INTRO: Using open access rights available under the 1999 Swiss railway reform, Mittelthurgau Railway is rapidly expanding its freight activities in partnership with other railways and businesses. Its innovative and flexible approach has taken competitors by surprise
BYLINE: Dr Ursula Widmer
Deputy Director, Mittelthurgau Railway
WHEN THE Swiss Parliament promulgated laws authorising the reform of the nation’s railways on January 1 1999, it opened up opportunities for third party operators to begin running their own trains. In fact, Switzerland has historically had a large number of ’private’ rail operators, in most cases owned by cantonal or local authorities. Mittelthurgau Railway is one of these.
The Swiss reform represented a major legal change, with five federal laws altered and 10 new regulations introduced. Like the Railway Reform that has changed the status of the former Federal Railway in Germany, the Swiss reform is modelled closely on the directives already in force in the European Union.
The intention is to give added muscle to the railways in their competition against road. For this purpose Swiss Federal Railways was relieved of major debts and its role as a state-owned company changed to that of a special limited company with a considerable degree of entrepreneurial freedom. This meant that it was to a large extent depoliticised. The reform also brought about the separation of operations and infrastructure in accounting and management terms, and open access operators were given the right of discrimination-free access to the national network.
The Swiss legislation was closely modelled on the German reforms introduced in January 1994. It is based on EU Directive 91/440, and the differences are insignificant. MThB was fortunate in being able to gain early experience with open access operations in Germany, where it has been running services for five years from Konstanz to Singen and Engen and since 1996 from Radolfzell to Stockach. This allowed the company to prepare for the changes in Switzerland.
Setting the goals
Right from the start MThB set itself clear goals for the first year of the reform in Switzerland. These included making immediate use of the open access provisions, growing strong traffic flows without compromising quality, launching international freight services across border crossings other than Konstanz, and developing working relationships with strong partners. In addition, it resolved to investigate the market for traffic suitable for bulk flows with block trains. All these objectives were set following a comprehensive analysis of the market.
Market entry hurdles
Businesses are led by people. Accordingly, they need strong incentives to accept new services and new suppliers.
The smaller a business, the greater are its problems in entering a market dominated by larger organisations. Not only are they resistant to change, but customers also tend to question the competence of a new operator. ’Can you really do that?’ and ’Do you have the expertise and equipment?’ are typical questions. Incumbent operators add fuel to the fire by encouraging such doubts, but this is part of normal competition.
MThB’s objective is to extend the geographical area it serves and to run trains on the tracks of other companies. It is inevitably faced with problems of this nature and has to convince customers that it can provide reliable services that meet market demand at favourable prices.
MThB is therefore obliged to concentrate on those areas where it can clearly demonstrate its abilities. Fortunately it was able to do so with oil traffic - for many years now the company has been able to bring efficient and reliable service to its customers in this market. This made the breakthrough into other markets somewhat easier.
To win new traffic it was vital to achieve high quality service, and no compromises were acceptable in the planning process. This meant that the rhythm of market expansion had to be matched to operational and production capacity. While this resulted in a slower development than the market would have allowed, it was important to be able to guarantee service quality rather than make short-term gains in terms of traffic volume.
For decades, MThB has run trains across the frontier at Konstanz, with continous growth. Clearly, the development potential here has its limits, and if further traffic growth is to be achieved, other frontier crossings will need to be used. These include Basel, Schaffhausen, St Margarethen and Buchs in northeast Switzerland. Special attention has been given to Basel because of the important traffic flows.
Building partnerships
The Swiss rail network shows much diversity. Some 3000 route-km or 60% are owned by SBB, with the other 2000 route-km shared by around 50 ’private’ operators. If the comparison is restricted to the standard gauge railways, the position is even more one-sided. MThB for example serves only 3% of the network served by SBB.
Given this situation, small companies can only hope to attain market success if they have the support of stronger partners. MThB was fortunate to be able to sign agreements at the right time with DB Cargo and NS Cargo, and these have led to the development of worthwhile import and export business. The partners have exploited the opportunity to run trains outside the traditional agreements drawn up between states and national railways. There is obvious synergy between the partners, and this has strengthened MThB’s competitive position compared with other railways and road transport.
Inevitably, MThB’s freight activity must be geared to operation of block trains. Nonetheless, the company’s small size and the related favourable cost structures mean that the definition of a block train does not need to be the same as on other railways - in extreme circumstances a block train could be formed of one locomotive and a single wagon. The main point is that operations can be profitable with much shorter trains and lower train weight than on ’big railways’.
At the moment the traffic potential for freight well suited to rail transport is considerable. MThB is watching the market carefully and bidding wherever it believes that its special characteristics offer a good chance of success. The company is also profiting from the fact that it is often underestimated by its competitors and turns up where it is least expected.
Achievements
In the first year MThB has succeeded in meeting its objectives. During the first half of 1999 it was able to grow its fuel oil traffic substantially, extending its area of activity to the whole of eastern Switzerland. This project initially involved co-operation with SBB. However, when SBB reorganised and hived off its oil traffic, MThB began running the trains on its own under open access arrangements. As much of the traffic was headed for destinations on the Bodensee-Toggenburg Railway, MThB contracted with BT for provision of some of the traction and services.
The first half year also saw MThB launch freight services across the border at Schaffhausen. This included aircraft fuel trains bound for Glattbrugg, representing a foothold in a potentially lucrative market with strong growth potential.
Before the summer 1999 timetable change MThB and the South Eastern Railway (SOB) prepared the ground for taking over postal and parcels trains running between Frauenfeld, St Gallen, Landquart and Chur. To ensure the required service quality, it introduced round-the-clock operations for the first time. This enabled it to manage the postal services successfully, with sufficient time available to make alternative arrangements in the event of problems.
MThB and SOB were able to maintain the required service quality for postal traffic throughout the first financial year. Not only that, but they managed to tighten the timetable, which to start with was considered to be very demanding. This gave the Post Office more sorting time.
During the second half of 1999 MThB turned its attention to routes involving other border crossings and sought to sign up additional long-term traffic contracts. It succeeded in acquiring business in Basel, St Margarethen and Buchs, paving the way for development of further import and export traffic.
For the first time the company won business related to a major construction project. Under a two-year contract starting in August this year, MThB will carry 500000 tonnes of spoil from Sissach via Regensdorf and Kloten to Schlatt on the Schaffhausen - Romanshorn ’Seelinie’, where the company has a 10-year concession to run passenger services.
In a competitive environment it is not possible to win all the time. One example is the loss of wagonload traffic on MThB’s own network to SBB. However, it should be noted that this was neither a market-based decision nor the customer’s own choice, but the result of a deliberate decision by the organisation that dominates the market.
MThB was able to meet its strategic goals for the first year under the new regime, with significant achievements in the liberalised freight market and successful operations on other networks. This generated revenue that more than outweighed the wagonload business lost to SBB.
During 1999 MThB’s traffic reached 30 million tonne-km, 15% more than in 1998. This is all the more impressive when it is realised that the lost wagonload traffic represented 40% of turnover the year before, and that the figures exclude the postal business. All in all, it was a very successful first year.
The future
A company called Lokoop was founded in 1994 by MThB, SOB and the Mittelthurgau Travel Agency. Originally Lokoop was a traction management business, but the liberalised market opened up the opportunity for Lokoop to extend its range of activities into the freight business. More recently SOB and MThB have moved all their freight business into the jointly owned company and are now using the Lokoop brand.
Expansion of Lokoop is now a major objective. Traction units available to the company include an Re 4/4II loco, 19 former German State Railway Class E242 Co-Co electric locos, and four Re 4/4I units no longer used by SBB.
Last year Lokoop ordered six Class 486 heavy-duty freight locomotives from Adtranz, with finance provided by ABB Credit BV. The first arrived in February and the last should be delivered next month. Such rapid delivery was possible as the units are virtually identical to Class 145s that Adtranz is supplying to DB, and they were assembled on the same production line in Kassel.
The locomotives are equipped to run in Switzerland, Austria and Germany, including LZB inductive train control for operation on high speed lines in Germany. Trials on the Hannover - Würzburg Neubaustrecke reached 176 km/h.
CargoSprinters
Several of our major potential customers have needs that are not met by either wagonload or conventional block train traffic. We are finding that there is increasing demand for fast, high-quality transport which simply cannot be met with traditional vehicles.
Recent years have seen the initial development of specialist rolling stock for this type of service, including freight multiple-units such as German Railway’s CargoSprinters. These are well suited to intermodal service and would meet the needs of major distribution companies. In Germany they have been used to carry air freight.
So far only diesel versions have been available, but for efficient use within Switzerland a hybrid is required for electric operation on main lines and diesel working in unwired sidings. Adtranz is currently developing electric traction for the CargoSprinter, and MThB has ordered three with an option for 10 more. The first will be delivered in 2001.
’Only rapid and decisive action would bear fruit. Any hesitation or unwillingness to become involved would hinder the chances of success’
Dr Ursula Widmer
Deputy Director, MThB
CAPTION: Six Class 486 units are being delivered by Adtranz for use by Lokoop on freight services in three countries. Branding includes use of the phrases: goods taxi, parcel taxi and truck taxi
CAPTION: Class E242 units were acquired second-hand from the former German State Railway; they were used to haul freight as MThB set about expanding its business
