Tackling the barriers to progress
Competitors are making their presence felt in the Italian market as the national railway prepares to step up the range and quality of its freight and passenger services. Chief Executive of FS Holding SpA Mauro Moretti talks to Nick Kingsley and Murray Hughes
Mauro Moretti, Chief Executive of FS Holding SpA, has some ambitious goals. Among the targets set for FS in the 2007-11 period is 'to position railways as the main mode of passenger and freight transport' in Italy. Numerous investment projects are in hand to drive the business towards this demanding objective, most prominent of which is the scheduled completion in 2009 of the Alta Velocità project for a north-south high speed line linking the country's principal cities.
Other projects in progress include the improvement of links to the rest of Europe thanks to investment under the TEN-T priority programme and an €8bn domestic scheme to segregate suburban and freight traffic flows from inter-city services in and around major cities.
At the same time the FS Group has launched several development initiatives designed to transform the national railway into a business stretching far beyond its traditional remit. Memoranda of understanding have been signed with the ports of Genova, Taranto and Venezia for upgrading of infrastructure and the development of rail logistics services. In a related move, at the end of February FS set up Italia Logistica, a joint venture with Gruppo Poste Italiane (RG 4.08 p206). This will see FS move into activities such as storage and warehousing, inventory management, packing and packaging, distribution and after sales service.
In a bid to exploit its valuable property portfolio, FS is working on plans to redevelop major stations - the most spectacular part of this programme covers the new or rebuilt stations for AV services at Torino Porta Susa, Bologna Centrale, Firenze Belfiore, Roma Tiburtina and Napoli Afragola. Elsewhere, abandoned areas of land are to be recovered and redeveloped, and many stations will be modernised to include car parks and better integration with local transport.
All this can be seen as preparation for the increasingly competitive market that will ultimately emerge as the European Union's policies take effect on rail businesses across the continent. In the meantime Moretti insists that Europe is 'not yet a free market. We have a sort of liberalisation, but in some ways it is the same as before,' as competitors are not necessarily from the private sector. Naming SBB Cargo and Deutsche Bahn as state-owned railways competing with FS for freight traffic, Moretti points out that Rail Traction Company too can be classed as 'part of the public sector' because Autostrada del Brennero, regional authorities and DB jointly own a majority share of the business (p318).
Combating the cherry pickers
The advent of domestic freight competition presents FS with the problem of cherry-picking. In terms of legislation permitting on-rail competition, Italy is 'more advanced than the rest of Europe', but Moretti says that it is impossible for Trenitalia to run freight services between central and southern Italy without a state contribution - the market will simply not bear the cost. Competitors can pick and choose their business, but 'I have the rest of the network to fund', he says. 'If we ran the network on the same basis as our competitors, we would have to close about 50% of the railway.'
Contending that free market policies will only be effective if common rules apply across all of Europe, Moretti notes that there is 'much talk' of common policy and standards, although in practice different policies apply in different countries. The main issue, he feels, is regulation of public service contracts, and at the moment 'the rules of public service contracts are not well defined'.
With the impending deregulation of international passenger services in 2010, Moretti views open access with some scepticism, calling for a fair market with 'reciprocity'. 'If SNCF wants to run trains in Italy, then the French market has to be free for other operators too. A few years ago FS spent €50m to enter the French market, but so far it has brought us nothing.'
Asked to comment on how independent FS is from the Italian government, Moretti says that 'FS is completely free when the market can pay the costs directly', both for passenger and freight traffic.
Costs and productivity
It is on routes where grants or subsidies are needed that the issue of operating costs becomes critical - agreements with the trade unions still require Trenitalia freight trains to have two fully qualified drivers. Pressed on this issue, Moretti confirms that 6 000 jobs were cut from the FS payroll in 2007, taking the number of employees in the group down to 87 000. He insists that 'we will face up to the problem of the single driver' now that automatic train protection technology is 'in place on the network'. Acknowledging that 'there are obvious difficulties with the trade unions', he says that 'we are preparing to take the next step, although we will need a transition period to discuss this.' Of course, he adds, 'the problem does not exist for our competitors.'
Financial targets set for FS Holding SpA by 2011 include a commitment to put the railway in the black, and the 2008 Business Plan puts the operating result at close to zero rather than a loss.
In December this year the 182 km Milano - Bologna section of the AV network will be finished, paving the way for journey time cuts on Italy's north-south corridor that will start to make rail competitive with air. In December 2009 opening of the 78·5 km section from Bologna to Firenze will finally complete the corridor, and Moretti expects the market for inter-city rail travel to grow dramatically: 'it will take just 3 h to travel from Roma to Milano, and during peak hours we will run trains every 15 min.'
This contrasts with the rather limited AV service currently operated between Roma and Napoli, where Moretti says that the market does not yet justify more trains. 'When the whole route is open from Milano to Napoli, the market will increase', he says.
This potentially lucrative axis is already in the sights of competitors such as NTV, which has announced its intention to launch competing services using a fleet of Alstom-built AGV trainsets. Asked if he is concerned, Moretti says 'we have no problem if competitors want to enter this market - if they ever arrive.'
Although the obvious benefit from the AV programme is faster journey times, a clear objective is to lift capacity on the core network. A combination of new line construction and upgrading will see capacity more than doubled on some routes (Table I).
One of the benefits is expected to be a real improvement in punctuality, the aim being for 92% of passenger trains to arrive on time and 80% of freight services to reach their destination within 30 min of the schedule.
A 35% improvement in seat availability thanks to better utilisation of the AV, Eurostar Italia and inter-city fleets is expected to yield significant benefits. Related to this is the introduction of a regular-interval timetable on many routes.
The Level 2 ETCS fitted on Italy's high speed lines is designed to permit 5 min headways with trains running at 300 km/h. Moretti is proud that FS was the first railway in the world to run trains at this speed with Level 2, and he laments the slow progress being made with the same technology in other countries - 'we are the first and only ones to use ETCS, and we feel quite lonely.' While Switzerland is arguably in the lead with the application of Level 2 at lower speeds - and LGV Est in France is being dual-fitted with Level 2 and TVM430 - Moretti believes that 'there needs to be a major effort to extend the technology to a reasonable network on Europe's main corridors. It needs more pressure from the European Union with concrete tools such as finance.'
Just over two-thirds of Rete Ferroviaria Italiana's 16 000 route-km network is electrified at 3 kV DC, but the high speed lines now nearing completion are wired at 25 kV 50 Hz. Moretti is disappointed that 'other railways' north of the Alps are not following suit and using what has effectively become a world standard for main line electrification.
The feeling of isolation extends into commercial areas such as ticketing. Trenitalia is not a member of Railteam 'as this is for northern Europe where different companies have the problem of working together. We are discussing whether to join Railteam, but it is not clear what the advantages are; it's different from an airline alliance.' In Moretti's view ticketing remains an important barrier in the rail market, and 'we need to break down the barriers.'
Table I. Capacity increase on ?core FS network 2008-11
Route Trains/day in 2008 Trains/day in 2011
Torino - Milano 244 484
Milano - Bologna 244 500
Bologna - Verona 88 270
Bologna - Firenze 222 442
Firenze - Roma 396 418
Roma - Napoli 570 866
Napoli - Salerno 278 574
Messina - Giampilieri 80 120
Catania - Giarre 100 130
Table II. FS Group freight investment 2007-11
42 new locos€152m
24 new Class E403 locos€143m
300 new wagons€16m
430 rebuilt wagons€2m
40 rebuilt D343 locos€40m
400 new wagons for steel traffic€53m
3 000 rebuilt wagons for other traffic€17m
50 interoperable locos€250m
Table III. Trenitalia traffic in figures
2005 2006 2007
Passenger-km billion 48·1 48·2 45·9
Tonne-km billion 22·2 22·9 24·5
'If SNCF wants to run trains in Italy, then the French market has to be free for other operators too'
Mauro Moretti Chief Executive, Ferrovie dello Stato
- CAPTION: Public service contracts governing many socially-necessary regional services should be better defined, Moretti believes. This Sibari - Taranto service passes Roseto Capo Spulico in Calabria.
- CAPTION: The bridge carrying the Milano - Bologna high speed line over the River Po near Piacenza will open for revenue traffic in December.
- CAPTION: Trenitalia is preparing to face growing levels of on-rail competition from competitors such as ?Ferrovie Nord Cargo.
- CAPTION: A freight train runs alongside the Tirrenean sea at Intavolata. Running freight services in the south of the country will always require subsidy, Moretti insists.