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In August 2024, the European Commission has published a study on passenger and freight rail transport services’ prices for final customers. The study analyses the effects of bringing competition into the rail market.
Competition can take two possible forms: either open access competition (also called competition in the market) or public service obligation contracts granted through competitive tendering (also known as competition for the market).
According to the study, open access competition has proved to reduce the price and increase the quality and frequency of passenger transport trains in Austria, Czechia, France, Italy, Spain and Sweden. However, in Germany the liberalisation process has failed both to reduce the price and to increase the quality, with the consequence that demand has not gone up, either.
On the other hand, the effects of liberalisation must be assessed not only in the short term, but also from a mid-term perspective. For instance, after 5 years , the Vienna-Salzburg ticket price has increased by 9%, not a very satisfactory performance; whereas the Prague-Ostrava ticket price has decreased by 2% and the Italy High-Speed ticket price has decreased by 19%, therefore two much better examples.
With regards to quality, the study highlights the provision of free wi-fi equipped on board trains, power sockets and in-seat refreshments after liberalisation. Another obvious measure of quality for trains is punctuality: Germany and Spain have been lately famous examples of railway systems that were once punctual and have become terribly unpunctual nowadays. The study mentions the case of Italy, with a 67.1% rate of punctual trains in 2022, due to the fact that increased frequency on the network produces an effect of saturation and, ultimately, a lack of punctuality. One could say that the success of liberalisation from the point of view of user demand poses challenges for punctuality.
Indeed, the introduction of competition produces effects on demand. In the case of Spain, high speed trains between Madrid and Barcelona have experienced a 25 percentage point increase in the first two years of competition. In Italy, high speed railway passenger demand has increased by 18 percentage points from 2012 to 2017.
Let us know turn to the second model of introducing competition, namely, the award of public service obligation contracts through competitive tendering. The study analyses the cases of France, Denmark, Poland and Germany. The latter Member State’s regional passenger rail customer price has increased by 5% between 2004 and 2022, certainly not a good performance. In Denmark, the report complains about unstable wi-fi, lack of punctuality and even cancellations. As a conclusion from this data, it might be defended that open access competition has brought better results for passenger transport than public service obligation contracts awarded through competitive tendering.
As a third item, the study also delves into freight transport, particularly in Croatia, France, Germany, Italy, Poland and Sweden, as well as the Rhine Alpine Corridor, the North Sea Mediterranean Corridor and the Mediterranean Corridor.
Here, liberalisation was completed in 2007. As a consequence, prices have evolved spectacularly. In France, railway prices have decreased by 43% after 15 years of freight liberalisation. Croatia has developed a similar trend, a 28% decrease in freight prices after 8 years of liberalisation. Germany’s decrease has reached 13% in four years; while Poland has achieved the same mark in eight years.
Quality has increased in France, Sweden, the Rhine Alpine Corridor and the North Sea Mediterranean Corridor, but not in Poland. Punctuality remains a pending challenge regarding quality after introduction of competition in railway freight services. The study shows that only 30% of rail freight services arrive on time.
Finally, neither Poland nor France have increased their demand for freight railway transport after liberalisation. In France, road transport has gone up by 30% between 1988 and 2018, to the detriment of railway. On the contrary, rail freight demand in Germany has almost doubled between 2004 and 2022.
Source of image: Alstom