Is Europe off track? Passenger rail study reveals an unstable situation

EU legislation on rail markets is moving toward fostering a more competitive environment to improve service quality and efficiency. All new contracts for public-supported train services from 2024, as part of public service obligations (PSO), will need a more competitive tendering process.

To better understand these dynamics, the Finnish Ministry of Transport and Communications investigated rail markets and services across 12 European countries. The research, carried out by Ramboll , focuses on national-level passenger traffic covering regional and long-distance rail. It also includes traffic tenders, open access traffic, as well as organisational and regulatory frameworks.

“Long-term visibility, lower risks, and broad political consensus on processes are needed to make specific markets more appealing for bidders,” says Ramboll senior consultant Ove Dahl Kristensen, who co-authored the report. “Political will must be signalled clearly, by establishing long-term plans for tendering and by focusing on gross contracts to de-risk market entry for operators,” he explains.

Read the full report here for our analysis and findings

How different rail markets compare on performance

Historically, EU regulations have steadily developed yet different markets are evolving in various ways and speeds. There are differences between countries, including population densities, local politicians changing priorities, market conditions, geographical conditions, as well as rail network structures and capabilities. Many EU countries are beginning to take action to meet tightening legislation.

Outside of the EU, the research highlights two examples: Switzerland and the United Kingdom. The Swiss rail system, with the most kilometres of rail per capita, has a market share almost double of Sweden, which has the second highest market share in Europe. Switzerland awards traffic—meaning the number of trains operating after tendering or via open access—directly to the operators and does not follow the EU’s legislation on tendering or open access. In the UK, the market used to be open to competition, but now is moving back to its original setup where the entire system is controlled by one organisation, National Rail.

Situation in the Nordics

Norway (not in the EU) and Sweden appear better than other countries in attracting new operators to the market. In Norway, all traffic is tendered out in five packages, but a government change cut short the process after three successful tenders. In Sweden, passenger volume increases are gained through public procurement and tendering out regional services.

When comparing travelled train-kilometres against the total length of the rail network, utilisation in Sweden and Norway is almost double compared to Finland. These three Nordic neighbours have relatively similar rail networks. Yet, geography and sparse population do not explain the low utilisation in Finland as Sweden and Norway are similar but have higher utilisation. Instead, a lack of long-term market pipeline does not support competition, making newcomers unwilling to invest to enter a market like Finland.

Open access traffic

The study also finds open access passenger traffic is not gaining ground in smaller markets because there is no room for making attractive traffic in parallel with PSO-supported traffic. For instance, open access with passenger train services aroused the greatest interest in Italy and Spain, where a dedicated high-speed rail network and large population attract investors and international operators.

Today, commercial traffic is often operated without support but is based on the investments made in the past. This traffic also often relies on the same operator running supported traffic in parallel.

How can countries attract more rail market competition?

Across Europe, there is a movement toward removing risks from tendering processes, and it is evident the number of operators willing to bid for new contracts will be small in the coming years.

In smaller markets, the competition for the tendered services seems to take place around train operations, staffing, and maintenance services.

As Ove Dahl Kristensen points out, attracting new bidders will require:

Read more about potential solutions in the full report here

The research was carried out using desktop analysis, interviews, and roundtable meetings at Ramboll expert panels. The research aim is to gain insights and recommendations to support the Finnish ministry prepare for upcoming EU regulations for passenger rail transport.