Is Europe on the right track?

| The European | 26th March 2015


There has been encouraging news for the British train manufacturing industry recently. In 2015, a new £82m train manufacturing plant will open in Durham, England. It is expected to begin production by January 2016. Japanese firm Hitachi is behind the project, which will be based in Newton Aycliffe, a town in County Durham.

Observers have called the plant possibly the most significant development for the north-east of England’s industrial sector since Nissan opened its Sunderland motor manufacturing plant in 1984. It is also the first plant focused on manufacturing trains to open in the UK for decades. This piece of positive news in the railway industry is perhaps all the more welcome given the negative media stories around the UK train manufacturing industry in recent years. In 2011, the British government put in a major order for Thameslink trains with the German company Siemens. Many saw this decision as a huge blow to the British train industry. There does, nonetheless, seem to have been a shift in the UK government’s position in favour of lending stronger support to Britain’s train building sector. In 2014, for example, it gave a £1bn Crossrail train manufacturing contract to the firm Bombardier. The latter is Canadian but owns what is currently the UK’s only train factory in Derby.

The new Newton Aycliffe site will build most of the trains for a £5.7bn contract that the UK government recently awarded to Hitachi Rail Europe. The contract is for the construction of 122 trains for East Coast and Great Western trains. The new plant will also directly create 730 new jobs, and could possibly enable 6,000 new jobs through its supply chain.

In January, Hitachi’s first train prototype arrived in Newton Aycliffe after a 52-day journey from Japan. “The arrival of the training carriage is a significant step for Hitachi Rail Europe’s plans to train our manufacturing staff,” said Darren Cumner, the manager of the manufacturing plant.

“Apprentices, technicians and engineers will use this train carriage to gain in-depth knowledge of how to build trains. Shipping this carriage via the Port of Tyne is further testament to our commitment to working with local partners and promoting a strong local supply chain,” Mr Cumner went on.

Andrew Moffat, the CEO of Port of Tyne, also commented: “The Port of Tyne has been working with Hitachi Rail, Höegh and NSA UK Ltd to ensure that this shipment goes smoothly.

“As the UK’s number one port for vehicle exports, the port regularly receives large car carriers arriving directly from Japan and has long established relationships with automotive and construction plant manufacturers including Nissan, Volkswagen, Renault, Komatsu and Audi,” Mr Moffat said.

Europe’s high speed rail journey

High speed networks are also set to be a major discussion point when it comes to Europe’s rail sector in 2015. There is already around 3,700 miles of high speed rail tracks in Europe. With this number set to increase, many in the railway industry are enthusiastic about high speed rail’s future in Europe.

“High speed rail is definitely something that Europeans should be excited about, and data show that they are,” says Libor Lochman, Executive Director of the Brussels-based Community of European Railway and Infrastructure Companies (CER). “Examples of the Paris-Lyon or Paris-London routes, for instance, where high speed rail operators now hold respectively 90 per cent and 80 per cent of the market in spite of fierce competition from other forms of mobility are proof of this success.”

“The environmental benefits of rail are well known, but what is perhaps less known is that high speed rail is by far the most energy-efficient mode for the transport of passengers. Indeed, high speed rail is almost nine times more energy efficient than aviation, a crucial point when considering the current energy insecurity in the EU,” adds Mr Lochman.

Mr Lochman is particularly emphatic about the economic advantages of high speed rail.

“The Paris-Lyon route helped rejuvenate the area around Lyon Part Dieu station, as did the new high speed station in St Pancras for that area in London. Estimates for the building of the HS2 line have shown that HS2 will help drive regional regeneration and invigorate regional economies north of London. HS2 will also help create around 100,000 new jobs – 70 per cent of which will be located outside of London – and generate an annual productivity boost of up to £15bn for the UK economy,” he says.

High speed rail projects underway across Europe include a 39 km high speed railway linking Milan and Brescia in Italy. Project leaders are aiming for the line to be completed during the spring of 2016. It will service 20 cities in Milan, Brescia and Bergamo.

Meanwhile in Germany, engineers are building a high speed railway linking Erfurt and Leipzig. The 2.74bn euros, 2,123 km line is due to open in December 2015. It has been designed for rail speeds of up to 300 km per hour.

France is set to introduce four new high speed lines by 2017 too. The high profile 1.8bn euros Poitiers-Limoges high speed line for now looks likely to go ahead.

The EU also seems set to finance $5.3bn worth of high speed rail links in Eastern Europe as well, namely in Estonia, Lithuania, Latvia and Poland. And perhaps one of the most interesting high speed rail plans associated with Eastern Europe is China’s move to finance a new link between Serbia and Hungary. The $3.1 bn project to connect Budapest and Belgrade is expected to be completed by 2017. China Development Bank is putting up 85 per cent of the money for the project. Chinese state-owned companies will carry out the work. Expert’s have explained China’s interest in the region’s rail infrastructure in terms of the Asian country’s desire to ramp up the scale of its exports to central Europe.

All eyes on Crossrail

A £15bn high speed new train line for the south-east of England, Crossrail also remains firmly in the spotlight. The 73-mile line will connect Berkshire and Essex and is set to open launch in 2018. However, 2015 should see the completion of some project milestones. In particular, tunnel portals and shafts connecting a number of London tube and train stations with Crossrail should be finished. These include Westbourne Park and Royal Oak Portal, Victoria Dock Portal, Pudding Mill Lane Portal and North Woolwich Portal. At the end of January, Crossrail also hit the headlines after the project’s boring machine managed to break into the eastern side Liverpool Street Crossrail station, a further indication that the project continues to develop.

However, the controversial multi-billion pound project is set to be under scrutiny in 2015. Barely a month into the new year, the Crossrail project hit the headlines after the project chairman, Terry Morgan, said that the team was arranging a “mitigation plan” to deal with the project’s problematic signalling system. According to observers, the flaws with the signalling system lie in the fact that it makes use of both traditional and more cutting-edge signalling systems.

This need not be a problem in itself if interfaces are put in place, allowing trains to switch seamlessly between systems. However, engineers are having trouble building these interfaces. Without them, the entire crossrail signalling system will be reduced to a confusing operation. It is looking more and more likely that the new line’s signalling system will not function properly when Crossrail opens in 2018, as coming up with a workable interface system will take time.

Therefore, train services could be reduced even when Crossrail first opens, a potentially embarrassing state of affairs.

Public reservations

Crossrail is not the only high speed rail project facing criticism. France is arguably the birthplace of the European high speed train. But, with its TGV system entering its third decade, perhaps France’s zeal for high speed trains is under greater scrutiny than ever. Questions are being raised about the financial viability of high speed trains in France. The country’s financial watchdog, the Court of Auditors, released a report that found that none of France’s high speed lines are making any profit if construction costs are taken into account. They are actually suffering a loss.

Public attitudes to high speed rail projects also seem ambivalent across Europe. These projects are often funded by the public purse. But critics have said that this makes little sense when high speed rail tickets are unaffordable for many everyday travellers.

In the UK, there has been fierce opposition to High Speed 2 (HS2), a planned high speed route connecting London with the Midlands, North West England and perhaps also North West England and central Scotland. Opponents have criticised the huge budget requirements of the project. HS2 is estimated to cost £42.6bn. Many argue that the money would be better spent on the improvement of other lines.

Critics have also argued that the 240,000 people with houses within a mile of the railway could see their property values plummet with no entitlement to compensation.


Stiff competition

The competition that European trains face from airlines is likely to also be a hot discussion point as 2015 unfolds. Just 6.4 per cent of passengers in Europe travel by train. The figure for air travel is almost 9 per cent.

“The biggest challenge facing high speed rail today is the growing competition from low cost airlines, but also from new forms of mobility such as car sharing. Due to more favourable regulatory conditions, these competitors of high speed rail can offer services at very low prices to customers. Indeed, while 100 per cent of the railway network is tolled, this is only the case on 0.9 per cent of the road network. This has a consequence on the cost of running these services,” says Mr Lochman from CER.

“Unlike aviation, rail is not exempted from VAT. Last but not least, high speed rail stations do not benefit from the hidden, but significant, subsidies that low cost regional airports get every year. Transport and Environment reckons that about 3bn euros of taxpayers’ cash in EU-approved aid finds its way to airports each year,” he adds.

To some, overnight sleeper trains seemed like an attractive alternative for people travelling between European cities and looking for an experience as well as just getting from A to B. However, in November, Deutsche Bahn discontinued its Climate Express Route. It then ended its Paris to Berlin, Hamburg and Munich sleeper routes in December. The Amsterdam to Prague and Warsaw sleeper is also being cut; it will now only run between Cologne, and Warsaw and Prague. “Unfortunately certain international services, such as overnight trains, are being discontinued, mainly for commercial reasons,” says Mr Lochman.

“Since the liberalisation of international passenger connections, railways cannot be run as loss-making organisations: therefore, if there is no state intervention, the decision to run a service is purely based on commercial reasons. Several night connections had become unprofitable due to disproportionate operational costs, even when the trains in question were full. As a result, these connections had to be cancelled in order to improve the overall quality of the service and to be able to maintain a minimum service level,” he adds.

Some analysts claim that the only trains that can seriously compete with air routes between European cities are high speed rail. For example Eurostar has more than 75 per cent of the rail and air market on its principle routes.

Long distance coaches could also provide stiffer competition for Europe’s railway lines over the next few years. Buses and coaches already have slightly more of the market (just over eight per cent), and with the expansion of coach operations, this proportion could well increase.

Europe legislates on trains

Other big discussion points to watch out for this year are co-operation and competition. Some observers think that European train companies need to start working together in order to compete better with alternative modes of transport. However, co-ordination is proving difficult. The EU has passed a number of reform directives since 2001. They outline an EU legal framework and set of requirements for EU railways to enable companies that do not own railway infrastructure to carry out open access operations on lines. Work has been ongoing to merge these directives into a single cohesive piece of legislation. The latest is the third railway package, which was passed in 2007.

The EU is now working on a fourth package, which will mean further changes in favour of liberalisation. Perhaps due to opposition from state-owned railway monopolies that fear an increase in competition, the fourth package is watered down. It was intended that, through the new package, infrastructure and train operations would be considered completely different businesses. However, now a single holding company is allowed to own both. Furthermore, although the European Commission approved the package in January 2013, the European Parliament is still yet to pass it.

Major rail operators are also showing glimmers of enthusiasm when it comes to competing with other national monopolies for certain routes. For example, Deutsche Bahn still intends to run a Frankfurt to London line, making use of the Channel Tunnel. This could present the first real competition for SNCF’s Eurostar. Nonetheless, early in 2014, those intentions did look to be on hold. Deutsche Bahn announced in 2010 that it was keen to have its Channel Tunnel service up and running within four years. It even said that links to Amsterdam and Rotterdam could be possible in the future. There was also talk of getting the service up and running in time for the 2012 London Olympics. These targets have not been fulfilled. Rolling stock certification problems have caused delays with Deutsche Bahn’s rolling stock deliveries from Siemens, which is believed to have at least partly caused the delay.

Thus, 2015 will probably be a mixed year for Europe’s train industry. High speed rail projects are likely to make plenty of progress. They will also continue to cause controversy. Actors in Europe will be pushing for the fourth reform package to be passed to improve competition.

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