BYLINE: Klaus-J Meyer

Secretary General European Rail Freight Association

INTRO: Rail’s share of the European freight market has risen to 35%, and competition between major private operators and a few state-owned companies ensures cost-effective and reliable service. Non-discriminatory access applies throughout Europe. All an illusion? Not so, according to Klaus-J Meyer, Secretary General of the European Rail Freight Association

EUROPE’S railways have a big problem. Not with passenger trains, where high speed services are steadily increasing rail’s market share. The great challenge lies in freight, where rail’s market share has fallen consistently and dramatically for far too long.

Looking at the attitude of some state-owned national railways, observers could be forgiven for thinking that they still cling to a vision of a monopoly that existed in the years following the Second World War. If this trend continues, rail freight could well become a relic of history in a few years’ time.

ERFA has a different vision. We believe that rail freight in Europe does have a future. It badly needs not just to survive, but to grow, as society requires this mode of transport to meet environmental concerns and especially to ensure a sustainable pattern of land use.

We have to admit that road transport is making considerable progress as far as pollution is concerned, but simply continuing the trend of massive growth seen in this mode over the past few decades would prove a real catastrophe for society. We do not have the space to build the roads and motorways needed to meet the rising demand for transport. Bear in mind that enlargement of the European Union will increase demand and encourage international trade.

All this means that revitalising the railways is essential. If we could succeed, Europe could enjoy the benefits of prosperous and flourishing rail freight services. It is to help meet this objective that ERFA has developed a vision for 2015 (below).

Is this vision an unattainable illusion? I do not believe so, and I am confident that European rail policy will be a further inspiration. The European Commission and the European Parliament have acknowledged the social importance of rail freight and its role in helping to protect the environment, in conserving energy resources and in land-use planning. Like most governments, they intend to promote rail freight, and they are convinced that the best way to do so is to introduce intra-modal competition, thereby encouraging rail freight to develop more strongly.

Legislation ends monopoly

European Directives dating from 2001 and 2004, the so-called first and second railway packages, have led to relaxation of the historic ’natural’ monopoly enjoyed by state operators on European rail infrastructure, and this process is due to be completed by 2007. This will give rise to serious intra-modal competition for the first time.

The decline of rail freight over the past few decades can probably be attributed fundamentally to the fact that rail was the only mode of transport that was not exposed to competition within its own system. All other modes have long been accustomed to different companies competing with each other, whereas the railways remained national monopolies. Under the pressure of intra-modal competition, other modes were able to make dramatic increases in productivity and quality of service, whereas progress in productivity on the railways has fallen back in recent years.

The new legal framework now offers the railways the chance to engage in competition with each other, and hence to become more competitive versus other modes of transport. Intra-modal competition is not an end in itself, but a means of strengthening the efficiency of the entire rail sector.

One railway in Europe has been exposed to intra-modal competition for a number of years now. In Great Britain, where the government is once again changing the structure of the railway business, tonne-km moved by rail increased by 50% between 1994-95 and 2001-02 (Table I). Admittedly, this was from the low figure of 13 billion tonne-km, and the 2001-02 figure of 19·4 billion tonne-km slipped back to 18·9 billion in 2003-04. Perhaps the most significant point is that rail managed to increase its market share in comparison with road haulage between 1998 and 2001, with annual tonne-km moving by road falling by 2·6 billion and rail tonne-km rising by 2·4 billion.

How did this come about? Infrastructure was separated from operations, the state railway was broken up and privatised and intra-modal competition was introduced for freight traffic. And that’s it!

The European legal framework allows private rail companies to be set up, an innovation which was once barely conceivable alongside the monopolistic state-owned companies. But a market organised on the basis of competition urgently needs private companies. Only private companies, which bear their own risks and are rewarded by profit, can create a climate of competition. This is because, compared with the traditional railways, they are more flexible, more reliable and more customer-oriented. They constantly strive to improve their service, and their rates are more favourable. Customers are pleased to accept the services they offer, and the new rail companies are recording annual growth rates of between 30% and 50%.

Even after a very short period of experience with an open market, it is clear that the legal framework offers motivation for both new and traditional rail companies to react more effectively and more promptly to the needs of the market than in the past. So there is a possibility to reverse the trend of a constantly falling market share. Intra-modal competition and the emergence of private companies are probably the last chance for rail freight in Europe.

Outstanding tasks

If ERFA’s vision is to become reality, much remains to be done to complete the legal framework so that rail freight can move as easily across EU borders as road transport. For example: