Rail Reform – Czech Experience Zdeněk Tomeš – Martin Kvizda – Tomáš Nigrin – Daniel Seidenglanz – Monika Jandová – Václav Rederer.

Rail Reform – Czech Experience

Zdeněk Tomeš – Martin Kvizda – Tomáš Nigrin – Daniel Seidenglanz – Monika Jandová – Václav Rederer

Summary

1. Introduction2. Passenger traffic3. Case study: Open access on Prague – Ostrava

route4. Freight traffic5. Conclusions

Czech railway reform

Vertical separation of the industry in 2003Horizontal integration of passenger and freight operation of the state-owned incumbent České dráhyCompetition entry of many small private operators

Vertical separation

1993 – 2002 → vertical integration of infrastructure management and provision of services1.1.2003 → vertical separation (partial); the emergence of the independent infrastructure manager (SŽDC) and the incumbent operator České dráhy (ČD)2003 – 2008 → infrastructure maintenance and timetabling still done by the incumbent ČD2003 – 2011 → traffic control performed by ČD2003 – 2015 → ČD possess railway stations

PASSENGER TRAFFIC

Railway passenger traffic - statistics

1995 2000 2006 2010 2013

Passenger-Kilometers(billions)

8.0 7.3 6.9 6.6 7.6

Modal Share of Railways

(%)10.8 8.3 7.5 7.5 8.5

Private Operator’sMarket Share

(%)n.a. n.a. 0.15 0.2 5.1

Density of passenger rail traffic

Source: ČD, 2009

Long distance x regional passenger traffic

Long distanceexpress, intercity and supercity connections of main cities. subsidized by the Ministry of Transportcompetition organization:

1) open access (Prague – Ostrava) 2) competitive tendering (3 routes at present) 3) direct awarding (rest of the network)

Regional regional and commuter trains for shorter distancessubsidized by regional authoritiescompetition organization: direct awarding of all subsidized services to the incumbent for the period 2009-2019

Challenges

Pros and cons of open accessCompetitive tendering still little usedInfrastructure investments:o Speed limits due to bad condition of

infrastructureo Main corridors x regional lineso Does HSR Praha – Brno make sense?

CASE STUDY: OPEN ACCESS PRAHA - OSTRAVA

History

Before 09/2011 → high density of traffic, low intermodal competition, high fares, low quality of ČD coaches, subsidies, no competition09/2011 → withdrawal of public subsidies; the open access entrance of the first private competitor RegioJet01/2013 → the entrance of the second private competitor LeoExpress2012 - 2015 → intensive competition of three operators

Service differentiation

Prices (CZK)

until 09/2011 09/2011 10/2011 12/2011 11/2012 12/2012 08/2013 09/20140

100

200

300

400

500

600

700

highest fares without loyalty card

lowest fares with loyalty card

average price without loyalty card average price with loyalty card

spread of prices

Profits (mil. CZK)

  2012 2013

  Revenue Profit Revenue Profit

České dráhy

19 500 -517 19 900 -1 795

RegioJet 246 -76 318 -93

LEO Express

7 -76 158 -159

Frequency of services (daily)

2010 2011 2012 2013 2014

0

5

10

15

20

25

30

35

40

ČD IC ČD SC RJ LEO

Capacity

 2010 2011 2012 2013 2014

Average Number of Coaches Per Train 8.9 7.2 7.3 7.0 6.7

Average Number of Seats per Train465 408 353 336 333

Total Daily Capacity (Number of Seats)10 687 12 649 11 282 13 437 11 650

Demand (mil. pass-km per day)

  ČD SC ČD IC RegioJet LEO Express

TOTAL

2010 1.1 1.9 - - 3.0

2013 0.7 1.2 1.6 0.7 4.2

(mil. pass-km per day)

Infrastructure capacity

Table 3: Train density on the Prague-Ostrava route in 2003, 2011, and 2013.

Number of passenger trains in weekdays

(one way only)

2003 2011 2013

ČD RJ Leo ∑ ČD RJ Leo ∑ ČD RJ Leo ∑

Prague

Long-distance 39 0 0 39 75 9 0 84 76 9 8 93 Regional 31 0 0 31 59 0 0 59 60 0 0 60 Total 70 0 0 70 134 9 0 143 136 9 8 153

Ostrava Regional 11 0 0 11 18 0 0 18 19 0 0 19 Long distance 29 0 0 29 42 9 0 51 40 9 8 57 Total 40 0 0 40 60 9 0 69 59 9 8 76

Notes: CR – České Drahy; RJ – RegioJet Leo – LeoExpress Source: Timetable ČD 2003; Timetable SZDC 2011, 2013.

From tact to demand derived timetable

12 a.m.

1 a.m. 2 a.m. 3 a.m. 4 a.m. 5 a.m. 6 a.m. 7 a.m. 8 a.m. 9 a.m. 10 a.m.

11 a.m.

12 p.m.

1 p.m.

2 p.m.

3 p.m.

4 p.m.

5 p.m.

6 p.m.

7 p.m.

8 p.m.

9 p.m.

10 p.m.

11 p.m.

0

1

2

3

4

2010 2014

Number of Passenger Trains Departing from Ostrava to Prague on Weekdays (number of trains per hour)

Assessment

+ better quality of services+ higher frequency of trains+ lower prices for customers

- all competitors unprofitable- weak regulation- no tariff integration- strains on infrastructure capacity

FREIGHT TRAFFIC

Railway freight traffic - statistics

1995 2000 2006 2010 2013

Tonne-Kilometers(billions)

22.6 17.5 15.8 13.8 14.0

Modal Share of Railways

(%)41.6 31.9 23.8 21.0 20.3

Private Operator’s

Market Share(%)

n.a. n.a 5.4 13.2 23.7

12006

Freight challenges

The incumbent is losing the most lucrative customers to private competitors.The incumbent’s freight division is slow reacting, under-invested and over-employed.Possible solution → horizontal separation of passenger and freight operation of the incumbent and privatization of the freight division.

Conclusions

Slow reform; the incumbent still owns railway stations.Dynamic evolution of open access competition on the Prague - Ostrava route. The capable regulator is missing to solve many emerging competition disputes. With the exception of the Prague – Ostrava route, all other passenger traffic is subsidized and in most cases directly awarded.Possible solution to weak performance of freight traffic could be privatization of freight division of the incumbent.