Fully on track České dráhy

FULLY ON TRACK FULLY ON TRACK

České dráhy, a.s. (Czech Railways), was established in 2003, integrating the activities related to passenger and goods transport and railway infrastructure management under a single umbrella, covering the operation of nation- and region-wide railway lines. Romana Moares spoke to Pavel Krtek, the chairman of the board, about the latest developments at this railway giant, and its plans for the future in light of market liberalisation.

RM: Mr Chairman, in the past few years, České dráhy (CD) has invested billions in its vehicle park. These funds have significantly supported the development of the Czech railway sector, as most of the modernisation as well as deliveries of new vehicles have been completed by Czech companies. What is the short-term outlook?

PK: It is true that we are a key customer for a large number of Czech companies and as such contribute to employment in the Czech Republic. Of course we will continue to invest in our assets, albeit to a slightly smaller extent for the time being. However, as a contracting authority, we must follow the rules set in the Public Procurement Act defining equal conditions for both local and foreign suppliers.

RM: Are you going to announce any new contracts soon?

PK: At the moment we are focusing on the long-distance transport sector. For example, we are putting out to tender the purchase of electric and motor units as part of the Ministry of Transport tenders; we plan to buy 50 new carriages for the Prague-Budapest line and 12 small shunting engines. Furthermore, we have announced contracts for the modernisation of dining and sleeping cars and for providing wi-fi technology in carriages. There will be further contracts announced as and when required, depending on the progress of railway market liberalisation.

RM: In this context, the Ministry of Transport is just introducing a new service – train rental. Why does CD object to this model?

PK: We regard state-owned train rental as an attempt to ease the way for competitors into the subsidised transport system. In the event that the government buys vehicles and provides for their maintenance at public expense, tendering will be open to anyone who just hires a couple of train drivers and stewardesses. We perceive the ownership of vehicles and of facilities related to their operation and maintenance as a high entry barrier, which would be eliminated in the case of vehicle rentals. But the main reason is that so far no one has said clearly how the Ministry would define the character of these units and how they would secure their subsequent maintenance.

RM: So in your opinion the government is eliminating a key competitive barrier for small transport operators to enter the railway transport market?

PK: Well, if a transport operator has no vehicles and no money to buy and maintain them, clearly they cannot provide such a service. We are not against competition, but it has to be fair. For us, as CD, to be able to compete in the open market and to improve customer service we had to incur debts. A renter-to-be private entity would not have to worry about money as the vehicles would be purchased for them by the state. I would go so far as to say that establishing a train rental service would devalue CD’s past investments in vehicles, service development as well as in the provision of safe, environmentally-friendly and efficient railway operation.

RM: The government has already declared which long distance lines they will put out to train operator tender, and the list may get even longer. How is this approached abroad?

PK: Most European countries discourage outside competitors from entering their internal passenger rail sectors to protect national transport operators and to sustain local market stability. I believe the Czech Republic should adopt a similar approach because a premature market opening will result in our losing our competitive advantage. By opening up competition earlier than other countries we will provide opportunities for European competitors to penetrate the Czech market without us having the same chance abroad. However, a key point we keep on highlighting in this context is unrestrained market opening. Poorly prepared liberalisation may thus severely damage the interests of state-owned CD, devalue its investment and destabilise the whole passenger rail system in the Czech Republic.

RM: So you believe the Czech government is too eager to welcome competitors?

PK: I myself was really surprised at how difficult it is in neighbouring counties for outsiders to win a route on lines run by a national operator. The Czech government wants to open the market in an unplanned manner, despite the fact that this will be required by the EU only from 2034 onwards, without due preparations and without knowing what the target status will be. Up to now, no one has said if the government wants to have a national transport operator and what its role would be.

RM: However, one may get the impression that you oppose the opening up of the market altogether.

PK: That is really not the case. But you can hardly expect us to clear the ground as soon as we are told to do so. We employ thousands of people and, as a business, we have commercial commitments towards the owner and those who put their trust in us; those who have lent us substantial funds to modernise the fleet, for which we, by the way, got the government’s blessing. It goes without saying that we want to keep our market share and intend to keep the ticket offices open, continue the services and sustain rail network operability throughout the country. That is the role of a national transport operator. I would also like to emphasise that it is only our company, CD, that, by law, ensures the operation of rail transport for the purposes of state defence.

RM: You cannot deny, though, that competition increases the quality of a service. This also applies to České dráhy.

PK: For a long time, no investment was made in CD vehicles. Only when Europe started to talk about markets opening up did the government give us a green light to start behaving like a business entity – borrow money, invest and make profits. We have spent billions on new trains, significant service improvements, eShop development, the introduction of the acclaimed MyTrain application for smartphones, continuous improvement of services for the disabled and so on. All this has been achieved by our own employees: no outside private entity has contributed anything to this success. And in term of the Prague-Brno line, for example, what better quality can anyone else bring? The line is serviced, in our colours, by Railjet, the best of the EuroCity trains and the new InterPanthers.

RM: Improved quality is one of the factors contributing to increasing passenger numbers on this particular line. What are the recent figures?

PK: In the last nine months, 128.96 million passengers used our services – i.e. almost 2 million more that in the same period last year. So far, this confirms the trends of the last few years. The final number for 2016 is yet to be seen. In 2015 we transported about 170 million people. Transport performance is also on the increase, i.e. people not only travel by train more frequently, but also for longer distances.

RM: You mentioned new vehicles – what about the new Series 380 engine? Will it be introduced any time soon?

PK: The engine is being tested in Germany. However, this engine is planned to run on the Budapest, Vienna and Linz lines. For Germany, we plan to deploy engines acquired in upcoming tenders with all the required tests for Germany already completed. But the reason for wanting to rent further vehicles is that we have a shortage of suitable engines for international connections. We simply need more machines. n