Having learned lessons from other markets about deregulation of rail services, Sweden offers an interesting model back to the world

Transdev’s Snälltåget


The railway industry across Europe, and in many other places around the world, is slowly, but steadily moving from a model of state backed monopolies of infrastructure and services to a model of infrastructure businesses – often still state backed – which allow, or the state franchises, public or private operators. The model is comparable to what we have seen in the air and generally the intercity coach businesses.

This new model has enabled a range of new intercity rail businesses to establish market niches across Europe. This competitive model only thrives or delivers customer benefits in certain circumstances, such as: when network and terminal capacity enables new market entrants to offer competitive services; where relevant rolling stock can be accessed promptly and at competitive prices; where the state doesn’t offer undue market advantages to its former state monopoly and thus, preclude any new market entrants; and when franchise operators can be incentivised via contracts, performance incentives and culture, to place customers rather than maximised profits at the heart of their operation.

These models are the centre of European Union policy on the development of the open rail market and are captured in a range of EU directives and frameworks.

The effects are already evident in several European rail markets, including the Czech Republic, Austria and Italy.

The UK, as an early adopter of the privatised model of rail service operation, has had much experience in the issues of operating this type of market – as well as in intercity coach, intracity bus and air markets. Some of the experiences since rail privatisation began in 1994 have been painful and disruptive, but fundamentally, the market for rail services has significantly expanded. Perhaps, we are now only seeing some of the long term benefits as the availability of rolling stock significantly increases, capacity is being created on many corridors and new open access operators develop new services.

Another interesting market for rail privatisation that has been enthusiastically embraced by the public policy authorities is Sweden. This market as well as the wider Nordic implementation of EU open access rail policy perhaps provides lessons for the UK.

A number of freight and passenger operators have entered the Swedish market. These include Vy (formerly NSB – the Norwegian State operator), SJ, Snalltaget (Transdev) and MTR (the Hong Kong mass transport operator), as well as many short haul freight operators (up to 50 operators at present) for the substantial rail freight movements across the country.

SJ’s ‘X2000’ service is the premier offer for intercity services. However, the distinctive tilting rolling stock originally dates from 1990 and while it has been updated it does not seem to offer the level of quality seen in many other European high speed intercity railway services. Particularly, high speed services in countries such as Italy or Switzerland. SJ is discussing another refurbishment programme for the service. This does demonstrate some of the market gaps for new entrants to the intercity market in the country.

The passenger service operators seem to have very much adopted airline-style marginal cost pricing to maximise revenue from travellers and fill underused seats. This is a tactic that is also widely used in UK rail services.

The passenger service operators seem to have very much adopted airline-style marginal cost pricing to maximise revenue from travellers and fill underused seats. This is a tactic that is also widely used in UK rail services.

An ongoing issue for a number of years for the new service operators has been the role of the SJ website as the principal portal for rail planning in the country. The portal is widely used and was felt by the other new operators to unfairly promote SJ services. Government efforts have been trying to increase transparency across all services in this portal; however SJ argues that this is their competitive advantage. This is an interesting comparison versus the UK where ATOC (now Rail Delivery Group) has performed the role of industry guardian of network information and private competitors such as Trainline emerged relatively early in the deregulated market.

Clear market gaps exist in service and service quality both at the higher as well as discount ends of the market. Vigorous competition is also present from, of course, personal driving; as well as coaches as in most of Scandinavia; as well as air between major cities. Stockholm to Copenhagen is in the top 20 of the busiest European air routes. There are over 25 daily flights between Stockholm and Gothenburg in west Sweden as well as the same number to Malmo, let alone nearby Copenhagen.

A number of new intercity operators have relatively recently begun operation. However, SJ AB is still overwhelmingly the dominant operator. ‘Snälltåget’ – owned by Transdev (French/German operator) has been running services on the Stockholm to Malmo route for the last decade as well as seasonal services to resorts in central Sweden. Snälltåget seems to position itself as a lower cost alternative to the incumbent SJ. It uses older ex-German rolling stock rather than the rolling stock used by SJ and so offers a slower journey. Three to four daily services operate on a typical day on the approximately four-hour journey between Stockholm and Malmo. Night train services are also offered which carry on to Berlin via a port in southern Sweden.

MTR also has over a number of years operated under contract the Tunnelbana in the city of Stockholm as well as recently the city’s regional rail system. MTR Express has since March 2015 operated between Gothenburg and Stockholm. The service uses distinctive red Stadler Flirt units – as are being rolled out by Abellio Greater Anglia in the UK. There is a distinct “VirginUK” feel to the branding and service this brand provides. MTR has recently expanded to be an operator of contract and deregulated rail services in several markets in Europe including Sweden and the UK.

Vy now operates a number of local rail franchisees in north and west Sweden as well as intercity coach services across various parts of the country. Meanwhile, FlixTrain has recently applied for train paths in Sweden with pending plans to link the country to its services in Germany. The company already provides intercity coach services in Sweden.

This year’s UITP Global Public Transport Summit in Stockholm was a chance for me to experience the Swedish rail market. I wanted to experience the developing intercity train market in Scandinavia, travel to Malmo in southern Sweden, use the new international services across the Öresund to Denmark.

The first part of this journey was a Snälltåget train from Stockholm to Malmo – Sweden’s third city of approximately 300,000 residents. The four-hour journey cost approximately £60 for a standard seat which was booked two weeks in advance.

The train, which began its journey in Stockholm at 09:30, was comfortable, clean and spacious. Free Wi-Fi and power outlets were available at every seat and there was ample room to work on a laptop at your seat. It made a number of stops in southern Sweden on its journey and was generally at seated capacity for most of the trip. Food and drink was available in the Bistro car. While the SJ X2000 service seemed to be slightly faster, more luxurious and comfortable, the Snälltåget service offer was more than acceptable and arrived at Malmo central station on schedule.

It was, however, great to have the choice of operators on this long distance intercity service and a choice between price points and levels of comfort!

It was, however, great to have the choice of operators on this long distance intercity service and a choice between price points and levels of comfort! This process is evolving across Europe and it fundamentally makes intercity train travel more appealing. Given a robust regulatory framework for the rail infrastructure and capacity to enable the entrance of new operators, it is a positive evolution of rail services and should increase the overall attractiveness of rail travel versus alternative modes which usually have higher environmental impacts.

The journey to Malmo was followed by a trip to Copenhagen, Denmark, again by train via the Öresund road and rail bridge/tunnel. This high profile rail service, which has united the labour market in southern Sweden and Copenhagen, operates with the dedicated “Öresundståg” services operating every 20 minutes on the 20-minute journey between city centres. The service has a distinct ‘Eurostar’ feel about it in stations and trains. The Öresund crossing along with the ongoing rail infrastructure improvement across Denmark is the key element in growing the extent of international rail passenger and freight services from Sweden. The government has recently asked Trafikverket, the Swedish transport agency, to consider what enablers would be needed to increase long distance overnight rail services which in part could use these international links.

Having clearly learned a number of lessons from other markets, including from the deregulation of rail services in the UK, Sweden now offers an interesting model back to the rest of the world. Key elements in this model include: strong national government support for rail as a key element of a sustainable transport service for both freight and passengers; a strong local/regional role in specifying and managing their own rail services; enabling and growing capacity on the network to allow new operators to enter the market; and working to grow the international connectivity of the rail network. More can still be done and it will be interesting to see the long term market share of SJ in this deregulated market versus local operators, larger European players, and global transport businesses.

About the author:
Giles K Bailey is a Director at Stratageeb, a London based consultancy assisting businesses think about their strategic vision and innovation. Previously, he had spent nine years as Head of Marketing Strategy at Transport for London.
This article appears inside the latest issue of Passenger Transport.

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