EU rail freight liberalisation feels the strain
Robert Wright, Financial Times Transport Correspondent reports in an article published on September 27 2009 "growing concerns about the future of Europe’s rail freight liberalisation after a wave of takeovers of recently started private operators by the dominant state-owned companies."
The European Commission, freight customers and other observers are concerned the transactions will strengthen the competitive position of state operators, whose positions liberalisation was meant to challenge.
The state-owned companies insist the deals will provide economies of scale that will make rail freight more competitive.
France’s SNCF is in negotiations to take over the non-French business of France’s Veolia Cargo, one of the largest private operators.
Germany’s Deutsche Bahn announced on Thursday it was buying 95 per cent of Poland’s PTK Holding, another private operator. SNCF and DB are also the only contenders to form a partnership with the strategically vital Swiss Federal Railways, which could further enhance their competitive power.
Nicolette van der Jagt, secretary-general of the European Shippers’ Council, which represents freight operators’ customers, said her members were concerned.
“It is raising questions whether this [outcome] was the purpose of liberalisation,” she said. “Is the open market to have some choice?”
A European Commission official said: “We are certainly concerned about the current development.”
SNCF’s planned takeover of Veolia Cargo outside France – the French operations are likely to be sold to Groupe Eurotunnel – has provoked irritation. SNCF’s loss-making freight division has been the subject of six rescue plans – the latest announced last week – and billions of euros have been poured into it.
Lord Berkeley, a member of the board of the European Rail Freight Association, said many private operators were angry.
“It is extraordinary that the state sector can find enough money to buy up the competition and then complain it’s short of money,” he said.
The resurgence of state operators contrasts sharply with the European Commission’s expectations when it started liberalising Europe’s rail freight market nearly 10 years ago. Rules allowing private operators to compete first on international routes then in domestic rail freight encouraged a series of entrepreneurs to create private operators whose operating practices marked a decisive break with the past.
However, almost from the start, Deutsche Bahn started buying up stakes in private operators, as well as the state railways’ freight operations in Denmark and the Netherlands. It controls or has stakes in operators in the UK, France, Spain and Italy.
SNCF has become much more aggressive in its expansion over the past 18 months, taking a large stake in Ferrovie Nord Cargo, one of Italy’s biggest competitors to the state-owned incumbent, as well as buying Geodis, a logistics company.
Its takeover of Veolia Cargo will be significant because Veolia last February bought Rail4Chem, one of the best-regarded private operators, which was set up by chemical companies seeking an alternative to the state-owned operators.
Nevertheless, Guillaume Pepy, president of SNCF, insisted the issue was rail’s failure to win over sufficient traffic from road transport. The takeovers would help it to compete better.
DB Schenker, Deutsche Bahn’s freight and logistics arm, said that it was vital it offered its heavily export-oriented German customers a Europe-wide network.
There are also few obvious alternatives to takeover by the state-owned operators for private operators struggling with a slump in freight volumes.