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European Commission

Siim Kallas

Vice-President and Commissioner for Transport

Europe's railways at a junction: signals for change

InnoTrans 2012/Berlin

18 September 2012

Ministers, ladies and gentlemen

It is a great pleasure to be back in Berlin and to speak again at InnoTrans, this remarkable showcase for the international railway industry as it attracts ever more visitors from around the world. Thank you for inviting me.

Some of you here may remember my last InnoTrans speech when I spoke about the vision of a single European rail area where railways offer high-quality, safe and punctual services at competitive prices. A smooth functioning network, economically efficient, to make rail a more attractive choice and encourage people not to use private cars.

Two years on, almost to the day, I can say that we have achieved the recast of the first railway package, the very first legislative proposal that this Commission issued on transport policy. This is a very important step towards achieving that vision and will change the way that the European rail market works.

It represents a review of EU rules on rail market access and will improve the financial architecture of the rail sector – by stimulating investment, improving market access conditions and reinforcing the role of national regulators..

At the same time, it is clear that much more needs to be done if rail is to achieve its full potential. With goods transport, the nine international Rail Freight Corridors now being set up are an important opportunity for infrastructure managers to cooperate effectively, to create the conditions for high-quality rail freight services to run seamlessly and reliably across borders.

In some parts of Europe, rail has continued to grow despite the wider economic downturn. In others, particularly for freight, there is something close to a crisis.

It is time now to ask how we see the sector evolving and how we can achieve a single European rail market.

I think we can all agree that we want an efficient and innovative railway, one with a larger role, both for freight and passengers. And we are already putting a great deal of longer-term investment into rail as an essential element of the Trans-European Transport Network.

This is so we can upgrade and expand infrastructure and build the missing links, particularly in cross-border services, for better connecting Europe together. That will also help us connect into neighbouring countries such as Russia and Turkey, to build east-west corridors linking Europe across Siberia to the Far East.

Building infrastructure, however, will not be enough on its own. Ultimately, this is about ensuring good quality service for customers.

Today, rail is a split and fragmented sector with diverging rules, standards and a history of protected national markets. These and other barriers make it difficult for newcomers to set up and compete with existing service providers.

Removing barriers to create more choice should lead to better quality – and that means punctuality, comfort and reliability. On certain important routes, for example, prices would come down with more competition.

Ladies and gentlemen – to ensure that Europe's railways achieve their full potential will require reforms. We do not accept the rapid decline in rail's market share that can be seen in some Member States, and we need to reverse this trend.

As you know, in a few months' time the Commission will propose new legislation for EU railways dealing with interoperability and market access. We are still listening to all ideas from all sides and examining various options.

To that end, the Commission will hold a conference on the future of EU rail policy in Brussels on September 24. I am sure most of the organisations represented here today will be attending.

In the meantime, let me set out some key elements in my current thinking.

For rail to thrive, there must be a genuine single market. This means it should be possible to build rolling stock to certain EU standards, and then certify it – just once - to run everywhere in the EU. This is a basic principle of the European single market, which celebrates its 20th anniversary this autumn.

This is not the case at present, because we have a highly decentralised system, burdened by problems of interoperability coming from many different vehicle types. There are more than 11,000 different rules and standards in effect across Europe today. This all hinders the development of a truly European rail area.

To authorise a new locomotive to operate in a first country, for example, can cost up to €6 million; a national recertification can cost up to €4 million. These procedures can take up to two years.

Why should expensive rolling stock be tied up in red tape for such a long time?

So we need to complete and apply, rapidly, the EU standards (TSIs), using them to move to a single European approval system.

This will save money and give a more efficient service once we improve the availability of rolling stock that can cross EU borders, and authorise vehicles and equipment to operate in several Member States.

It will, of course, take a great deal of technical work.

I believe the solution is to make the European Railway Agency into a 'one stop shop' that can, eventually, issue single European certificates for safety and authorisation.

This would be a European 'passport' to allow rolling stock to move freely in all national rail networks, provided there is technical compatibility. The Agency would still depend heavily on national authorities to carry out much of the technical work.

Not only will this reduce costs significantly, it will also remove interoperability problems with the ERTMS management system that is so vital for ensuring rail safety and optimising performance in a seamless cross-border service.

Today's complicated and costly approval procedures do not help to bring more competition into Europe's market for rail services, where one of the largest single barriers to creating a fully open market is access to rolling stock – particularly for newcomers wishing to enter the market. Without full and fair conditions for access, it is very difficult to have a flexible marketplace.

This brings me onto another issue that we will address: the domestic rail passenger market, where so far only a few countries are open to competition.

Competition leads to improvements in service and efficiency; it encourages innovation and cost-efficiency. If there is no competition, there is no incentive to improve or change, particularly in the case of a monopoly or dominant operator.

Europe should have a railway market where operators have the right to provide domestic passenger services throughout the EU – instead of battling against barriers to access, network inefficiencies and market distortions.

Today, market access conditions are generally skewed in favour of the existing rail operators, particularly where they also control the railway infrastructure.

Domestic passenger rail markets are still often closed to foreign and national competition, whereas rail freight markets have been fully opened to competition since 2007.

In short, there is no level playing field and no predictable business model for railway service providers to operate throughout the EU's rail network.

Since conditions are different across the Member States, I believe the best way forward is a mixture of open access and public service contracts – in other words, competition in and competition for the market. The challenge here will clearly be to strike the right balance between the two.

Market opening should also attract more private investment and generate more passengers. And that means a shift away from more polluting means of travel such as roads, onto cleaner alternatives like rail and waterways.

Again, this is all about offering a better service – and this is something we can achieve by encouraging newcomers to come in and, hopefully, offer an their own attractive and efficient rail operation to passengers, but also to those who are willing to try rail freight as an alternative to road.

Regarding public service contracts: these cover the vast majority of domestic passenger traffic in Europe – urban, suburban and regional services – and in a large number of Member States, inter-city services as well. As you know, under EU law today, these subsidised service contracts do not have to be awarded through open tendering.

Competitive tendering can create a strong incentive for rail to perform better. Experience in those Member States which already use competitive tendering shows it will also save the taxpayer a significant amount of money and properly compensate railways for the services that they provide. They also ensure a healthy degree of innovation to improve the service offered to passengers.

So I believe we should introduce mandatory tendering as a way to get more innovation and efficiency into Europe's railways.

We will also look at defining the scope and size of contracts, since national authorities now have a wide margin of discretion in identifying areas where public service obligations are imposed. And contract conditions need to stimulate enough competition so that there is an efficient transport service.

Ladies and gentlemen

Of course, we do not have all the solutions today to all the issues we need to address. One of these, for example, is the sensitive question of the relationship between the infrastructure managers that run the network and the service operators that use it for transporting passengers or goods.

We do, however, recognise that railways are a network. This can only hold true if, along with proper opening of rail markets, services and infrastructure, areas such as integrated ticketing systems, passenger care and coordinated network operation are preserved and enhanced.

Lastly, I would like to emphasise the important role of research and innovation for rail. EU railway manufacturers are world leaders in their market. Research and innovation are the basis for the competitive and attractive railway system of the future. So the European Commission is now considering options for further strengthening rail research in the context of the next research programme.

Over the last 10 years, and more, the rail sector and the regulatory environment in which it operates have changed considerably. I applaud all the efforts that the European rail industry has made to improve its efficiency and put passengers and freight users at the heart of its development strategy.

The overriding aim of any changes we make will be to increase rail's efficiency, punctuality and reliability. This is so that we can unleash its true potential, and raise the quality of service so that rail becomes a real and attractive alternative.

That will be to the benefit of everyone: to the rail industry, to freight businesses, to all passengers.

Thank you for your attention.

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