EUROPE: ‘Competition in railways seems to trigger an increase in ridership and brings about significant benefits to society’, according to the European Commission’s Directorate-General for Mobility & Transport.
DG Move commissioned EY to undertake the ‘Study on passenger and freight rail transport services’ prices to final customers’ to examine the impact of EU policies on the rail sector. The final report was published on September 23.
DG Move said the Commission had identified that railways were ‘a crucial lever’ for the decarbonisation of the transport sector, thanks to their relative low CO2 intensity. But despite the high efficiency of railways, more needed to be done to harness their full potential and utilise rail capacity more efficiently.
To this end, the EU had been opening up its rail markets to foster competition, either through open access (competition in the market) or through tendering of Public Service Obligation contracts (competition for the market). The report noted that rail freight is ‘almost exclusively organised through open-access competition’, while both models have been applied in the passenger sector.
The study itself was undertaken through a literature review, a stakeholder survey, targeted interviews and 21 case studies. It found that competition had ‘led to a notable reduction in prices for end consumers in open access passenger rail competition, as well as in the freight rail sector’.
This price reduction was attributed to the increased market competition, ‘where new entrants aim to distinguish themselves in the market by offering lower prices than incumbents’.
However, the findings for the PSO sector were less clear, as the vast majority of current contracts had been directly awarded before the tightening of rules on competitive tendering. The case studies found that competitive tendering led to ‘reduced costs for competent authorities’, but DG Move explained that it was for the latter to decide ‘whether and how to pass on these benefits to passengers’ for example in the form of increased frequencies or higher quality of service instead of lower fares.
Rail sector response
Publication of the Commission’s findings was welcomed by AllRail, the Alliance of Passenger Rail New Entrants, which said that the study added to ‘the ever-growing evidence that competition, both in Open Access and PSOs, delivers benefits for all — passengers, operators, taxpayers, and the climate — that are crucial for accelerating the modal shift to rail’.
AllRail welcomed the study’s findings that commercially driven open access competition ‘both decreased ticket prices and improved the quality of the service as compared to the situation prior to the start of competition … making railways more attractive to passengers, thereby increasing demand for rail, and shifting passengers to rail from competing modes’.
However, the association also noted the warning that ‘there are several challenges which impede reaching the full potential of competition’, notably the need to ensure ‘easy access to all types of rolling stock’ and ‘equal access to ticket vending platforms for operators’. It welcomed suggestions for the introduction of track access charge rebates to support new operators ‘in their first years of operations’.
‘The evidence is clear’, said AllRail’s Salim Benkirane. ‘Competition improves rail services for everyone. We must finally break down remaining barriers and fully open the rail market, to benefit passengers, taxpayers, and the environment alike.’
Freight competition uneven
In terms of rail freight, the study found that competition was delivering increased and ‘more diverse’ transport services, and a higher quality of service, while encouraging incumbent operators to modernise their businesses.
However, the European Rail Freight Association noted that despite a gradual opening of the market the report had ‘identified several concerns of the sector’, including the poor condition of railway infrastructure, ‘unaffordable technological upgrades’, unfair state aid and the complexity of cross-border operations. ERFA added that the report largely echoed the main findings of its own 2022 study into market opening and some of the proposals in its Manifesto for 2024-29.
Emphasising that the market share of new entrants continued to increase, ERFA commented that they had driven increased efficiency in asset management and human resources, while influencing incumbents to modernise their practices. They had also brought additional services and new rolling stock to the market, thanks in part to a vibrant second-hand and leasing market. Finally, customers had experienced lower prices.
According to the study, major challenges remained in providing ‘sufficient and good-quality capacity’ to handle the additional traffic from the much-needed modal shift. ERFA explained that operators were struggling to afford technological upgrades including the fitting of ETCS on-board units, while cross-border operations remained complex, ‘with numerous delays at border crossings and poor co-ordination of capacity paths between neighbouring infrastructure managers’.
‘This Commission study must become a blueprint for the rail agenda of the appointed Transport Commissioner’, said ERFA President Dirk Stahl. ‘Apostolos Tzitzikostas should make it a priority to overcome the identified challenges to competition in the rail freight market. This is essential to complete the Single European Railway Area and enable the market share of rail freight to grow.’
