Any Lesson from Norway’s Railway Reform?

Norway’s government has taken a sweeping reform of the railway sector by the hand. The goal is not competition on the railways, because the market is too small for that. The state wants to save but by the tendering of concessions for individual subnets. That’s why Sweden and the UK will also operate trains on Norway’s tracks in the future.Rudolf Hermann writes.

It was loved as a national symbol, but hated  for its delays and failures: NSB, the Norwegian state railroad that no longer exists. Since the name was changed in the spring with great fanfare, the state owned transport company is now called Vy. With the equivalent of around R30 million, the management wants to express the idea of ​​”rebranding” that they have a “new vision” and want to survive with them in a traffic-political environment in which they face tough competition.

The audience, however, could not initially understand why a brand that has existed for more than a hundred years and was well established should be abandoned and exchanged for a name that does not tell anyone. And much less was understood why the money was not put into improving the service.

New operator of long-distance routes
But all of that may not even matter soon. Because it is quite possible that the NSB – pardon, Vy – will soon disappear from a large part of the Norwegian rail network anyway.

As part of a government-initiated reorganization of rail transport, namely, the long-haul routes are tendered in so-called packages and awarded to those railway company, which makes the best operating offer. The first two tenders have already gone on stage. And both times NSB / Vy was among the losers.

The Southwest package with the Oslo-Kristiansand-Stavanger route as its core went to the British go-ahead group less than a year ago. However, the Norwegian State Railways are more likely to feel that the northern package with long-distance connections- Oslo-Trondheim-Bodö -was lost in June. Not only does this include the touristically interesting routes of the Rauma and the Nordlandbahn, but the contract was won by the Swedish railway company SJ. From a Swiss point of view, this would be something like when Deutsche Bahn would take over the St. Gallen-Geneva route or the Gotthard railway.

Long-distance routes

According to the media releases on the outcome of the two tenders, offers from Go Ahead and SJ were 21% and 27% lower, respectively, compared to the respective offerings of NSB / Vy. In the railway management, which is responsible for the rail traffic and thus the Tender state agency, one can see this confirmed in the path of reorganization. Cheaper offerings mean that the state has to take far less of a subsidy into the coffers.

No competition on the rail

“Our primary goal is to ensure mobility, increase efficiency and improve customer focus,” says Törre Aalbu Rasmussen, an analyst at the Railways Directorate. This need not necessarily be done by competition on the rail, but could be achieved even by the fact that an exclusive operating license is no longer simply given to a predetermined company, but just several offers would be obtained.

On the other hand, competition in the railways, as it already exists in certain parts of Sweden for example, should not be seen so quickly in Norway. According to Aalbu Rasmussen, there is currently no obligation on the part of the EEA (of Norway). Although this goal is being pursued, the so-called Fourth Railway Package of the EU has not yet been implemented. Nor is Norway a special case insofar as there is no “race track” on which the volume of traffic would be large enough for several providers at the same time.

Rail travel between the capital region and the three major urban centers Stavanger, Bergen and Trondheim take between six and eight hours. The aircraft is not only much faster here, but often cheaper. The railway therefore serves more to connect the places along the route with the larger centers. However, this does not generate large volumes. Accordingly, an hourly rate is illusory; none of the three routes make it to more than half a dozen runs per day and direction. Another obstacle to denser traffic is the fact that it is all about one-lane routes.

The hour of truth

The railway reform in Norway has been designed with these special features in mind. While route monopolies are preserved, the areas of railway network infrastructure, rolling stock and ticketing, once also occupied by the state railway, are separated from the actual railway operations. If Go Ahead in December 2019 and the Swedish Railways in June 2020 take over the routes awarded to them, then they must rent the rolling stock of Norske Tog, a state company in which all existing locomotives and wagons of the still-monopolist NSB / Vy have been outsourced. Only if the newcomers run the business so well that they can offer connections beyond the contractually agreed level, they may only use their own rolling stock.

Likewise, the new operating companies had to undertake to take over the NSB staff and thus also the previous level of employment at least for the time being. If they have misjudged their business plan and therefore want to throw in the towel early, the contracts provide substantial penalties that make getting out before the end of the eight- to ten-year term of the concession relatively unattractive.

For NSB / Vy comes the moment of truth when the railway management is over the outcome of the third tender. This concerns the famous Bergen Railway; the deadline for submitting tenders came to an end on 1 August. If the state railway company also loses this competition, it must also hand over the undisputed fillet in the Norwegian route network. The Bergen Railway has become a tourism racer; their trains are often fully booked.

Without the Bergen Railway, NSB / Vy would only have the voluminous but unattractive S-Bahn business in the greater Oslo area. This is hardly profitable to operate because of the commuter flat rates and dependent on government subsidies. On the long-haul routes, however, the Railway Directorate assumes that the two new operating companies should have reached breakeven towards the end of their contract. And the potential of the Bergen Railway is even greater.

Are the Swedes better?

Industry insiders believe that NSB / Vy’s management had been shaken from its earlier complacency at the latest in the failure of the Nordbahn package tender and realized that efficiency was not self-evident. In this context, according to a report by the public broadcaster NRK, there was also the “director’s glut” in the railway sector: Since the split of the former state railway, which was headed by a total of 11 top executives, into several independent units, the number of top cadres is 49 swollen.

Transport Minister Jon Georg Dale, whose area of ​​responsibility falls on the railways, however, justified the action against NRK: The new directors were necessary to reform the individual parts of the former state colossus and to prepare the companies for an existence in a competitive environment. The savings made by tendering each operating concession more than offset spending on the new squad, Dale said.

From the rail driver’s point of view, however, it is not just the discussion that causes a frown as to whether a stripped-down Norwegian state railways actually needs more bosses than before. But also the fact that the extensive package Nord was awarded just the Swedish SJ. If the Norwegians are upset about the unreliability of their former NSB (and give them the statistics in this regard), you can hear similar lamentations in the neighboring country on the SJ. The Norwegian consumer should therefore be under the hood, as a railway company with similar bad reputation in terms of susceptibility to disturbance elsewhere should bring a significant improvement.

However, both NSB / Vy and SJ are paying for their past as state monopolists. Operational disruptions are also charged to them if they are not (more) directly to blame. The majority of the delays stem from the inadequate track infrastructure, and for some time now it is no longer the railway operators but the national traffic departments (Bane Nor in Norway and Trafikverket in Sweden). However, the railway operators are very responsible for the provision of train substitute connections, and there SJ has not made the best impression in recent major disruptions.

The Arctic North also wants a trainruh. Bodö · Looking at the map of Norway, Bodö already has a respectable travel distance from the capital, Oslo – around 1200 road kilometers, reports the route planner. If you want to continue along the coast to the northeastern end of the country near Kirkenes, Bodö is only just in the middle of it. And if the Norwegian railway network ends here, that means that the whole northern half of Norway will have to get by without this means of transport.

A Northern Norway railroad has been haunting the minds of traffic planners. A first, inglorious attempt comes from the time of the Nazi occupation of Norway in the Second World War: A railway line to Kirkenes was to secure the supply of Germany with essential war materials, namely iron ore and nickel. Thousands of forced laborers were deployed in inhumane conditions, using the simplest of technical aids to set the route through the difficult terrain of the northern Norwegian mountain and fjord landscape.

After Norway had been able to put the Nordland Railway from Trondheim to Fauske and Bodö into full operation in 1962, the idea of ​​continuing to Narvik or even Tromsø kept coming up for grabs – and was just as often rejected. Now the topic is once again up for debate. The National Railway Directorate (Railway Authority) published in July a calculation that the construction cost of a nearly 400 km long single-track line from Fauske to Tromso with an 80 km long branch to Harstad, an important base of the fishing and the petroleum industry, to a total of 132 billion nKr. (CHF 14.5 billion) (for comparison: the Gotthard Base Tunnel cost around CHF 12 billion). Politicians should now take a stand by October.

In northern Norway, the project is popular. “We want the train now!” Headlined a local newspaper in Tromsö recently resolutely. For the policy, however, this would mean consciously pulling up a railway project that, according to the railway authority, will never be in the black.

Reasons given for the construction of the railway line are the rising economic importance of the north, the improvement of transport services for the population and the shift from road to rail transport. In addition, at Narvik could be made a connection to the projecting from northern Sweden Kiruna railway line

In northern Norway, the project is popular. “We want the train now!” Headlined a local newspaper in Tromsö recently resolutely. For the policy, however, this would mean consciously pulling up a railway project that, according to the railway authority, will never be in the black.

Reasons given for the construction of the railway line are the rising economic importance of the north, the improvement of transport services for the population and the shift from road to rail transport. In addition, at Narvik could be made a connection to the projecting from northern Sweden Kiruna railway line.

However, skeptics fear that other, equally necessary infrastructure projects for the Arctic North will fall by the wayside. With the money that would swallow up the railway line, it would be possible to revamp the entire road network in the region, which would benefit a far greater number of residents, it is said.

If one takes the existing Nordlandbahn between Trondheim and Bodö to the scale, doubts are indeed attached to the meaning of a route extension. With one day and one night train per day and direction over the entire length of the route, the railway is indeed attractive for tourists who have the leisure to enjoy the spectacular journey. However, the train is hardly suitable as a competition for motorized private transport with this traffic density. 

In freight transport, the railway is under such heavy price pressure from heavy road traffic that the business is increasingly unprofitable. Without political steering measures in favor of rail, a Northern Norway railway would therefore be a dubious project.

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