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2015, 23 JAN
High-speed rail in Europe: problems down the line
FAST trains in Europe ended 2014 with a flourish. In December Eurostar, which connects London, Paris and Brussels, started selling tickets for a new, year-round service to the Mediterranean, starting this May. Poland introduced its first high-speed service, between Warsaw and Krakow; Serbia signed an agreement with China to build a fast line from Belgrade to Budapest; and Turkey inaugurated a line from Istanbul to Konya, having opened one between Istanbul and Ankara in July. 

High-speed rail is controversial, as those now trying to introduce it to America know to their cost. This week, as work began on California’s “bullet train” project, taxpayer groups condemned it as a monstrous waste of money. Indeed, high-speed trains usually depend on public subsidy, yet their tickets are often unaffordable for many potential users, so they may not fill enough seats to avoid losses. The counter-argument is that over distances of 300-800km, fast trains between big population centres are quicker and less polluting than most forms of transport. No one is keener on them than the European Commission. Supported by EU and national subsidies, Europe has added more than 6,000km of high-speed track—on which trains travel at least some of the time at 250kph (155mph) or more—to the 1,000km or so it had in 1990. Much more is under construction or planned (see chart). In 2015 a new line from Leipzig to Erfurt is due to open. A Milan-Brescia service may begin in 2016. By 2017 no fewer than four new French lines will come into service. 

he EU, which is itching to spend more on infrastructure, plans to finance a €4.5 billion ($5.3 billion) fast-rail link between Estonia, Latvia, Lithuania and Poland. On a few routes high-speed rail has clawed market share from airlines: Eurostar now claims more than 75% of the combined rail/air market on its main routes; and Paris-Lyon and Madrid-Barcelona are also successful. Often, however, fast trains just take business from slow ones. Between 2000 and 2011, as high-speed lines opened across the EU, rail’s overall share of passenger-kilometres travelled was little changed, at 6.4% in 2011. Cars’ share had barely budged, at 72.5%. Buses and coaches lost a percentage point, to 8.2%, with air travel (excluding flights to outside the EU) gaining more than a point, to 8.9%. Some countries may have overextended their networks. In France, whose Trains à Grande Vitesse (TGVs) launched high-speed rail in Europe in 1981, traffic, revenues and profit margins have fallen from their peaks. To keep local politicians happy, TGVs stop at too many places, the national auditor concluded recently. Cheap flights and co-voiturage, or car-sharing, are siphoning off customers; SNCF has started a cut-price service in response. Spain’s high-speed track is even longer than France’s, despite it having about a fifth as much passenger demand. Fares were cut in 2013 to boost demand, but on many routes there are still plenty of empty seats. Lack of competition among rail operators is another reason why high-speed rail is failing to win passengers from other means of transport. 

The EU is finding it hard to transform a bunch of national rail monopolies into a pan-European market in which operators compete across borders. Three rail-reform packages since 2001 have made a start: competition was introduced into freight services; some common technical standards have been laid down to make it easier to run trains across frontiers, and the beginnings of a single market in cross-border passenger services has been introduced. But a fourth reform package, to liberalise further the market for passenger rail, has been held up and watered down by the European Parliament and national politicians. So far national rail firms are preferring to collaborate than to compete.

In September France’s SNCF and Germany’s Deutsche Bahn renewed a joint venture, Alleo, which manages some high-speed services between the two countries. In December Lyria, owned by SNCF and its Swiss counterpart, opened a new service between Lille and Geneva. However, on a few of the busiest routes, competition may eventually take off. Deutsche Bahn has postponed but not abandoned a plan to send trains from Frankfurt through the Channel Tunnel to London. That means taking on Eurostar, in which SNCF owns a majority stake. Deutsche Bahn is also gradually pulling out of Thalys, a venture with SNCF and its Belgian and Dutch counterparts, in preparation for competing with them on those routes. In domestic markets, too, things are moving. Europe’s first private-sector high-speed operator is battling for market share in Italy. Nuovo Trasporto Viaggiatori (NTV, in which SNCF has a stake) started services in 2012 and reckons it now has over 20% of the business. It has struggled to compete with the state-owned incumbent, FSI, which controls the tracks. NTV has complained to the authorities about what it sees as FSI’s dirty tricks; and it is hoping that a newly created independent regulator will insist on fair play. 

The national rail operators would surely find it harder to rally political support to keep foreign rivals off their tracks if they were privatised. The Italian government is said to be considering at least a part-privatisation of FSI. But Germany is thought to have quietly shelved a similar notion. And in France, especially, privatisation seems out of the question. However, competition from other forms of transport will only keep rising. Low-cost airlines are continuing to expand and in parts of Europe long-distance coaches are being liberalised. Germany opened up its coach market in 2013 and Deutsche Bahn reckons that as a result its high-speed routes lost €50m of revenues in the first half of 2014. A similar liberalisation is being proposed in France (where SNCF owns a big coach operator). While high-speed rail remains in the grip of sluggish state monopolies, its chances of becoming a successful, competitive business look poor.

The source: The Economist