European Transport Agencies Consolidate Intercity Rail Operations in Face of Competition

» As Veolia closes in on Transdev, Deutsche Bahn completes acquisition of Arriva. All before much real competition has begun.

Compared to Western Europe, the U.S.’s intercity passenger rail system seems positively easy to understand, with exactly one major carrier. The Old Continent has a glut of operators providing services along thousands of miles of travel corridors, representing billions of rides every year. In Western Europe, with serious competition in play in the United Kingdom, Germany, and the Netherlands, this makes for a complex system of corporate link-ups and competing systems, as the chart above shows.

With European Union regulations promoting competition in international services across the continent beginning this year and in domestic services over the next few, the system will get a whole lot more complicated. That is likely to benefit most directly three major corporate entities: The German national rail company DB, the French national rail company SNCF, and private company Veolia Transport.

DB completed the acquisition of the Arriva Group last week, making a wholly-owned subsidiary of the British company that operates several rail franchises in the United Kingdom, Germany, and the Netherlands. Though the German businesses of Arriva will be divested as part of a deal with European regulators, this will give DB a major foothold in the U.K. to join with its already clear dominance in its home market.

Meanwhile, the merger of Veolia Transport and Transdev, both French companies, seems likely to create a similar powerhouse if the deal goes through as expected either in 2011 or early 2012. The merged group, representing almost €10 billion in annual revenues, is primarily involved in public transit operations, but it is advancing rapidly towards increasing its presence on the intercity rail market. Veolia announced late last year that it is working with Italian national rail operator Trenitalia to run high-speed trains into France.

SNCF has been expanding its international presence through its Keolis division, which already runs trains in Britain, Germany, and the Netherlands.

Each of these companies is either completely owned by a national government or has some government involvement in its organization. National European rail operators are relatively autonomous in their decision-making. Still, this could produce an interesting situation in the near future in which, for example, a division of the government of Germany could operate trains between destinations in France and the United Kingdom.

The dominance of these three players is likely to upset the current deals that allow high-speed trains to travel between European countries, since until recently the major national rail companies stuck to their own countries. In essence, E.U. regulations will allow any operator to use tracks in any of member countries as long as they pay the required track use fees and win a schedule slot. DB is planning to run its ICE trains through the Channel Tunnel, competing directly with primarily SNCF-controlled Eurostar; NTV, a new fast train company partly owned by SNCF, will compete with Trenitalia beginning later this year; through Keolis, SNCF has said it may run TGVs into Germany for the first time without agreement from DB.

The sheer size of companies like DB, SNCF, and Veolia increases their ability to bid for intercity rail operating contracts in countries across the continent. This seems likely to put into difficulty the existing national operators not only in the countries where competition is already accepted but also eventually in places like Spain, currently monopolized by national service Renfe.

Notes about the chart above: To simplify matters, I’ve only included the U.K., Ireland, France, Spain, Belgium, Luxembourg, Portugal, Germany, and Netherlands; Western Europe is larger than that, but there’s only so much to be shown on one chart. I also have included several deals that are not yet completed, included the Veolia-Transdev merger. In addition, some of the chains of control are simplified, excluding some subsidiaries sitting between corporate HQ and actual operations. Local public transit is not included here.

11 Comments | Leave a Reply »
  • J

    Even with the “simplifications” I have no idea whats happening in that chart

  • Ted King

    Thank you for the chart. It gives me a scorecard / player list for understanding articles on European passenger railroads. (The North American equivalent would be the cross connections between the various freight railroads.)

  • Tom West

    The German government was planning to privitise the passenger and freight sides of DB… does anyone have any news on that front?

    • Max Wyss

      It is going to take some time.

      The DB has serious problems in Germany, where some of them are more or less the consequence of “making fit for privatization”, such as the maintenance issues in the Berlin S-Bahn operation, or overly eager reduction of infrastructure.

  • Tom West

    sorry to double-post… but imagine if freight operators in North America had to accept any train (freight or passenger) operated by a 3rd party, subject to capacity and trackage fees.

  • Sam

    I’m under the impression that privatization of DB was postponed because of the financial crisis.

    I’ve also read that the new UK government wants to franchise out HS1 which based on my understanding of ‘franchising’ means they’re planning on a vertically integrated railway. I guess I must be wrong because of DBs plans which are mentioned and also the EU might not accept it. Does anyone understand the UK governments plans better?

  • veokeoliaskeptic

    It seems like the only reason for national operators to own private companies in other countries is to skirt union agreements (as well as safety regulations, etc) and of course, to dodge responsibility towards the taxpayer.

    These operators are coming into the US right now and breaking US labor laws as well as participating in union busting. They like to pay poorly (to be honest, below market rate in many cases, and they get the work force they deserve as a result) and in at least one case have been caught using racial preferences in hiring which is against the laws of the United States.

    I have no doubt that the same scenario plays out in Europe. The public operator is constrained by having to please the public, which wants frequent, reliable service, and doing their national duty by paying their employees fairly and with nice benefits. By bringing in the “private” operator (really, the public operator from next door), they can break labor agreements and more importantly, break the social compact.

    Just look what happened to Stella Artois, both the product and the workers, when the Brazilians took over.

    Good for the public? I’ll believe it when I see it. And why is it that people who have physically demanding, dangerous jobs are somehow not deserving of fair pay, but an upper class fat cat who has never had to struggle their entire life is entitled to “compensation” of 100 times that of their front line employees? More B.S.

    • Um, just look at what happened to the R160, made in non-union plants (Kawasaki US is very anti-union), with the shells of the cars made in Brazil. The trains function perfectly, and New York got them for a lower than average price.

    • Max Wyss

      The primary reason is that most of the state railroads are not allowed to directly operate in another country. There has to be a local company. The private operators can, on the other hand operate in any country, as far as they fulfill the national requirements as an operator.

      Bypassing unions is part of the competition concept, considering that the unions are preventing any progress … in Europe, and even more so in the US. So, a lot of complaining about “below union rates” etc. must be considered to be union propaganda (legitimate, of course).

      One can, on the other hand, wonder whether the whole “privatisation” concept is viable, as there have been considerable failures (for example in the UK), and whether that artificial competition has any benefit at all. It may, however, have some good things for the state railways, as it is going to wake them up and kick them into the 21st century.

  • First time I have come across this interesting site (through UITP in Brussels)! A few comments; Sweden (off your map) also has a range of foreign operators in regional services tendered out in competition. On the whole this has proved a success. – All Swedish operators are companies regardless if they are publicly or privately owned. This means that all staff are employed according to a common private sector agreement with pay variations according to location, competition, type of service etc. This is important for a smooth revitalisation of the run down European railways.

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