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December 24th, 2006, 04:36 AM
Comboios do Portugal embraces best practice
You are in: Railway Gazette > Home > News
01 February 2006
'WE ARE putting Portugal on the European railway map', insists António Ramalho, President of the country's state-owned train operator Comboios do Portugal. Recently elected to the board of the Community of European Railways, Ramalho wants to take advantage of his position to bring best practice to his distant corner of the continent's rail network.
The next five years will be a challenging time for CP. Building on eight years of experience with vertical separation, the government is moving to implement EU directives on deregulation of freight and passenger operations and the introduction of contracts to run unprofitable services. Construction of the two new high speed lines (p86) will also change the shape of Portugal's rail industry.
As part of this process, CP launched its Leader 2010 programme at the end of 2004. According to Ramalho, it has three main strands:
¥ to adopt international best practice, benchmarked against European industry, and take a much more international perspective, particularly in terms of freight operation;
¥ to 'turn around' the income and expenditure account, and make CP profitable by the end of 2010;
¥ to become 'the best train operator on the Iberian peninsula'.
CP has already made a promising start. Until 2003 it was losing market share by around 1% a year. Thanks to an increase in investment, Ramalho says that market share is now growing faster than in the other 15 countries in the pre-expansion European Union. Over the last six months, passenger-km is up by 1·8% against an average of 1·6% and freight tonne-km by 4·8% against 3·8%.
This growth was not unexpected; CP is benefiting from upgrading work on the main Linha do Norte between Lisboa and Porto, and from the completion of electrification on the Lisboa - Faro route, which also benefited from a dramatic 1 h time saving with completion of the rail link across the April 25 bridge over the Tagus in 2004. Although CP does not yet have figures for market share in the first full year of operation, Ramalho says the 10 long-distance trains each day between Lisboa and Faro are now achieving an average load factor of 71%.
Ramalho says stronger growth is being seen in the freight sector, admittedly from a low base. He expects the 4·8% year-on-year growth to lift CP's freight traffic above 10 million tonnes for 2005. Much of this growth has been achieved in the domestic market, and he admits that rail's share of Portugal's international freight business is only 1% to 1·5%.
'We have a very efficient operation in a relatively small country, where typical freight hauls are only 300 to 400 km' Ramalho explains, emphasising that 'the emergence of a global market means CP must take a much more international perspective, particularly looking at intermodal solutions, combining ports, road and rail.' He believes that CP's domestic experience can be translated to the wider stage, capitalising on the geographical location of Portuguese ports as a gateway to Europe once the break of gauge can be eliminated.
Although Ramalho is keen for CP to become 'the best operator in Iberia', he will not be drawn on whether the company will be seeking open access powers to run its own freight trains into Spain. 'That is a question for our partners in Spain - we are looking at the best ways to win a bigger share for rail in the international freight market. We see a good opportunity to work with other partners to capture value and grow market share', he explains. 'We are talking about a number of different ways to develop.'
Financial challenge
In his quest to put CP on the path to profitability, Ramalho believes that 'we can create a lot of value for our shareholder by 2010.' The train operator has already established separate business units for its freight, long-distance and regional passenger operations, together with separate entities for the Lisboa and Porto suburban business.
Ramalho expects growing international freight business to be 'really profitable', for example. He also hopes to see strong profit growth on long-distance inter-city services, 'particularly on the Atlantic axis between Faro and Braga', and perhaps through the emergence of long-distance commuting on the main lines as the main roads leading into Lisboa become more and more congested.
The biggest question hangs over the suburban and regional operations. Regional traffic is declining as a result of the demographic changes which are seeing Portugal's population drifting from the interior to the major conurbations and the coastal towns.
Suburban traffic is growing strongly, but not profitably as the government retains the right to cap fares for journeys of less than 50 km for socio-economic reasons. Whilst CP is obliged by its shareholder to operate unprofitable services, there is no formal mechanism in place to compensate for this, other than the government picking up any losses at the end of each year. Ramalho is hopeful that the situation is about to change. 'We are discussing with the government about the introduction of proper public service contracts, in line with European public procurement regulations, and we hope to find a solution this year.'
As yet, the only suburban service which operates under a formal contract is the cross-Tagus route, which was won by Fertagus in 1998. Putting the operation of other suburban and regional services onto a contractual basis opens up the prospect for further competition, but Ramalho is not worried by this. Few other operators have expressed interest in the traffic, and any change would be revenue-neutral.
He believes there is potential to target intra-regional business flows in areas where there is sufficient rail capacity. Although there is more to be done in terms of improving efficiency and reducing operating costs, Ramalho says the solution to the current regional losses is 'much more about growing the market'.
Given the EU's plans to deregulate passenger services, Ramalho recognises that 'liberalisation will happen'. But he believes that Portugal's peripheral location means that it 'is not a big issue', unlike the freight sector with its potential for international business.
Asked about CP's relationship with infrastructure manager Refer, Ramalho admits that there were problems in the early days, 'because Portugal was one of the first countries to split'. In particular, there was an issue over the level of track access fees (p87). 'About four years ago CP and Refer reached a gentleman's agreement to re-establish normal relations, and since then things have been going quite well. Now we are looking to move forward, to create benefits for our customers and improve the sustainability of the railway as a system. With the benefit of experience over the past eight years, Refer understands that CP needs to be competitive in the market; we are clear about our goals and objectives.'
Planning for a high speed era
Ramalho recognises that the go-ahead for the long-awaited high speed lines will have a major impact. 'It is probably one of the most important steps ever for Portugal's railway industry', he says, adding that it is a fitting way to commemorate the 150th anniversary of Portugal's oldest line later this year.
But the project is just another step, albeit an important one, in the 'natural evolution' of the Portuguese railways. 'It's a European project, not just for Portugal' Ramalho explains, noting that upgrading of the Atlantic Corridor linking Vigo, Braga, Porto, Lisboa and Faro is one of 30 priority projects in the Trans-European Networks programme.
Ramalho believes that the commitment to the new lines, plus the related agreement with the Spanish government will also create 'big opportunities at the Iberian level'. He identifies three main zones of development across the peninsula: Mediterranean (between Barcelona and Valencia), Central (around Madrid) and Atlantic (including Lisboa and Porto). 'So the focus in terms of rail activity is clear: first Europe, second Iberia, third Portugal.'
As far as the domestic impact of the new lines is concerned, Ramalho's objective is to create added value on the Lisboa - Porto corridor. He believes the time savings and enhanced capacity will make rail much more competitive with the existing A1 motorway, generating wider benefits for the national economy.
Whilst the route of the new lines has been defined and the schedule for construction agreed, the government has yet to address the operational aspects of the project. Ramalho says the intention is to put the operating concession out to competitive tender, but the structure of the operating authority has not yet been determined. Although no timescale has been set for the tendering process, he expects it to start around 2009-10.
Ramalho himself heads a newly-created high speed business unit, which will prepare CP to bid for the concession to operate the new lines, possibly as a joint venture. 'We believe the lines will be profitable, and we can create expertise'. As well as basic planning, the unit will be looking to draw on the experiences of other high speed operators through the international benchmarking programme.
Ramalho is adamant that 'the high speed line needs to be part of the network', noting that CP has scope to expand its commuting business, both on the new line itself and making use of capacity freed up on the existing routes. 'There is a lot to do in terms of modal shift between the conventional and high speed lines', he believes. 'Commuting is an important part of the passenger base for rail, when compared to other modes.'
He feels that there is a lot of suppressed demand for travel in the Atlantic Corridor. As well as the Porto - Faro motorway, there has been a lot of road building in the last decade, yet 'there is still heavy traffic congestion in towns and cities, and growing capacity problems on the railway too'.
At present, says Ramalho, there are 912 trains using some part of the Linha do Norte each day. Threading CP's 220 km/h Alfa Pendular tilting trains through the mix of regional, suburban, and slower inter-city services is 'very difficult', to the point where most freight traffic can only move at night. He hopes that transferring the long-distance high speed traffic to the new line will release enough capacity on the network to allow CP to go after new business, 'particularly in regard to international freight traffic'.
Fleet investment
Ramalho says CP has spent a lot on its fleet of locos and rolling stock in recent years. The tilting trainsets that work the premier services from Lisboa to Porto and Faro may have the highest profile, but a modern fleet of Siemens EMUs has been introduced on the Porto suburban network. The units for Lisboa's Cascais and Sintra lines have been heavily refurbished by EMEF, the semi-privatised railway workshop at Entroncamento.
CP is currently in the process of upgrading its Corail-style long-distance coaches for 200 km/h operation, so that loco-hauled inter-city trains can match more closely the Alfa Pendular performance. The existing Class 5600 electric locos are already cleared for 200 km/h operation, but at present many of these are deployed on freight trains.
Following competitive tendering, an order was placed with Siemens in January for another 15 electric freight locos, of which three will be built in Germany and the rest assembled locally. According to Ramalho, CP was looking to buy 25 locos in total, which would provide enough to work the new electrified line from Sines to the Spanish border. They will be funded 40% from equity and 60% from debt, and he expects to achieve a 7% rate of return.
CP is also investing heavily in support services and its commercial activities. New IT systems have allowed the introduction of yield management for long-distance fares, and distribution channels are being improved. Ramalho says the operator has installed many ticket vending machines over the last seven years, and in September 2005 it introduced an online ticket sales facility when the CP website was relaunched.
Development is now underway on a Galileo interface to enable ticket sales by travel agencies. Ramalho is keen to develop a code-sharing agreement with the airlines, and his top priority is to work with the Portuguese state airline TAP. He says CP is well-placed to act as a domestic feeder for TAP long-haul flights to Brazil and the former Portuguese colonies in Africa. As TAP is a member of Star Alliance, Ramalho hopes this will open up further code-sharing opportunities.
CP provides a shuttle bus link between Oriente station and Lisboa airport. The Lisboa - Porto high speed line will have a station at the future Ota airport, 40 km north of the capital, and Ramalho envisages an airport express service taking just 8 min from Oriente. ...........................................................Disculpa e muito longo.
You are in: Railway Gazette > Home > News
01 February 2006
'WE ARE putting Portugal on the European railway map', insists António Ramalho, President of the country's state-owned train operator Comboios do Portugal. Recently elected to the board of the Community of European Railways, Ramalho wants to take advantage of his position to bring best practice to his distant corner of the continent's rail network.
The next five years will be a challenging time for CP. Building on eight years of experience with vertical separation, the government is moving to implement EU directives on deregulation of freight and passenger operations and the introduction of contracts to run unprofitable services. Construction of the two new high speed lines (p86) will also change the shape of Portugal's rail industry.
As part of this process, CP launched its Leader 2010 programme at the end of 2004. According to Ramalho, it has three main strands:
¥ to adopt international best practice, benchmarked against European industry, and take a much more international perspective, particularly in terms of freight operation;
¥ to 'turn around' the income and expenditure account, and make CP profitable by the end of 2010;
¥ to become 'the best train operator on the Iberian peninsula'.
CP has already made a promising start. Until 2003 it was losing market share by around 1% a year. Thanks to an increase in investment, Ramalho says that market share is now growing faster than in the other 15 countries in the pre-expansion European Union. Over the last six months, passenger-km is up by 1·8% against an average of 1·6% and freight tonne-km by 4·8% against 3·8%.
This growth was not unexpected; CP is benefiting from upgrading work on the main Linha do Norte between Lisboa and Porto, and from the completion of electrification on the Lisboa - Faro route, which also benefited from a dramatic 1 h time saving with completion of the rail link across the April 25 bridge over the Tagus in 2004. Although CP does not yet have figures for market share in the first full year of operation, Ramalho says the 10 long-distance trains each day between Lisboa and Faro are now achieving an average load factor of 71%.
Ramalho says stronger growth is being seen in the freight sector, admittedly from a low base. He expects the 4·8% year-on-year growth to lift CP's freight traffic above 10 million tonnes for 2005. Much of this growth has been achieved in the domestic market, and he admits that rail's share of Portugal's international freight business is only 1% to 1·5%.
'We have a very efficient operation in a relatively small country, where typical freight hauls are only 300 to 400 km' Ramalho explains, emphasising that 'the emergence of a global market means CP must take a much more international perspective, particularly looking at intermodal solutions, combining ports, road and rail.' He believes that CP's domestic experience can be translated to the wider stage, capitalising on the geographical location of Portuguese ports as a gateway to Europe once the break of gauge can be eliminated.
Although Ramalho is keen for CP to become 'the best operator in Iberia', he will not be drawn on whether the company will be seeking open access powers to run its own freight trains into Spain. 'That is a question for our partners in Spain - we are looking at the best ways to win a bigger share for rail in the international freight market. We see a good opportunity to work with other partners to capture value and grow market share', he explains. 'We are talking about a number of different ways to develop.'
Financial challenge
In his quest to put CP on the path to profitability, Ramalho believes that 'we can create a lot of value for our shareholder by 2010.' The train operator has already established separate business units for its freight, long-distance and regional passenger operations, together with separate entities for the Lisboa and Porto suburban business.
Ramalho expects growing international freight business to be 'really profitable', for example. He also hopes to see strong profit growth on long-distance inter-city services, 'particularly on the Atlantic axis between Faro and Braga', and perhaps through the emergence of long-distance commuting on the main lines as the main roads leading into Lisboa become more and more congested.
The biggest question hangs over the suburban and regional operations. Regional traffic is declining as a result of the demographic changes which are seeing Portugal's population drifting from the interior to the major conurbations and the coastal towns.
Suburban traffic is growing strongly, but not profitably as the government retains the right to cap fares for journeys of less than 50 km for socio-economic reasons. Whilst CP is obliged by its shareholder to operate unprofitable services, there is no formal mechanism in place to compensate for this, other than the government picking up any losses at the end of each year. Ramalho is hopeful that the situation is about to change. 'We are discussing with the government about the introduction of proper public service contracts, in line with European public procurement regulations, and we hope to find a solution this year.'
As yet, the only suburban service which operates under a formal contract is the cross-Tagus route, which was won by Fertagus in 1998. Putting the operation of other suburban and regional services onto a contractual basis opens up the prospect for further competition, but Ramalho is not worried by this. Few other operators have expressed interest in the traffic, and any change would be revenue-neutral.
He believes there is potential to target intra-regional business flows in areas where there is sufficient rail capacity. Although there is more to be done in terms of improving efficiency and reducing operating costs, Ramalho says the solution to the current regional losses is 'much more about growing the market'.
Given the EU's plans to deregulate passenger services, Ramalho recognises that 'liberalisation will happen'. But he believes that Portugal's peripheral location means that it 'is not a big issue', unlike the freight sector with its potential for international business.
Asked about CP's relationship with infrastructure manager Refer, Ramalho admits that there were problems in the early days, 'because Portugal was one of the first countries to split'. In particular, there was an issue over the level of track access fees (p87). 'About four years ago CP and Refer reached a gentleman's agreement to re-establish normal relations, and since then things have been going quite well. Now we are looking to move forward, to create benefits for our customers and improve the sustainability of the railway as a system. With the benefit of experience over the past eight years, Refer understands that CP needs to be competitive in the market; we are clear about our goals and objectives.'
Planning for a high speed era
Ramalho recognises that the go-ahead for the long-awaited high speed lines will have a major impact. 'It is probably one of the most important steps ever for Portugal's railway industry', he says, adding that it is a fitting way to commemorate the 150th anniversary of Portugal's oldest line later this year.
But the project is just another step, albeit an important one, in the 'natural evolution' of the Portuguese railways. 'It's a European project, not just for Portugal' Ramalho explains, noting that upgrading of the Atlantic Corridor linking Vigo, Braga, Porto, Lisboa and Faro is one of 30 priority projects in the Trans-European Networks programme.
Ramalho believes that the commitment to the new lines, plus the related agreement with the Spanish government will also create 'big opportunities at the Iberian level'. He identifies three main zones of development across the peninsula: Mediterranean (between Barcelona and Valencia), Central (around Madrid) and Atlantic (including Lisboa and Porto). 'So the focus in terms of rail activity is clear: first Europe, second Iberia, third Portugal.'
As far as the domestic impact of the new lines is concerned, Ramalho's objective is to create added value on the Lisboa - Porto corridor. He believes the time savings and enhanced capacity will make rail much more competitive with the existing A1 motorway, generating wider benefits for the national economy.
Whilst the route of the new lines has been defined and the schedule for construction agreed, the government has yet to address the operational aspects of the project. Ramalho says the intention is to put the operating concession out to competitive tender, but the structure of the operating authority has not yet been determined. Although no timescale has been set for the tendering process, he expects it to start around 2009-10.
Ramalho himself heads a newly-created high speed business unit, which will prepare CP to bid for the concession to operate the new lines, possibly as a joint venture. 'We believe the lines will be profitable, and we can create expertise'. As well as basic planning, the unit will be looking to draw on the experiences of other high speed operators through the international benchmarking programme.
Ramalho is adamant that 'the high speed line needs to be part of the network', noting that CP has scope to expand its commuting business, both on the new line itself and making use of capacity freed up on the existing routes. 'There is a lot to do in terms of modal shift between the conventional and high speed lines', he believes. 'Commuting is an important part of the passenger base for rail, when compared to other modes.'
He feels that there is a lot of suppressed demand for travel in the Atlantic Corridor. As well as the Porto - Faro motorway, there has been a lot of road building in the last decade, yet 'there is still heavy traffic congestion in towns and cities, and growing capacity problems on the railway too'.
At present, says Ramalho, there are 912 trains using some part of the Linha do Norte each day. Threading CP's 220 km/h Alfa Pendular tilting trains through the mix of regional, suburban, and slower inter-city services is 'very difficult', to the point where most freight traffic can only move at night. He hopes that transferring the long-distance high speed traffic to the new line will release enough capacity on the network to allow CP to go after new business, 'particularly in regard to international freight traffic'.
Fleet investment
Ramalho says CP has spent a lot on its fleet of locos and rolling stock in recent years. The tilting trainsets that work the premier services from Lisboa to Porto and Faro may have the highest profile, but a modern fleet of Siemens EMUs has been introduced on the Porto suburban network. The units for Lisboa's Cascais and Sintra lines have been heavily refurbished by EMEF, the semi-privatised railway workshop at Entroncamento.
CP is currently in the process of upgrading its Corail-style long-distance coaches for 200 km/h operation, so that loco-hauled inter-city trains can match more closely the Alfa Pendular performance. The existing Class 5600 electric locos are already cleared for 200 km/h operation, but at present many of these are deployed on freight trains.
Following competitive tendering, an order was placed with Siemens in January for another 15 electric freight locos, of which three will be built in Germany and the rest assembled locally. According to Ramalho, CP was looking to buy 25 locos in total, which would provide enough to work the new electrified line from Sines to the Spanish border. They will be funded 40% from equity and 60% from debt, and he expects to achieve a 7% rate of return.
CP is also investing heavily in support services and its commercial activities. New IT systems have allowed the introduction of yield management for long-distance fares, and distribution channels are being improved. Ramalho says the operator has installed many ticket vending machines over the last seven years, and in September 2005 it introduced an online ticket sales facility when the CP website was relaunched.
Development is now underway on a Galileo interface to enable ticket sales by travel agencies. Ramalho is keen to develop a code-sharing agreement with the airlines, and his top priority is to work with the Portuguese state airline TAP. He says CP is well-placed to act as a domestic feeder for TAP long-haul flights to Brazil and the former Portuguese colonies in Africa. As TAP is a member of Star Alliance, Ramalho hopes this will open up further code-sharing opportunities.
CP provides a shuttle bus link between Oriente station and Lisboa airport. The Lisboa - Porto high speed line will have a station at the future Ota airport, 40 km north of the capital, and Ramalho envisages an airport express service taking just 8 min from Oriente. ...........................................................Disculpa e muito longo.