Rail de-regulation in the 2020 horizon

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The opening up to the private competition of the transportation of passengers by rail approaches the 2020 horizon for the member states of the European Union, in general, and for Spain in particular.

There are 20 months left of preparation and adjustments by the public sector, ADIF as administrator of rail infrastructure, and Renfe, as their operator, to comply with the directive marked by the so-called Fourth Railway Package of the European Union.

The Spanish Government approved on 21 December, in its penultimate Council of Ministers of 2018, a Royal Decree Law, which gives the green light, definitively to the possibility of new railway companies entering to operate in the national territory in high-speed and long-distance services.

The Royal Decree contemplates the date of December of 2020 as the start of the entry of competitors alongside Renfe Operadora. Within 18 months, any company that has the appropriate license for the transport of passengers by rail, as well as having the safety certificate granted by the State Railway Safety Agency, may provide their services after having requested the corresponding use of rail track to the body managing the railway infrastructures, namely ADIF.

The EU promotes competition

The so-called Fourth Railway Package, on which the whole development of the forthcoming de-regulation of passenger transport, at a commercial level, in the Member States, agreed by the European Parliament and the Council of Ministers of the European Union – is based, has marked the calendar, of mandatory fulfilment, that has as date of beginning of the entrance of different operators in the national railway networks in the year 2020, although it is intended that the liberalisation agreement is already incorporated by all the countries of the Union during the present exercise, and that it is in the next year when they can thus begin to operate with all normality those companies that meet the demanded requirements.

The decision of the EU has been justified in the need for European railways to be much more attractive and competitive as a means of transport, as well as making the industry more innovative.

According to the Community authorities, the agreement reached will allow, in particular, to improve the provision of rail services.

Fourth Railway Package:

What does it entail?

This is a set of Directives and Regulations approved in these laws involve modifications with respect to two groups of standards.

On the one hand, those named “technical pillars”, which regulate safety, interoperability and the Railway Agency of the European Union. On the other, those of the organisation of the market for passenger transport services.

Specifically, this Fourth Railway Package is composed of six legislative proposals that were presented by the Commission in January 2013, but that have had to undergo different procedures. Amongst them, the acceptance of the different indications of the member states,

until reaching the definitive agreement that is now contemplated. According to the European transport commissioner, Violeta Bulc, “a new chapter for European railways opens up”, since it has been proven that in recent years the market share of the use of this transport compared to the other existing ones has been constantly decreasing.

The Commissioner believes that a gradual opening of the market will improve the performance of rail services and will favour the creation of new investment opportunities, jobs in the sector, maintaining thus developments in the process of decarbonisation, etc.

Better responses to demands

From the EU it is defended that the entrance in 2020 of this new norm opening competition to the national railway markets, will suppose a better answer to the demand of the market, and, mainly, of the consumers, since new business models are set to appear that will offer a greater number of possibilities to passengers.

It is similarly deemed important, as a final aim of this process, that there is no single operator in each country, that the monopoly be broken, and that historical companies adapt to the new formulae. This will improve the service for passengers, with higher quality, better performance in terms of punctuality and frequencies, etc., and also lead to cheaper prices.

Trans-European transport network

This set of measures is part of the European Union project known as the Trans-European Transport Network, and the Connect Europe programme, which seeks to improve European communications through airports, roads, ports, but, above all, all railways, which are considered the most sustainable transport method, and for which the construction of 15,000 kilometres of high-speed tracks and the railway connection with 94 large ports are planned; along with 38 airports with the highest traffic density and the improvement of 35 cross-border crossings.

To this end, nine fundamental corridors were drawn up and an investment of some 700 billion euros is forecast up to 2030. Noteworthy amongst them, for Spain, the 4th and the 6th, which are the Mediterranean and Atlantic corridors.

New opportunities

From Europe it is indicated that the de-regulation of the sector will generate new opportunities for private companies.

The existence of a market open to competition will foster the easing of services, and will result in greater efficiency in the allocation of resources. In addition, users will benefit, since they will have at their disposal more commercial alternatives to travel and choose the option that best fits their needs.

However, at present there is also a current in the sector that believes that de-regulating the operation of passengers can be counterproductive and costly.


The regulations approved by the Government indicate that this liberalisation does not affect the services considered Public Service Obligation (PSO), since the European Union approved two years ago that Commuter Rail, Medium-Distance and Avant services were not included in this mandatory opening in 2020

until the year 2023, although, being a means of transport considered essential for the internal communication of the countries, this period could be extended.

However, the Government has signed an PSO service contract with Renfe with a minimum term of ten years and a possible extension of another five, for an amount of 9.693 billion euros, which Renfe’s operations are safeguarded in this regard, by making it impossible for competitors to enter.

Another aspect to be highlighted in the Decree approved by the Government is that, finally, the current regulatory framework is completed and clarified, in such a way that the legal rules are established on which the entrance of those companies wishing to compete with Renfe Operadora. Amongst these clarifications are the reinforcement of the requirements of independence and transparency on the part of infrastructure managers before the companies that operate on the Spanish network.

In this regard, it should be noted that there is a different opinion between Adif, and the current public operator, Renfe Operadora.

Whilst who will charge for the tracks the new companies will use is interested in having a good number of companies requesting them and paying the appropriate rates of use of the roads, which will mean increased levels of income; the public operator, on the other hand, fears that the arrival of these competitors will diminish the ability of passenger movement.

Yet Renfe has also been prepared to compete in this new scenario and has already announced the entry into operation of a new type of high-speed train, EVA, which will be 40% cheaper than the current version. With a layout of five seats per row, it will not feature first-class seating and cafeteria, and will carry vending machines for food and beverages. This train can start running next year, possibly at Easter, and will link Madrid with El Prat (Barcelona).

However, at present there is also a current in the sector that believes that de-regulating the operation of passengers can be counterproductive and costly.

ADIF’s Plans

The administrator of Railway Infrastructures has already sent the Ministry of Development, the CNMC and future Renfe competitors in passenger transport, the draft of the “Modification of the Network Declaration for 2019”. This document contains the aspects that will govern the de-regulation of commercial passenger services in the General Interest Rail Network (RFIG) and details the supply of capacity in both the Spanish high-speed network (AVE) and on long-distance routes. In this process of opening up to competition, the ten-year agreement made by Adif is to make available to those interested 60% of extra capacity that currently exists.

Thus, its forecast is to shift from 119 to 189 circulations per travelling direction per day so that at least three different operators can compete from December 14, 2020 onwards.

This increase in infrastructure falls within the framework allowed through EU Regulation 2016/545. Furthermore, Adif reserves the capacity to finalise specific agreements regarding operations year on year.

Consultation process

Presently, the consultation process on the Adif document is open and has already received a response from some operators interested in the Spanish market, such as the case of the French railways (SNCF). Due to its experience, capacity and fleet available, Renfe has an advantage over the other bidders.

The next step is to have available on July 1, 2019, the final document that includes the system of allocation of capacity that makes effective the entry of competitors into the market within 20 months. In addition, by October 31, the aim is to have resolved the requests of potential rail operators.

Three axes and service options

This document indicates that the axes that will be opened to competition in 2020 will be: Madrid – Barcelona French border; Valencia- Barcelona; Madrid – Levante and Madrid – Toledo – Seville – Malaga. Once the works are finished, the high-speed lines to Galicia and the Basque Country will be incorporated into them. In addition, it is explained that operators can access three types of packages (A, B and C), which depend on the number of circulations planned per day.

This proposal aims to ensure that at least three railway companies can operate optimally. With these alternatives, of different sizes, we also seek to include the different business strategies and adapt to the commercial plans of the stakeholders, such as the offers of trips in the so-called “low cost” bracket.

In the first place, for Package A, 48 daily circulations are proposed (three trains per hour and direction); while that of group B comprises 16 services per day (one train per hour and direction), and the C five trips (one train every three hours in each direction. Itemised per corridor, the proposals similarly differ. For Madrid-French border passenger connections, an increase of 60% is estimated. Thus, it would go from the current average of daily traffic that is in 43 to a total of 69.

Regarding the second axis, the Levante corridor, Adif also proposes to expand circulation by 40%, from the current 37 services to 52.

In this case, for package A there are 32 routes per day (two trains per hour in each direction), 16 for package B (one train per hour and direction), and four operations in each direction for package C. third, Madrid-Toledo-Seville-Malaga, its commercial use will be increased by 70%. These routes include 48 circulations in mode A (three trains per hour and direction), another 16 in package B (1 train per hour and direction), and in C (four journeys per day and in each direction).

Adif indicates that the awarding criteria to the potential operators will be the bid maximising  greater use of the capacity offered. Stakeholders have the right to choose to bid on one, two or all three corridors.

These plans, which are specified in ten-year framework agreements, could be abandoned in those cases in which the operators’ requests do not exceed 65% of the capacity offered. Should this percentage not be reached, a new proposal will be launched by Adif.

New classifications

The opening to competition of passenger services also brings with it three new concepts: specialist lines, coordinated stations and congested facilities.

The latter are the ones that will be de-regulated at the present time.

Private operators await the starter’s gun in Spain

Before the possible companies that are willing to present their candidacy to obtain one or several connections, it should be noted that there have already been those who have done this, and have achieved it. This is the de-regularisation of international traffic that is already approved, as well as that of merchandise, although the latter is not providing  the results that were expected, and in fact in the years 2017 and 2018 it has stagnated.

International traffic

Turning once again to international passenger traffic by rail, last September the National Markets and Competition Commission (CNMC) ruled in favour of the company Intermodalidad del Levante (ILSA) controlled by the company Air Nostrum, with the participation of Acciona, who had submitted the connection project between Madrid and Montpellier, thus giving this the green light.

It has been ILSA, then, who has taken the first real step, yet the issue is the lack of units with which to operate, in fact there is no fixed term for the launch of this connection, which would have two daily frequencies with stops in Saragossa, Barcelona, Perpignan and Narbonne.

Interested operators

However, poised to act is another good number of interested stakeholders, amongst which are several interested companies, namely the French state-owned company Societé National de Chemins de Fer (SNCF) who already announced their wish to enter the Spanish market in 2014, following the announcement of the then Minister of Development.

Along with this company, the German operator Deustche Bahn (DB) has also announced its desire to enter the Spanish railways, which has displayed its volition to launch a route between Coruña and Porto, connecting several other cities. This action would be carried out with its subsidiary Arriva Trains.

These two companies have enough in-house rolling stock to bring them to Spain and would not depend on manufacturers to supply (it takes an average of two years to deliver new units) or rent compositions from Renfe.

Precisely, the ability to have trains to break the monopoly is one of the current topics of debate. The request that new competitors have sufficient resources to provide commercial operation is also included in this point. It is for this reason that the companies that want to start operating will have to boast robust solvency to face an investment of purchase of rolling stock or explore other business formats.

Likewise, there are other foreign companies analysing the situation and may make their decision in the coming months, such as the British Virgin Trains or the Dutch Nederlads Spoorwegen. Regarding interest on a national level, the list is also broad, although there has been a reduction among the first stakeholders back in 2014.

Already having been granted the appropriate permits are: Aisa Tren; Avanza Train; Veloi Rail; Alsa Railroad; Continental Rail; Ecorail; Ferrovial Railway and Interbus, amongst others. However, the experts consider that it is an excessive number, and in fact the possibility is assessed that in the end there will only be three or four competitors alongside Renfe, and that there will also be a series of joint ventures for the running of the system.