Globe Article: On Board With the Rail Barons - Europe's Privitization of rail

[GregWTravels]

On board with the rail barrons
Eric Reguly, July 24, 2007 at 11:21 AM EDT

Rail businesses are suddenly hot commodities. In Canada, Canadian Pacific rebuffed an approach from Brookfield Asset Management and is probably in play. Canadian National admits to having considered splitting itself into real estate and train operating companies.

The rail scene is even hotter in Europe, where Deutsche Bahn (DB), the German national rail company, is on the verge of partial privatization. The German government wants to sell about 25 per cent of DB some time next year by way of initial public offering or direct placement to investors. The government says the 25 per cent stake is worth at about €3-billion, the equivalent of $4.3-billion (Canadian).

DB is a huge transport company. In 2006, it had revenue of €30-billion and an operating profit of €2.5-billion. It owns and operates 34,000 kilometres of track and almost 4,200 rail stations. It has 80 subsidiaries and sea, trucking and air freight operations around the world. Freight accounts for half of its sales. It has 229,000 employees and last year carried 1.85-billion passengers.

Why does DB want to join the stock market? Partly, it appears, because it can. For years, DB was a chronic money loser. Under CEO Hartmut Mehdorn, it has become profitable and is turning into a powerful international business. Another reason is rail liberalization. In 2010, the European rail market will be opened to competition. DB needs access to capital to fight this war. It wants to spread its high-speed trains, known as ICE, all over Europe before SNCF, the French national railway company, gets a chance to do the same. Both DB and SNCF know they are vulnerable to cheap competitors. Rail versions of discount airlines like Ryanair and EasyJet could emerge.

The competition is good news for travellers. European passenger rail service is superb by North American standards and is getting better as billions of dollars are pumped into high-speed service. The fastest electric trains travel at 320 km/hr. A new high-speed line just opened between France and Germany. The Paris to Stuggart run used to take 6 hours. Now it takes 3 hours and 40 minutes. Three other fast lines are opening by the end of next year. When they’re finished, the London to Paris run will take a mere 2 hours and 20 minutes. Why bother flying?

Europe, of course, has the high population densities and relatively short distances that make high-speed trains an attractive proposition. Still, it’s a pity Canada doesn’t get into the game with a high-speed network that links Toronto, Ottawa and Montreal. Bombardier, the maker of many of fast trains used in Europe, would be happy to oblige. With oil prices rising, highways getting more crowded and carbon dioxide reduction becoming a priority, high-speed electric trains have a bright future in Europe. They could, too, in Canada.

http://www.theglobeandmail.com/servlet/story/RTGAM.20070724.WBwreguly20070724112129/WBStory/WBwreguly

 

[AnarchoSocialist]

It will be interesting to see how liberalization affects the European network. The work that is being done all across Europe upgrading lines and stations and developing the network is really quite incredible. It is easily on par with the construction of the Interstate Highway System in the US in the 50's and 60's (and I would argue even it goes well beyond that even).

How much of the European experience is applicable here is hard to tell. The sheer scale of their undertaking really makes comparisons hard. As far as privatization goes, I think that partial privatization of intercity services in the Quebec-Windsor corridor should be examined and considered. Obviously it would be on the condition that a proper passenger rail network is constructed but having a crown corporation with some private investment operate high speed services and local and remote services operated by a seperate fully public crown corporation could be an ideal arrangement.

The status quo is not going to cut it if rail service is too become an effective means of travel in the corridor. This is where, as I mentioned in the thread about the New York airport reordering plan, really creative and innovative thinking are needed. It is not necessarily about reinventing the train, but about reordering the system (both physical and institutional) so that it can properly serve the needs of cities and people in the Quebec-Windsor corridor.

 

[AnarchoSocialist]

While not on the topic of privatization this article does have to deal with passenger rail in Ontario and could inspire some conversation on changes that could take place in the corridor. If GO were to start operating service in Eastern Ontario and GO in Toronto continues to expand, as it is, you could have a provincial passenger rail company with large enough coverage that the idea of having GO operate most local services in Ontario with VIA left primarily to deal with intercity service between major centers might not seem so strange. (And it would not have to be GO necessarily since Toronto might prefer to have commuter rail seperate from the overall provincial network).

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Ottawa Sun July 26, 2007

Ottawa ready to GO
Regional transit looks to Toronto

By DEREK PUDDICOMBE, CITY HALL BUREAU

Ottawa could be moving from the O-Train to the GO Train.

With Mayor Larry O'Brien mapping out an ambitious inter-regional commuter transit plan for Eastern Ontario, the province's biggest regional commuter carrier, GO Transit, is expressing interest in helping the city with its plan.

"It's definitely something we would look at," said Jamie Rilett, communications director for Ontario Transportation Minister Donna Cansfield, whose department operates the Government of Ontario (GO) network in the Greater Toronto Area.

"When it was first brought up to us and we discussed it with various mayors and members from the Ottawa area, it was made clear to them we would look at any proposal they had and if they were interested in having GO participate in whatever way then it's definitely something we would consider," said Rilett.

SYSTEMS CONNECT

The GO system is also one of the most efficient transit systems in the world. It recovers almost 90% of its operating costs through revenue, "one of the best financial performances for any transit system in the world," says GO Transit's website. The province covers the rest.

OC Transpo's goal is to reach a 55% recovery rate from passenger fares, which could include raising fares 15% by 2010.

Based on the GO Transit fare schedule, a one-way trip to downtown Ottawa from almost anywhere in the proposed Eastern Ontario transit corridor would be about $10. GO trains run at capacity every day during peak hours and are expanding the system to meet demand.

To cover any growth in the system the province chips in one-third with the understanding that the federal and municipal governments contribute the balance.

Ottawa West-Nepean MPP Jim Watson told the Sun recently that the province would be open to providing funding if lobbied by the Eastern Ontario consortium of municipal politicians.

With O'Brien hosting about a dozen mayors from Eastern Ontario and the Outaouais next week, the group hasn't formally discussed GO Transit operating a similar network here, but with thousands of commuters travelling to Ottawa every day from Smiths Falls, Brockville, Cornwall and other areas to work, it's a plan they intend to discuss.

 

[unimaginative2]

That's a really, really poor choice for Ottawa. It would obviously be crazy to run their transit system from Bay St, by people who never even see let alone ride the trains. Moreover, it's entirely the wrong way to go (no pun intended). Ottawa already has what GO should be doing: frequent, urban service delivered by appropriate equipment. Can you imagine them shutting down the O-Train and replacing it with trains of bilevels three times a day? GO has about as much experience operating an urban rail service as I do.

 

[AnarchoSocialist]

^You would expect anything less of Ottawa? The transit debate in Ottawa is a total farce and no one seems to have any clue what they are doing. I have become totally indifferent about what happens. It is best not to try to understand or think about it because it only leads to confusion and headaches. Viewed as a comedy, or tragedy, it is rather entertaining though.

 

[Ronald]

Privatization of Deutsche Bahn might be a good idea because of the money that it will raise for the company. I don't think that total privatization would do rail services any good. Especially the German governement needs to think twice before possibly making that move in the future.
In 1995, Dutch Railways was privatized. The former state-owned company does not own the infrastructure (railways are owned by the ministry of traffic, spatial ordening and environment), they just use it.
The risk that Dutch Railways stops operating on certain tracks is present, if those tracks aren't economically viable to operate. This is where the government jumps in (again): if tracks are considered to be important to society, the government will insure continued service on those tracks. That way, you won't lose railservice because of economic forces.
If only the government keeps its influence, nothing's wrong with privatization. We just need to make sure that service isn't stopped along certain tracks because it is economically unviable, IMO.

 

[Hipster Duck]

Can you imagine them shutting down the O-Train and replacing it with trains of bilevels three times a day? GO has about as much experience operating an urban rail service as I do.

Shit, that was funny.

 

[AnarchoSocialist]

^^I agree that the government must always have a level of control over services to ensure that more remote or lines with lower ridership are not just shut down in the name of profit and instead remain open as an important public service. Canada does not even have that level of government intervention. The infrastructure is almost entirely privately owned now with VIA (the national passenger rail service) being a crown corporation but still at the mercy of the private freight companies. Before any sort of privatization of rail operations should be considered the government needs to take control over the rail lines again, or at least in some cases construct and operate new passenger only lines.

The arrangement that NS has for its HiSpeed service is actually a model I find that would work quite well. While NS is still the operator of the HiSpeed service KLM does have a 10% interest in this service. So you allow some private investment, and in this case you can also benefit from working with an airline company and developing code sharing and co-operation in travel. The same would work well in the Quebec-Windsor corridor. If the government simply said we are going to build a proper network and that is that but gave private investors a chance to own say 10 - 25 percent of the service then you could gain some of the benefits of private business being involved in operating HS service without the government losing control.