Europe’s Year of Rail should be about competition

We need more rail competition through private competition.

The European Parliament recently approved 2021 to be the European Year of Rail, to promote rail as a sustainable and viable alternative to air travel or use a car. 

European Commissioner for Transport Vălean said: “Our future mobility needs to be sustainable, safe, comfortable and affordable. Rail offers all of that and much more! The European Year of Rail gives us the opportunity to re-discover this mode of transport. Through a variety of actions, we will use this occasion to help rail realise its full potential. I invite all of you to be part of the European Year of Rail.”

However, while the European Union’s promotion of rail might be laudable, actual policy changes need to follow suit. In too many member states, incumbent state rail actors receive preferential treatment, either through years of subsidisation or through continued state participation. Europe is far from having a real free market in the rail sector, which leads to higher prices and more and more antiquated networks.

Rail privatisation would bring far greater efficiency to the transport of cargo, while also improving domestic passenger services, bringing lower fares and greater choice. In the Czech Republic, for example, the entrepreneur Leoš Novotný created Leo Express, a private rail company which is attempting to drive Czech trains into the 21st century. 

In Germany, however, things have started to change. Federal states are now offering regional rail traffic to the best bidder. It’s not the ideal solution, but it has enabled prices to drop, even for the main provider Deutsch Bahn.

Many fear that rail privatisations lead to price gouging, yet there is little evidence for this. In the United Kingdom there has been, since 1995, only a 2.7 per cent increase in the average cost of a single journey. If you bear in mind that today’s trains run faster, have air-conditioning and loos that people actually don’t mind using, then ‘gouging’ is something of an overstatement.

Another viable alternative is the Italian model.

After several directives between the 1980s and the 1990s, the most important of which was the Directive 440/91/EC, several positive changes have occurred in the European Union. Between 2001 and 2016, the EU approved four legislative packages aiming at gradually opening up rail transport service market to competition, defining passengers’ rights about minimum quality standards, making national railway systems interoperable, and defining appropriate framework conditions for the development of a single European railway area. The Italian legislation enforcing these directives was not easy to implement, as in other European countries. Still, Italy was the first member state that proved successful in opening the HSR market to competition.

The new regime of competition began in April 2012, when the private company, Italo (managed by Nuovo Trasporto Viaggiatori), entered the market. The existing rail incumbent at that time, Frecciarossa, managed by Trenitalia, was wholly owned and operated by the national railway company Ferrovie dello Stato Italiane, a conglomerate holding of the railway sector including service, infrastructure, and transportation of goods, as required by European legislation concerning the separation between the infrastructure manager and the service operator.

As a result, we’ve seen a reduction in ticket prices of 41%, paired with an increase in demand of 90%. This makes Italy one of the best countries for high-speed rail use.

We can make viable changes to the European network, but we should refrain from believing that government investment alone can make this happen. On the contrary, we should look to the private sector to provide the means to reach our sustainable transport objectives.

Originally published here.

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