Last year Finnish Railways reported record levels of passenger traffic, and growth is continuing in 2006. President & CEO Henri Kuitunen explains to Chris Jackson that a new timetable will boost the level of service, but VR must now face the arrival of open-access competition in the freight sector

THE OPENING of the Kerava - Lahti line offers major opportunities for Finland's national train operator to grow its business, according to VR Group President & CEO Henri Kuitunen.

At present, his biggest priority is accommodating recent growth, with capacity the key issue. Over the past decade VR Group has seen total passenger journeys grow by an average of 3·6% a year and freight tonnes hauled by 2·1% a year. Passenger journeys grew by 5·6% between 2004 and 2005, and Kuitunen says '2005 was our best year ever'. However, '2006 is on course to be even better', with a 4% increase recorded from January to July.

Over the same decade, the level of service provided, in terms of train-km, has increased by just 1·9%. This reflects capacity limitations on the national network, which is still 90% single-track. Quadrupling of the two main routes in the Helsinki suburban area during the 1990s provided some welcome relief, aided by the arrival of the 30 Alstom-built Sm4 two-car EMUs in 1999-2003.

As well as shortening journey times to the eastern part of the country, completion of the Direct Line (p663) has released much-needed capacity on the double-track main line leading north from Helsinki to the key junction at Riihimaki. VR has been able to take advantage of this, and Kuitunen says the new timetable launched on September 3 offers a 5% increase in train-km.

'Our target is to continue growing our passenger traffic at around 3% per annum, year on year', he says. 'Of course the timetable change will take some time to settle down, and the passengers will have to become familiar with the new service patterns, but we hope that the changes will not slow down the rate of growth over the longer term.'

Timetable improvements

The new timetable offers savings of around 30 min on journeys from Helsinki to Lahti, Kouvola, Imatra, Lappeenranta and Savonlinna, and 1 h to Kajaani, Kuopio, Mikkeli and Joensuu. VR is doubling the number of Pendolino services to Tampere, Jyväskylä and Kouvola, while introducing new InterCity and Pendolino services on other routes.

Much of the recent growth in long-distance patronage has been on the northwestern main line. Kuitunen notes that Tampere is just 1 h 20 min from the capital by Pendolino, which he says is faster than can be achieved by car. With the new line bringing Helsinki - Lahti timings under 1 h, again making rail faster than road, VR expects much of the passenger growth to come from its eastern routes over the next few years.

Further improvements will come with the completion of RHK's project to electrify the Iisalmi - Kajaani - Oulu line at the end of this year. 'This is one of the last steps to improving services to the north', says Kuitunen, noting that 'it will enable us to cut journey times on this route from the beginning of 2007'.

Citing the speed-up of daytime services, VR and the Ministry of Transport & Communications have terminated their contract for three overnight services. The Helsinki - Kajaani - Oulu, Helsinki - Pieksämäki - Joensuu and Turku - Joensuu sleeper trains ceased to run on September 2.

By contrast, the new timetable sees one of the two daily overnight Helsinki - Rovaniemi services equipped entirely with new double-deck air-conditioned sleeping cars. The through overnight train to Kemijärvi has been cut back to Rovaniemi because the new stock cannot be diesel-hauled. A connecting service will continue to run until the end of the year while VR negotiates with the ministry and the Lappland Regional Council over its longer-term future.

From September 3 all long-distance trains have started calling at Tikkurila, which will become VR's new railhead for the northern suburbs of Helsinki. Passengers from the Tampere direction will change here for the eastern routes instead of at Riihimaki. In addition, there is a bus shuttle between Tikkurila and Helsinki-Vantaa International Airport, running every 10 to 15 min, as a forerunner to the airport rail link being promoted by the local authority.

New stock in service

Extra services require additional rolling stock, even with the efficiency gains offered by shorter journey times. VR finished taking delivery of several new builds earlier this year, and Kuitunen confirms that the stock was all ready to enter service with the timetable change.

As well as its premier fleet of 18 Pendolinos which work the fastest services from Helsinki to most major cities, VR has 92 Talgo-built double-deck inter-city coaches for medium-distance loco-hauled trains. From September 3, some services are designated 'InterCity2' and formed exclusively of double-deck stock.

In the summer of 2006 VR refurbished nearly 120 inter-city coaches at a cost of €1·2m, with emphasis on vehicles with compartments for families, business travellers, pets and smokers.

The timetable change also saw the entry into service of the remaining diesel railcars being supplied by CKD for regional routes. Some services between Jyväskylä and Seinäjoki were turned over to railcar operation, and the Savonlinna - Parikkala service has been doubled to 11 trains a day each way.

Completion of the Iisalmi - Kajaani - Oulu electrification will eliminate the loco change at Iisalmi, and introduce more electric diagrams, but VR expects to cover the extra requirement through improved locomotive utilisation.

Other than the Helsinki suburban fleet (below), Kuitunen does not expect that VR will need to place major orders for passenger stock in the next decade. 'VR has invested sizeable sums in rolling stock for several years, and in 2005 capital investment was the highest in the company's history at €210m', he confirms. 'But now the spending is drawing to an end and we must start to prepare for our next wave of investment which will begin in about 10 years time. We will spend this time planning for our next generation of trains.'

Suburban expansion

Almost 80% of VR's passenger journeys are carried on local trains in Helsinki and the surrounding region, even though they only account for one-third of passenger revenues. VR currently operates suburban services around the capital under contract to the Metropolitan Area Council (YTV), which embraces the local authorities of Helsinki, Espoo, Vantaa and Kauniainen. The partners signed a 12-year agreement at the beginning of 2006 covering the period up to 2017, which is worth an average of €46m a year to the operator.

The four-part agreement includes sections on operation, rolling stock, maintenance and other services. One provision includes the expansion of the current YTV zonal ticketing scheme to include the important hub at Kerava, which lies just outside the Vantaa boundary. VR has its own regional fare zones which continue beyond Kerava to the limits of suburban operation at Lahti and Riihimaki. Kuitunen sees much potential for expansion of commuting from the two stations on the Direct Line, although he concedes there may be some transfer from existing stations.

Signing of the new operating agreement has given VR the confidence to make long-term plans for the metropolitan area and cleared the way for the award of a long-planned contract for replacement EMUs.

VR's original Sm1 and Sm2 units are close to 40 years old and will be nearer 50 when they are finally replaced. A new joint venture company, Junakalusto Oy, has been formed to procure the replacement stock, owned 35% by VR and 65% by the four YTV municipalities.

On August 31 Junakalusto confirmed a €189m order for 32 four-car Flirt low-floor EMUs which will be supplied by Stadler in 2009-14. Financed by the Finnish arm of Handelsbanken Finans AB, the trains will be owned by Junakalusto and leased to YTV for operation by VR.

Russian potential

Kuitunen sees considerable potential for growth in the Russian market, where international passenger traffic has risen by around 20% this year from the 270 000 passengers carried in 2005. 'The big project is our high speed service between Helsinki and St Petersburg, which will cut the journey time from more than five hours to a target of 3 h. We believe that will give us the potential to triple our current passenger volumes.'

The existing three trains a day each way have been accelerated by 25 to 40 min with the timetable change, both by the opening of the Direct Line and by the transfer of the Sibelius and Repin from the Laatokka station in St Petersburg to the Finlandski station. Together with the daily Moscow service, all the trains now call at Tikkurila.

VR and RZD have been negotiating for several years over the upgrading strategy. 'The plan is to establish a new joint-venture company which will buy rolling stock for the international services', says Kuitunen. 'These will be dual-system trains suitable for 220 km/h operation on our 25 kV 50 Hz electrification and the 3 kV DC which RZD uses around St Petersburg'.

As a major step forward, the Finnish government has included in the state budget for 2007 the €185m that RHK needs to fund infrastructure upgrading between Lahti and Luumäki near the border. Construction is expected to start in 2008 and take three years upgrading is also planned on the Russian side.

'If all goes well, we hope to have the new service operational by the end of 2010', he says confidently.

But in the interim, Kuitunen has some concerns over the quality of service that VR will be able to deliver during upgrading work on the single-track route. He says the company faces similar issues on the Seinäjoki - Oulu section of the main line, which RHK is also to upgrade over the next few years.

Freight traffic at risk

Russian traffic accounts for around 40% of VR's freight business and Kuitunen admits that this is 'volatile'. Traffic was down by 15% in 2004 but better in 2005 when volumes rose again by 7% to 8%. He expects freight volumes for 2006 to finish at much the same level as 2005. 'Strategically, this is very important business, with good potential but bigger challenges.'

At present he is particularly concerned about the volume of container traffic, which is running around 80 000 TEUs below the 2005 figure due to sharp increases in RZD's tariffs for the Trans-Siberian landbridge. 'The whole traffic has collapsed at the moment - we are negotiating with the Russians all the time.'

The bulk of the business continues to move via the southern border crossings, as the privately-promoted NoWe rail link connecting VR's line from Kontiomäki to Vartius with the RZD network through Karelia is 'not yet playing an important role operationally' despite earlier promises.

In the domestic freight market, the forestry sector accounts for around 60% of VR's freight volumes. This was badly hit by industrial disputes during 2005, which resulted in the loss of business worth €20m to the railway. 'Fortunately the problems are over and the traffic volumes are much better for 2006', reports Kuitunen.

'Passenger and freight activities are both showing a positive result', he confirms. 'In particular, the development of passenger traffic has had a very positive impact on our bottom line. Our operating costs are relatively fixed, so any extra business volume passes straight through to the profit figure.'

Looking forward

Kuitunen is confident about VR's prospects, although he concedes that the operator faces some significant challenges in the years ahead. On the passenger side, 'we have put the new trains in place, now we need to deliver an effective service and improve our operating efficiency to maintain our positive results.'

But the biggest challenges are coming on the freight side. Open access on the Finland's broad gauge network is due to start at the beginning of 2007, and competitors are already lining up. 'It is clear that someone will be interested', says Kuitunen. 'On rail competition is going to happen. It may not come on January 1 2007, but it will start sooner or later.' He confirms that Russian open-access operator Spacecom, already 'very active in Estonia', has now applied for rights to run in Finland.

But he is confident that VR will be able to meet the challenge of competition. 'We need to improve our efficiency, and improve our relationship with Finnish industries. We must cut our costs and be more effective. There is always scope to be better. And as the established national operator we can offer security in our long-term relationship with our customers.' He recognises that the Russian transit traffic may be at greatest risk, noting that 'we have to improve the performance of our Russian business. We need to keep on making sure we are the best.'

The other big challenge he sees for the next few years is 'to ensure sufficient investment in renewing and modernising the rail network'. VR believes that infrastructure authority RHK needs government grants of around €170m each year to keep the network in good condition. 'If the rail sector cannot lobby effectively for this investment, it will create bigger problems for us in the longer term', he warns.

CAPTION: InterCity2 services are formed exlusively of double-deck stock, including a business area for use by first class passengers, and hauled by Sr2 electric locosPhoto: VR

CAPTION: One of VR's 30-strong fleet of Alstom-built Sm4 low-floor suburban EMUs stands at Vantaakoski the Circle Line project would extend this route to Vantaa airport and Tikkurila

CAPTION: Traffic to and from Russia accounts for a significant proportion of VR's freight business a train of tank wagons passes the border crossing at Vainikkala