Lessons learnt from railway deregulation and tendering in SwedenDr. Gunnar AlexanderssonStockholm School of Economics Institute for Research
Former head of Government Committee reviewing the organisation of the railway sector
Nordic Public Transport Conference NLTMHelsinki, 16 June 2016
Presentation outline• Background to liberalisation and evolution of
reforms• Experience and effects• Current issues and conclusions
The evolution of reforms
Pre-history1960s-1980s A period of decline and increasing financial
problems for the Swedish State Railways (SJ) line closures operating subsidies introduced additional state grants needed
1985 New Railway Law: SJ to separate its accounts track access charges introduced
1986 SJ in severe financial crisis
1988 New Transport Policy Act
Evolution of reforms (1)1988 Vertical separation of track infrastructure
(Banverket) from operations (SJ)
Decentralisation of responsibility and resources to regional public transport authorities
1990 First tenders for regional passenger services
1993 First tenders for interregional (long-distance) passenger services
1996 Deregulation of freight services
2001 Separation and corporatisation of SJ’s divisions
2007 Market opening for night trains and chartered trains
2009 Swedish Transport Agency established, with multi-modal regulatory responsibilities
Evolution of reforms (2)2009 Market opening for weekend traffic
Market opening for international passenger services (to comply with EU directive)
2010 Banverket’s construction and maintenance unit is separated and corporatised (Infranord)
Banverket is merged with the Road Administration to form the Swedish Transport Administration (a multi-modal infrastructure manager)
Market opening for domestic passenger services, with full effect from December 2011
2012 New law on public transport (affecting interface between tendered services and commercial services)
Overview of changes in regulatory structure (market access)
Rolling stock manufacturing
SJ ASEA
Railway operation
Swedish railway market 1988Pa
ssen
gers
Frei
ght
IT services
Passen
gers
Freigh
tSwedish railway market 2016
Real estate management
Rolling stock manufacturing
Rolling stock management
Licenses, safety, market
monitoring
Infrastructure management
EuroMaint RailBombardierDSB VedligeholdMidwaggon
JernhusenTrain Alliance(A-train, in-house)(SL, in-house)
SJTransdevMTRArrivaA-trainNSB/Tågk.
EuroMaint RailMotala TrainsMiTrans
BombardierAlstomStadlerSiemensAnsaldo
TransitioSLSJNSBDSBTÅGAB
Regionalpublictransportauthorities
IBABGreen CargoHector RailTÅGABRush RailReal Rail
AlphaTrainsMitsuiRailpoolHector RailGreen CargoCargoNet
InfraNord VR TrackStrukton InfratekNCC
Infrastructure maintenance
Planning and tendering of
public transportTrain operation
Swedish Transport Administration
Swedish Transport Agency
CleaningRolling stock maintenance
FinancingConsultancy services
Rolling stock refurbishment
MantenaAlstomMotala Trainsmgw Service
BombardierDSB Vedligehold
Experience and effects
• Increased investments in rail infrastructure• Strong local and regional commitment to develop
passenger services• Strong growth in demand• Improvements in (for example) productivity and safety• Innovations, new pricing models• In recent years, decrease in average speed of trains
(mainly due to capacity constraints)• Punctuality problems a recurrent issue of concern• Appearance of several new entrants, reducing the market
share of the incumbents• Tendering leading to reduced need for operating subsidies
but also cases of strategic bidding
Experience and effects
Rail infrastructure investments and maintenance
Source: Trafikverket, and own calculations
0,0
5,0
10,0
15,0
20,0
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Expe
nditu
re(billion SEK, 201
4 prices)
New investments Maintenance Reinvestments
Source: Jakob Wajsman, Trafikverket
Development of demand
80
90
100
110
120
130
140
150
160
170
180
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Inde
x (1
988=
100)
Freight transport
Passenger transport
12.0 billion passenger km
20.3 billion tonne km
1988 2014Share of passenger km 6.1% 8.4%
– short distance 3.0% 6.0%– long distance 15% 15%
Share of tonne km– long distance 28% 24%
Modal share of rail
Source: Trafikanalys
Safety
0
20
40
60
80
100
120
140
160
180
200
Accidents total
Derailments
Source: Nelldal & Wajsman (2015)16
Ticket price developmentCPTA monthly travel card
SJ 2000 highest price
SJ IC/Regional normal price
SJ 2000 discounted price
SJ 2000 lowest price
SJ night trains
0
25
50
75
100
125
150
1990 1995 2000 2005 2010
Aver
age
spee
d, k
m/h
Reshastighet all tågtrafik i Sverige
Snabbaste tåg
Allaförbindelser
Fastest train
All connections
Source: Nelldal et al (2013)
Speed of passenger trains
Punctuality (5 min. level)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1970 1975 1980 1985 1990 1995 2000 2005 2010
Source: Trafikverket
Freight services
Passenger services
Market entry in passenger services (1)Tendered services
1990 BK Tåg new entrant for local/regional train services in Småland and Halland
1995 Sydtåg new entrant on single line in Skåne1998 Linjebuss new operator on local line in
Stockholm; French CGEA (later Connex, Veolia) new owner
2000 Break-through for new entrants (Citypendeln, BSM Järnväg, Tågkompaniet, Sydvästen) following several important tenders
2006 NSB new majority owner in Tågkompaniet2007 Arriva new entrant for Pågatågen commuter trains
in Skåne2009 DSB First new operator for Öresundstågen (early
exit in 2011)2016 MTR expected new contractor for Stockholm
commuter trains
Market entry in passenger services (2)Open access
2008 For a couple of months (June-October), Unionsexpressen runs daily services between Stockholm and Oslo
2010 Veolia starts daily services between Stockholm and Malmö (expansion of 2009 weekend service)
2011 Skandinaviska Jernbanor starts daily services Uppsala-Stockholm-GothenburgTågåkeriet starts new direct line between Gothenburg and Dalarna region
2013 Tågkompaniet starts weekend service Ludvika-Västerås-Stockholm
2015 MTR Express starts frequent daily services between Stockholm and Gothenburg, with all-new vehicles
Train operating companies
Source: Jakob Wajsman, Trafikverket
0
5
10
15
20
25
30
35
1988 1992 1996 2000 2004 2008 2012
Antal o
peratörer
Godstrafik Persontrafik Person‐ o GodstrafikFreight Passenger and freightPassenger
Source: Jakob Wajsman, Trafikverket
0102030405060708090
100
1997 2000 2003 2006 2009 2012
Ande
l (%
)
SJ AB Övriga järnvägsföretagOther RUs
Market share development (passenger operators)
SJ Ltd
0102030405060708090
100
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Ande
l (%
)GC-koncernen Privata företag MTABPrivate RUsGC Group
Market share development (freight operators)
Source: Jakob Wajsman, Trafikverket
Experience from competitive tendering (competition for the tracks)• In the early tenders, there were typically only 1 or 2 bidding
train operating companies• Later common with 3 bidders or more (sometimes 5-6)• Contract periods have increased from 1-3 years to 5-8 years• Competitive tendering of train services has resulted in
considerable reductions in costs / reduced need for subsidies (10-25%)
• The cost reduction effect has typically been most evident the first time a certain traffic is tendered, followed by a diminishing effect in subsequent tenders and sometimes even higher costs
• In several cases, unrealistic or strategic bids have been a matter of concern
MTR Express• Ramping up services March-
August 2015 to 8 departures per day
• New non-tilting Flirt trains from Stadler
• Travel time: 3h 30 min
• 1 ticket class and 3 types of flexibility/service levelGenerally cheaper than SJ’s 2nd class
• Punctuality (5 min): 70%(15 min): 88%
• 18 departures per day
• Old but refurbished tilting X2 trains from Bombardier
• Travel time: 3h 10 min
• 2 ticket classes and 3 types of flexibility
• Punctuality (5 min): 57%(15 min): 77%
SJCompetition on the tracks Stockholm-Gothenburg
Current issues and possible directions of
future reforms
Current issues• Capacity and path allocation problems
In 2015 three companies compete on the tracks Stockholm-Gothenburg
Growth of tendered services at the expense of commercial services
• Backlog of track infrastructure maintenance
• Early steps taken towards construction of high-speed lines
• Division of roles and responsibilities; cooperation and coordination between actors
• Access to real estate and related services
Government Committee 2013-2015 looked into the current organisation and areas in need of improvement
3 reports + 1 volume of appendices
28
Selected conclusions and recommendations (1)• The step-wise evolution of regulatory reforms in the Swedish
railway sector has been successful in several respects.• It has also spawned a number of issues that have not been
handled properly, sometimes despite being identified early on. • Addressing issues such as the division of responsibilities and
commitments of various actors will also provide the necessary foundation for improved and developed cooperation between the actors.
• These and other proposals should then lead to a better functioning of the railways, both for the actors and their customers.
Selected conclusions and recommendations (2)• The upcoming investments in high-speed lines highlight the
weaknesses of the mixed model for market access in Sweden (open access with competition on the tracks and competitive tendering for the tracks)– A number of uncertainties and risks may lower the willingness of
operators to invest in high-speed trains– Difficult to achieve an optimum supply of high-speed services as well as
fast regional services
• In the short term perspective, there is a need to strengthen the conditions for operators of commercial passenger train services in comparison to tendered services
• In the long-term perspective (10-15 years), the Government should further investigate a change in the model for market access. The recommendation is a model in which access for all domestic long-distance passenger traffic is regulated by means of competitive tendering
Thank you!
Contact:[email protected]
Website of Government Committee:www.sou.gov.se/jarnvagensorg/in-english/(with extended English summary of final report available for download)