitable use of equipment, and locomotives in particular, is one of the biggest and most complex cost factors for all rail operators, especially private and independent ones. Lengthy and complicated acceptance procedures in each member state require enormous resources in terms of time, staff and money. In some cases, the acceptance process for one loco type in one member state can take up to 50 months and cost €3·5m. To overcome this problem, the European Bulls partners have set up a joint pool of locomotives.

A related problem for independent operators in particular is the availability of appropriate rolling stock. Whilst there is a long-established freight wagon leasing market in Western Europe, no such market has yet emerged in the countries of central and eastern Europe. Shippers in western countries are used to funding their own specialist wagons, but this has been less common in the east.

Within this context, ERFA warmly welcomes the EU's intention to make vehicle acceptance an issue for the European Rail Agency. This work will be crucial in the next few years, as the interoperability process moves toward the development and implementation of a single signalling and safety system for the 25 member states.

Another factor is the non-recognition of cross-border acceptance of trains and their loads, which seems to be a particular problem in central and eastern European countries. In some places, it seems that cross-border agreements are only permitted for the state railways, and are not for other operators. ERFA is pressing the European Commission to find a way of prohibiting such restrictions of trade which go against the whole concept of the single market.

Much work still to do

Unfortunately, this list of barriers is far from exhaustive. However, it does provide evidence of the problems being experienced by newcomers to the market and shows the potential for discrimination by member states in favour of their national railways.

ERFA members are convinced that many more successful alliances would emerge if the macroeconomic framework were corrected and the administrative, legal and technical conditions harmonised to permit fully-interoperable open access traffic. Up to now, the private operators have been pioneering ways to break through or bypass existing barriers. But in the longer term, the liberalisation of the rail market cannot be driven by a handful of private operators alone.

The three railway packages provide a good framework to liberalise the rail market, but the requirements are not being applied satisfactorily. So we are very keen for the EU to act to ensure coherent implementation and application of directives, and to bring forward further regulations where necessary.

Table I. The European Bulls

rail4chem Germany

LTE Austria

Viamont Czech Republic

Ferrovie Nord Cargo Italy

Comsa Rail Transport Spain

  • CAPTION: A rail4chem Vossloh diesel hauls a CITA grain train in the Port of Rotterdam
  • CAPTION: Rob Spierings and rail4chem CEO Matthias Raith joined Bombardier representatives for the rollout of the first joint-liveried loco at Kassel in February 2005
  • CAPTION: A pair of electric locos in European Bulls livery heads an open-access intermodal service through Switzerland Photo: Daniel Wipf/
  • CAPTION: ABOVE: Rolled out on November 25, rail4chem's latest Bombardier Class 185 electric loco is leased from Mitsui Rail Capital Europe, and will be maintained by Kassel-based MGWService GmbH
  • CAPTION: Viamont and rail4chem operate cereals and grain trains between the Czech Republic and Rotterdam via the border crossings at Bad Schandau and Bad Bentheim
  • CAPTION: Austrian operator LTE is using its Siemens Eurorunner diesel locos to haul petrochemical coke trains between Germany and Slovakia
  • CAPTION: FNC operates trans-Alpine rolling motorway services to and from Italy using Class 189s leased from Siemems' Dispolok pool

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