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Opportunity Analysis for Rail Operators—Growth and Evolution to Newer Businesses 

  • September 2015
  • 11 pages
  • Frost & Sullivan
Report ID: 3312075

Summary

Table of Contents

Introduction

Technology has caused revolutionary transformations in businesses and industries worldwide. The Internet has allowed for the creation of marketplaces that have caused enormous disruption to traditional participants across various industries. The railway sector, globally, has faced tough competition from participants in road transportation. As landscapes change through innovation of concepts such as ride-sharing and mobile freight brokering, the rail industry might need to be aggressive to embrace change.

Changes in the Ecosystem for Rail Operations In rail, more than % of the costs are fixed; therefore, efficiencies are realized only with high economies of scale. With extremely high costs, it becomes natural for the state/government to contribute economically; hence, railways tend to be monopolies that are owned and operated by the state. North American railroads are an exception, as the railroads have mostly always been private enterprises—where funds were raised through investment bonds and private equity.
A monopolistic railway can create an environment of abusive behavior toward customers, deteriorating infrastructure, and unfair barriers for potential market entrants. There is a huge trend toward clear distinctions in the roles of policy makers, regulators, asset owners, and service operators, globally.

The de-regulated model is largely associated with European railways. For example, in 1995, the Nederlandse Spoorwegen (NS) was the only rail operator in the Netherlands. Today, there are rail operators offering passenger, freight, and track maintenance. Similarly, in Brazil, the struggling state-owned railway sector was dissolved into several businesses, which were then auctioned to the private sector as a long-term integral concession. The privatization of the sector has generated a positive impact on the Brazilian railways, which had previously accumulated a loss of more than $620 million.

Europe alone shows a wide spectrum of relationships between infrastructure management and transport operators. Countries with full separation include Great Britain, Finland, Denmark, the Netherlands, Norway, Spain, Sweden, Portugal, Slovakia, Lithuania, Romania, Czech Republic, and Greece. Countries with partial separation include France, where the infrastructure manager—RFF— and train operator—SNCF—are separately owned. However, a number of infrastructure management activities are contracted back to SNCF.

Estonia, France, Hungary, Slovenia, Luxembourg, and Latvia are other European examples of partial separation. Another interesting concept is partial integration, where the infrastructure management companies and train operators are subsidiaries of the same holding company. Examples of partial integration are found in Austria, Germany, Belgium, Italy, and Poland.

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