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Rivals back competing routes to viability

01 Mar 1999

ANYONE seeking an insight into high level thinking on the strategic plans of European Railways would have been well rewarded by attending the EuroRail Congress '99, staged in Paris on January 26-28 by AiC Worldwide. Delegates were treated to agenda-setting presentations and forthright views from senior figures on competition, open access and regulation. Rival European operators offered contrasting policies from opposite ends of the restructuring spectrum.

With the predictable exception of the French transport ministry and French National Railways, who maintained that the path of competition led nowhere, speakers were almost unanimous about the need to move rail into the commercial arena. The question was how.

Dr Helmut Draxler, Director General of Austrian Federal Railways, suggested there were two ways to reach viability. One was a relatively painless transition that kept an integrated structure, with the railway developing a fully-targeted sales policy and improving efficiency - which ÖBB advocated after studies with McKinsey and other consultants.

There was no logical reason why integrated railways could not win new business, said Draxler, citing North American practice; it was not necessary to take the more destructive way of abandoning the integrated structure. He believed that 'liberalisation came from dissatisfied customers, so don't block it, but learn the new game.' Separating infrastructure from operations entailed 'losing a lot of money', with inflexibility, bureaucracy and the risk of 'stranded investments'.

Much better in his view was a 'customer-focused partnership model', which ÖBB had developed as a contractor for Nestlé with value-added logistics services. ÖBB had worked successfully with German Railway to move car parts for VW, Audi and Mercedes. After detailed analysis of customer requirements, the railways relaunched their service in March 1998 with shorter journey times, fewer delays, less damage to products and lower costs; the result was a 40% traffic increase. Suggesting that 'co-ordination is much more the game than privatisation', Draxler said 'political influence will apply if you do not succeed.'

Daniel Johannesson, President, CEO & Director General of Swedish State Railways, openly favoured privatisation. He noted that track access charges in Sweden had dropped radically from January 1 1999 in acknowledgement of the fact that it is 'politically impossible to charge roads the real access costs'. This being so, 'the next best thing is to cut rail access charges', which 'has put SJ in a reasonably competitive position'. Long-distance bus services had been deregulated at the same time, but despite this SJ's long-distance services were now 'more profitable than before', with rail gaining market share from private cars.

SJ had had plenty of experience in competing for freight against 'the largest lorries in Europe', and Johannesson predicted that 'our freight service will be profitable from next year.' The competitive regime meant SJ needed to introduce new products all the time. Green Cargo offered customers 24h door-to-door service, seven days a week, with prices quoted over the phone and bookings via the internet. Previously 'you had to be almost a professor to buy rail freight'.

But SJ now faced the problem of discriminatory track access charges for rail freight passing through Denmark, which meant that it was 'more profitable to take paper to G