Ove Dahl Kristensen, Jukka-Pekka Pitkänen
April 13, 2023
Is Europe off track? Passenger rail study reveals an unstable situation
European Union (EU) legislation calls for more competition in the rail market, but some countries have not been as successful in attracting new operators. Our study for Finland’s transport ministry reveals three ways to make specific markets more appealing for bidders.
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.
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.
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.
Open access passenger traffic has a clear positive impact on countries with:
Long distance highspeed traffic
Many large cities
Separate infrastructure with high degree of free capacity
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:
- Political will and clear communication of intent to attract newcomers
- Long-term plans for tendering
- Focus on gross contracts, as operators are not willing to take large financial risks
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.
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Ove Dahl Kristensen
Global Spearhead Director