Rail transport segment faces big changes

TURBULENT times are coming to Slovak passenger rail transport as two private Czech companies, RegioJet and Leo Express, will enter the lucrative long-distance transport between Košice-Bratislava and Prague. The first clashes between RegioJet and state-run passenger carrier Železničná Spoločnosť Slovensko (ZSSK) have already occurred.

TURBULENT times are coming to Slovak passenger rail transport as two private Czech companies, RegioJet and Leo Express, will enter the lucrative long-distance transport between Košice-Bratislava and Prague. The first clashes between RegioJet and state-run passenger carrier Železničná Spoločnosť Slovensko (ZSSK) have already occurred.

The first InterCity (IC) trains of the largest private train carrier in the Czech Republic and Slovakia, RegioJet, began the Bratislava to Prague route October 12 and the carrier plans to begin Košice-Bratislava trains December 14. Leo Express will run one pair of trains between Košice and Prague starting in December and plans to run trains from Košice-Bratislava in 2016.

The state-run carrier ZSSK currently operates four pairs of IC trains between Košice-Bratislava, which means that together there will be seven IC trains to Košice starting in December. To deal with the new competition, ZSSK will introduce some changes but it does not want to reveal it plans until late November, the Sme daily wrote.

“We expect that any private carrier entering [Slovak rails] will particularly increase competition and subsequently [it will bring] less expensive services of higher quality for travellers,” Transport Ministry spokesman Martin Kóňa told The Slovak Spectator. “The joining of offer and choice is always a positive contribution for both carrier and travelling public.”

Moreover, since November 17, pensioners and students will travel by ZSSK-operated regional trains and second class express trains for free which is one of the economic measures proposed by the ruling Smer party in late June. RegioJet demands same donations for their trains but the Transport Ministry refuses that claiming that RegioJet trains will not travel in the public interest thus the state will not pay for those 100-percent discounts, according to the Hospodárske Noviny daily.

“This is a lifebuoy for Železničná Spoločnosť Slovensko which is threatened by a decreasing amount of travellers and a drop in incomes,” editor-in-chief of railways magazine Železničná revue Desana Mertinková said, as quoted by Hospodárske Noviny on October 16.

RegioJet competes

RegioJet wants to compete with ZSSK with modern wagons produced by the Romanian firm Astra, which have seats with installed monitors where customer may watch movies, browse the internet or check a map of their route – all for people with second class tickets.

All state-run railways try to make first class wagons as good as it gets and then subsequently “fleece travellers in second class”, Jančura told to press on October 7 while presenting the new wagon. “We chose a different approach and offer comfort even in lower classes.”

There will be one such wagon in each train of RegioJet travelling route Bratislava-Košice from mid December and the firm plans to increase this number continuously.

The second tool for competing with the state carrier is price. RegioJet wants to set prices for tickets between Košice and Prague at €9 while the state carrier charges €22 for the least expensive ticket. Moreover ZSSK sells a regular ticket for a ride by InterCity train for €20 while RegioJet will offer the ticket on the same ride for around €14, the Pravda daily reported on October 8.

“The price war may result in the price for Bratislava-Košice route lower than €10,” Jančura said, as quoted by Pravda. “We will see what will be the response of state carrier.”

Low price is a basic marketing tool for successful entry to the market and customers expect it. This sum is around 25 percent lower than the state carrier’s and will not make a profit in the long term, experts say. ZSSK has been operating IC trains since 2011 without state donations for higher prices and is still losing money, former head of ZSSK Pavel Kravec told the Hospodárske Noviny daily.

ZSSK lost €1.7 million by running IC trains in 2013 while in 2014 it expects better result but not black numbers, ŽSR spokeswoman Jana Morháčová told Sme.

On the other hand, Jančura pointed out that expenses of RegioJet are just 60 percent of ZSSK expenses, according to Hospodárske Noviny.

Jančura expects to make profits in March 2015 but only in the case that ZSSK will not abuse its monopoly position – meaning it will not operate trains at a loss and that the Transport Ministry will also pay the transport of students and pensioners by RegioJet.

It is not unreal, according to Deputy Director General of the Transport Research Institute Pavol Kajánek who claims that RegioJet’s losses could be covered by higher numbers of travellers.
“If RegioJet chooses the right times [of train rides] it will have potential to be successful and lure people into its trains,” Kajánek said, as quoted by Hospodárske Noviny.

Conflict in Košice

The possible price war is not the only upcoming conflict between RegioJet and ZSSK. In spite of the fact that the Košice railway station is large enough, RegioJet has no place to sell tickets. ŽSR, which owns the building, claims that it is seeking solutions for how to deal with RegioJet’s demands. The private company, however, wants to have one of nine selling points of a customer services centre rented by ŽSR.

“We sell tickets for almost 1,410 trains and it is absurd to leave one of those selling points for a carrier who will operate eight trains,” Morháčová said, as quoted by Sme.

The seemingly banal conflict could expand to a lengthy legal scramble with ŽSR.

“More than 19 percent of travellers buy tickets in [railway] stations in Slovakia,” RegioJet owner Radim Jančura said, as quoted by Sme. “We would have to demand the money, which we had lost because of this, from the owner of the infrastructure who did not provide us with fair space.”

Leo Express to take on buses

Leo Express mainly wants to compete with bus operators which drive from Košice to Prague. Four of five people use buses on this route and Leo Express will offer greater comfort and shorter travel time for similar prices, Leo Express head Leoš Novotný said in interview with Sme.

Currently Leo Express is focusing on central and eastern Europe since there are state carriers with monopolies in the railway sector which abuse their position by providing low quality services with extremely high costs.

“I see this as opportunity in Czech Republic, Slovakia and in other countries,” Novotný said, as quoted by Sme. “It is just an accident that we come to [Slovakia] in the same year as another private carrier.”

Moreover, while RegioJet will run its trains from Košice to Prague during the day Leo Express will ride during the night reflecting the result of its intern analysis showing that people travelling from Košice to Prague want to reach their destination at 8:00.

“RegioJet will go during the day. I consider it to be the loss of time,” Novotný said, as quoted by Sme.

Discounts not for everyone

The state plans to earmark €205 million for personal railway transportation in public interest in 2014 and this number should increase to €218 million in 2015. Thus around €13 million from state coffers will go for students and pensioners travelling for free and people travelling for work eligible for discounts, according to the draft of state budget published on October 14. To avoid overcrowded trains the Transport Ministry plans to increase their number, the TASR newswire reported.

“It is natural that more vulnerable groups of people are protected in certain ways,” Kóňa said. “The lowering of fares for socially disadvantaged groups of citizens will improve their social situation and ultimately it will affect also their living standards.”

RegioJet claims that it has right for donations of discounts and in case that state will not fund tickets of those social groups in RegioJet’s trains all of those people will avoid them. Around 11 million travellers used state-funded discounts in 2013 while the number may increase after 100-percent discounts will be introduced, according to Hospodárske noviny.

The Association of Bus Transport (ZAD) which connects 15 biggest bus operators in Slovakia welcomes the state’s support of mobility related to students, pensioners and people travelling for work, but this approach is not systemic. The state has not decided to fund bus transportation in this way despite the bus operators are leading carriers in regions where they transport 85 percent of all travellers. Therefore the ZAD is demanding financial support also for bus operators, according to ZAD Chairman of the Board and CEO Peter Pobeha.

Many of those social groups will not change their travelling habits and will still prefer buses because many train satiations are placed 3-4 kilometres from villages. The ZAD expects to lose 5 percent of its customers, Pobeha told Hospodárske noviny in early September.

“Train and bus have their customers; each of them serve to group of people which chooses them in the most profitable way for them,” Pobeha told The Slovak Spectator. “We are complementing not competing with each other.”

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