Railway Market Opening and Organisational Reforms in

Dr. Gunnar Alexandersson

Senior Researcher School of Economics Institute for Research [email protected] Presentation outline

• Railway liberalisation milestones • Overview of changes in regulatory framework • Current organisation • Experience and effects • Conclusions and current issues Swedish railway liberalisation – some milestones

1988 Vertical separation of track infrastructure (Banverket) from operations (SJ) Decentralisation of responsibility and resources to regional public transport authorities 1990 First tenders for regional passenger services 1993 First tenders for interregional (long-distance) passenger services 1996 Deregulation of freight services 2001 Separation and corporatisation of SJ’s divisions Swedish railway liberalisation – some milestones (contd.)

2007 Market opening for night and chartered trains 2009 Swedish Transport Agency established, with multi-modal safety and regulatory responsibilities Market opening for weekend traffic and international passenger services 2010 Multi-modal infrastructure manager Swedish Transport Administration (Trafikverket) established (merger between Banverket and the Road Administration) 2011 Market opening for domestic passenger services, with full effect from December 2011 2012 New law on public transport (affecting interface between tendered services and commercial services)

Swedish railway market 1988 Freight

Railway Rolling stock operation manufacturing

Passengers SJ TGOJ ASEA SL Järnvägar

Source: Ole Kjörrefjord and own development Swedish railway market 2019

Infrastructure Infrastructure Licenses, safety. construction and market monitoring maintenance management

InfraNord Infratek Swedish A- Swedish Transport Swedish Competition Authority Strukton VR Track Transport IBAB Agency Swedish Consumer Agency

NCC Administration Godskunder

Planning and Rolling stock Rolling stock tendering of Train operation management manufacturing

public transport Passagerare

Regional SJ AB Green Cargo Transitio AlphaTrains Bombardier public Transdev Hector Rail SL Mitsui Alstom transport Arriva TÅGAB SJ AB Railpool Stadler authorities MTR Express Real Rail DSB Hector Rail Siemens A-train Green Cargo Ansaldo NSB/Tågkomp.

Financing Real estate IT services management Cleaning Consultancy services

Jernhusen Rolling stock Rolling stock TrainAlliance maintenance refurbishment A-train SL EuroMaint Rail DSB Vedligehold EuroMaint Rail DSB Vedligehold Mantena Midwaggon Bombardier MiTrans Bombardier Motala Trains Motala Trains Alstom mgw Service

Source: Ole Kjörrefjord and own development Overview of changes in regulatory structure (rail transport market access)

Part of rail transport market 1988 2019

Passenger services Regional (non-profitable) SJ holds monopoly and Procurement by competitive receives subsidies tendering (competition for the tracks); since 1990 Open access (competition on the tracks); since 2011 Inter-regional (non-profitable) SJ holds monopoly and Procurement by competitive receives subsidies tendering (competition for the tracks); since 1993 Open access (competition on the tracks); since 2011 Inter-regional (profitable) SJ holds monopoly Open access (competition on the tracks); implemented step-by-step 2009-2011 Freight services SJ holds monopoly Open access on all lines (competition on the tracks); since 1996

Current organisation of the Swedish railway sector – some characteristics

• Institutional vertical separation between infrastructure and train operations (since 1988) • Mixed market access models (competition for and on the tracks) • National multi-modal authority Trafikverket (Swedish Transport Administration) is the main (80%) rail infrastructure manager, with strong focus on procurement from external contractors • Trafikverket also handles the annual path allocation, completely independent of any train operating company • Train operating companies (and other organisers of train services) apply for paths and pay track access charges • Decentralised responsibility for regional passenger train services to 21 county public transport agencies (PTAs, controlled by municipalities and counties with their own taxation power) • Railway stations owned/managed by several different actors; the most important ones by real-estate company Jernhusen Experience and effects of reforms

• Increased investments in rail infrastructure and rolling stock • Strong local and regional commitment to develop the supply of passenger services • Strong growth in demand • Improvements in (for example) productivity and safety • Innovations, new pricing models • Punctuality a recurrent issue of concern • In recent years, a decrease in average speed of trains (mainly due to capacity constraints) • Appearance of several new entrants, reducing the market share of the incumbents • Tendering leading to reduced need for operating subsidies (initially 10-25%) but also strategic and faulty bids • Increased supply and falling prices following open access competition Rail infrastructure investments and maintenance

12,0

10,0

8,0

6,0

4,0

2,0 Expenditure (billion SEK, 1989 prices) 1989 SEK, (billion Expenditure

0,0

2004 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 New investments Reinvestments Maintenance

Source: Trafikverket, and own calculations Safety

200

180

160

140

120 Accidents, total 100 Derailments 80

60

40

20

0

Source: Trafikanalys Development of demand (1)

220 13.8 billion passenger km 200

180

160

140

120 21.7 billion tonne km

100 Passenger km and tonne km, index (1990=100) km, index and km tonne Passenger

80

Passenger transport Freight transport Source: Trafikanalys Development of demand (2)

300

250

200

150

100

50 Passenger km and (1990=100) km,tonne Passenger index

0

2005 2012 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2006 2007 2008 2009 2010 2011 2013 2014 2015 2016

Regional passenger Long-distance passenger Freight Source: Trafikanalys Regional train systems 1990-2016

Nya regionala Nya regionala Nya regionala Nya regionala tågtrafiksystem tågtrafiksystem tågtrafiksystem tågtrafiksystem 1 januari 1990 1 januari 2000 1 januari 2010 1 januari 2016

Luleå

Umeå

Sundsvall Sundsvall Sundsvall

Gävle Gävle Gävle

Uppsala Uppsala Uppsala Stockholm Stockholm Stockholm Stockholm

Linköping Linköping Linköping Göteborg Nässjö Göteborg Göteborg Göteborg

Växjö Växjö Halmstad Halmstad Kalmar Halmstad Kalmar Halmstad Kalmar Helsingborg Helsingborg Helsingborg Helsingborg Karlskrona Karlskrona Karlskrona Malmö Malmö Köpenhamn Malmö Köpenhamn Malmö

Source: Oskar Fröidh, KTH Punctuality and operated trains

100% 1000

90% 900 Thousands

80% 800

70% 700

60% 600

50% 500

40% 400 destination 30% 300

maximum minutes 5 of maximum delay 20% 200

10% 100 Punctuality, share (%) of passenger trains with (%) oftrains passenger share Punctuality,

0% 0 reaching end passenger trains Number ofoperated 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Operated trains Punctuality (5 min level)

Source: Trafikanalys Speed of passenger trains

150

125

100 Fastest train All connections

speed, km/h 75

50 Average

25

0 1990 1995 2000 2005 2010 Source: Nelldal et al (2013) Ticket price development

CPTA monthly travel card

SJ 2000 highest price

SJ Night train

SJ IC/Regional normal price

SJ 2000 discounted price

SJ 2000 lowest price

Source: Nelldal et al (2015) Market entry in passenger services Tendered services Competition on the tracks Stockholm-Gothenburg MTR Express SJ • 8 departures per day since • 18 departures per day August 2015 • New non-tilting Flirt trains • Refurbished tilting X2 trains from Stadler from Bombardier • Travel time: 3h 30 min • Travel time: 3h 10 min • 1 ticket class and 3 types of • 2 ticket classes and 3 types flexibility/service level of flexibility

• On average 25 % cheaper • Prices falling about 13 % than SJ (March 2015-June 2016) • Punctuality (July-Sep 2016) • Punctuality (July-Sep 2016) (5 min): 88% (5 min): 73 % (15 min): 95% (15 min): 88 % • 7 % increase in passengers 2016 Conclusions and current issues

• 30 years of reforms in the Swedish railway sector (driven by internal needs and EU legislation) have resulted in a highly vertically and horizontally separated sector and a very open market • A number of improvements in performance can be seen, but also a fair amount of issues to be handled: ➢ Capacity constraints and path allocation ➢ Growth of tendered services sometimes at the expense of commercial services ➢ Backlog of track infrastructure maintenance ➢ Division of roles and responsibilities; cooperation and coordination between actors ➢ Information and support to passengers, in particular during disruptions