Thursday, May 22, 2014

RDC’s Posner: “Europe needs cooperation as much as it needs competition”

Written by  William C. Vantuono, Editor-in-Chief
Henry Posner III Henry Posner III Jim Judkis
In a forum at the May 21, 2014 OECD (Organisation for Economic Co-operation and Development) International Transport Forum in Leipzig, Germany, Railroad Development Corp. Chairman Henry Posner III said that European railways “need to be opened up for both competition and cooperation to widen their market and become successful.”

Posner was one of several railway experts from around the world who took part in a roundtable discussion addressing the importance of rail for ecologically sound, sustainable mobility.

RDC, based in Pittsburgh, Pa., in addition to its U.S. property, Iowa Interstate, operates freight and passenger railways in Latin America (Colombia, Peru) and Europe (Germany, France). Earlier, RDC operated railways in Estonia, Malawi, Mozambique, Argentina, and Guatemala. “Contrary to European thinking, [U.S.] freight rail traffic has a long history of success,” Posner said. “Being no stranger to environments of institutional resistance and perverse economics, Europe is nonetheless an extreme case for us.”


What Posner finds in Europe is that “many railways are and operate like states within states. This is much different from the North American situation, where railways are culturally diverse and, though sometimes arrogant, do not enjoy the support of the State in that arrogance.”



“In Europe, railways tend to work against each other and against both competition and cooperation,” Posner stated. Giving OFPs (Operateurs de Fret de Proximite, or freight rail feeder operations similar to North American short lines) as an example, he said, “SWL (single wagonload) is a network business at the national and European levels. Thus, cooperation—and not competition—is necessary between network operators and OFPs in order to secure customer commitments. In addition, having small, creative companies in a market brings in alternative thinking and innovative ideas with positive results not only for customers but for all operators.

“Additionally, the behavior of European railways is less than understandable, as easy intermodal cooperation–in addition to competition–would strengthen the rail system. Instead, many European states prefer an underfinanced rail system with one national quasi-monopolist operator and thus are missing out on building up an attractive alternative to road and air transport.”



Posner urged the European Commission to continue to build, on the European Union level, a single European railway area “to foster European competitiveness and growth. We support the Commission’s struggle to succeed. We need more competition in and for rail in Europe, a level playing field for all players, for new endeavors and ideas. To achieve this, we need the 4th railway package in the version that was voted for by the Committee on Transport and Tourism (TRAN) of the European Commission before Christmas 2013, including more regulations and—for vertically integrated incumbents—strong ‘Chinese walls.’ To accept the current version of the package would be fatal, since it would take the European railway market several steps backward, instead of toward lively and fruitful competition with significant advantages for people, business, and environment.”



In Germany, RDC is the major shareholder of Hamburg‐Köln‐Express GmbH (HKX), the first private railway company in Germany that exclusively supplies long‐distance passenger rail services. When setting up its services, HKX “experienced a whole range of obstacles, most of them caused by regulations that favored the German incumbent Deutsche Bahn or by the rules due to the setup of Deutsche Bahn as a vertically integrated, national railway system,” Posner said. “Some examples: Framework agreements for track access can only be made every five years; track access fees are exorbitantly high compared to other countries and, equally important, other modes of transportation; fees raised for stops in train stations are not plausible and transparent, and lack price stability; competitors have no access to tariffs and sales distribution channels since these are owned by Deutsche Bahn—now the federal cartel authority is looking into this; and traction current is supposed to be subject to higher state contributions under the Renewable Energies Act (EEG).”



In France, RDC is a joint venture partner with Belgian rail-based forwarder EuroRail in RegioRail the largest operator of OFPs in France. “This was only possible after Fret (Freight) SNCF instituted a policy of consolidation and accordingly decreased its presence in SWL, which, though the highest cost, is also the highest-value segment of the market, and quite sensible to pursue if shifting the modal split in transport toward rails is a common goal,” Posner noted. “But it took six years and many false starts, as well as finding the right European partner, before RDC’s wagonload freight initiative finally took root. Examples for old and new obstacles: There is no stable agreement with the incumbents as to share capacity and risks in long-haul trains; meanwhile, the incumbents are fighting to pick back traffic once discontinued and then saved by OFPs.”



“Europe needs cooperation as much as it needs competition in the rail sector,” Posner concluded. “These are basic institutional solutions. By comparison, political solutions are both a waste of resources and a distraction.”