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Railfreight is in a state. The great and the good preach the environmental benefits of modal transfer – but quality of service has to come first
Even the die hard members of the Railway Liberation Army (the militant wing of the Official British Rail) would have found it hard to argue that Railfreight should be in the public sector. Under British Rail, train load freight, at least, had a remit to be profitable, even if parcels, containers and international were collectively loosing money.
Privatisation would set Railfreight free from the dead hand of the Government/reactionary railway management blah blah, free to compete with other modes in an open market.
Well, sort of. New owner Wisconsin Central and its financial chums re-amalgamted the three railfreight companies as English Welsh & Scottish Railway, renegotiated a more generous track access agreement with Railtrack and launched an ambitious re-equipment programme as the basis of business plan that would double tonne miles in five years and triple them in ten.
EWS also bought Rail Express Systems, aka the Post Office mail contract, and International, aka a licence to lose money. In fact, when it comes to International, saying ‘bought' could get me in trouble with the press council. We, the taxpayers, paid Wisconsin large sums of money to take the problem off the Government's hands.
Freightliner was sold to a Management Buy Out, the ‘sale' including £75million in grants over five years toward track access charges. These started at £25 million in year one and dropped in £5million decrements to £5million.
Then, in theory, the infant Freightliner would have the stabilisers taken of its fairy-cycle and pedal off into a self supporting future.
And now, for all the talk of growth in tonne miles and record numbers of containers handled, after five years in the private sector, freight is starting over again.
At EWS, Ed Burkhardt's belief that you could translate down home short line business philosophies to a passenger intensive European railway has proved to be fatally flawed. When Ed told us that wagon load could be revived his forceful personality, self belief and disdain for British Rail and all its anti-freight mentallity made even veterans of Speedlink suspend their disbelief.
And as the Class 66s have ended, wagons are still rolling out of Thrall at Doncaster and the Customer Service Delivery Centre is in business, the dash for growth has stalled. Doubling in 10 years, is now a more modest aspiration. Meanwhile, the new locos alone have added £30million a year in leasing charges to the bottom line.
Freightliner, on the other hand, was the ying to EWS yang. It put its managers where the customers were. It invested cautiously in re-engineered Class 47s rather than new kit. And it grafted away at what it knew – multi-modal transport.
But despite success in building volume, making money out of the business is still difficult. As a result, the track access grant will have to continue. According to Informed Sources future support has been agreed in principle.
Returning to Euston down the WCML the other afternoon put these contrasting fortunes into place. As the Virgin train whizzed along, the steady flow of extremely well loaded container flats racing northwards was impressive.
But, as we came into the Euston re-modelling work – a real hive of activity incidentally, the number of shiny Class 66s sitting around with ballast trains was equally noticeable. Now I know that Railtrack's penalties on works trains are severe, and were I West Coast Route Modernisation Manager Tony Fletcher I would be delighted by the sight of such reliable traction on my trains, I couldn't help thinking that these locos ought to be out on the network hauling high value freight not tonnes of crushed rock.
Which brings us to another factor in the freight equation, Railtrack's creation of a new market for haulage of its infrastructure works trains.
One of Ed Burkhardt's many quips described the relationship between EWS and its customer as ‘the infrastructure provider from hell meets the works train provider from hell'. The trouble is that while Ed was unhappily stuck with Railtrack, Railtrack, which was buying the service, was able to choose.
Not only that. What with the WCRM and the Channel Tunnel Rail Link works, timely delivery of massive amounts of ballast and track was going to be vital.
So the infrastructure provider from hell decided to diversify its works train haulage. It realised that a long term contract would provide the new haulier the assured income which would give Rolling Stock Companies the confidence to buy new locos for lease. And now we have Freightliner Heavy Haul and GB Freight with leased Class 66s ‘bootstrapped' off their Railtrack contracts – and less work for EWS.
This episode highlighted EWS problem. When the acquisition was made pretty well everything that had gone before under BR was, not to mince words, slagged off, including quality of service.
Now EWS has lots of new hardware, but as its recently appointed Chief Executive Philip Mengel told staff
in the EWS house magazine, despite substantially completing its locomotive and wagon investment programme, EWS is not providing service performance levels ‘acceptable to our customers or us', train cancellations and service failures in particular.
While equipment reliability and the condition of the network contribute to these problems, Mengel added ‘It is too easy to point the finger at others and accept mediocre customer performance. We must look inside EWS and recognise the urgent need to improve out business processes in such areas as train planning, driver rostering, ground operations and many others'.
‘Many changes' to EWS business process in the coming months are now promised aimed at enhancing customer service delivery. ‘We will be striving to create a culture within EWS in which all staff are enthusiastic and dedicated to performing their jobs with a sense of urgency, attention to detail and a relentless focus on customer requirements'.
Time for a final Burkhardt gem, admittedly apocryphal, which sums up the freight situation. According to an Informed Source Ed is supposed to have described EWS as having ‘the kit without the wit', while Freightliner ‘has the wit without the kit'.
Philip Mengel is certainly aiming to build up the ‘wit'. As he told the Rail summit, since EWS was formed the company had shed around 3,000 staff and ‘downsized too far'. And, in a memorable phrase added ‘you can't downsize to greatness and we are now offering resources back.
Extra staff have been recruited to work in yards and sidings, together with more maintenance and customer service personnel. In Mengel's book ‘putting the customer first is the key to growth and at the moment our service is too variable'.
Meanwhile, in Central Government, local authorities and at the Shadow Strategic Rail Authority, modal shift of freight from road to rail is fundamental policy. And the shift is happening.
According to the Department of Environment, Transport and the Regions freight moved by road in Britain during 1999 fell by 1.8% from 152 billion tonne km to 149 billion tonne km. Rail carried 18billion tonne km. In terms of tonnes lifted road fell by 3.9% while rail tonnage was only 2.5% down.
This means that rail's market share of land-based freight grew at the expense of road to 10.8%. This compared with 8.3% in 1993 at the tail end of the recession.
So, rail is gaining, albeit slowly, despite the problems outlined above. And Railtrack is under heavy pressure to invest in extra capacity to meet this future demand.
Given Railtrack's current tussle with the Rail Regulator over, among other things, freight capacity on the WCML, its Head of Freight Nick Ford, was remarkably bullish when I met him recently.
This optimism was based on a Railtrack funded study of the freight market which included the development of a model of the overall freight industry. Inputs to the study came from the Shadow Strategic Rail Authority, freight customers, the Highways Agency and the Department of Environment, Transport and the Regions.
Current freight traffic on rail is around 17bn net tonne km a year (the DETR figures above are gross). The model was used to predict future levels for a range of scenarios.
If present costs, service levels and service quality are maintained, a sort of ‘minimalist' scenario, the model suggests that traffic would rise to 21bn net tonne km after 10 years.
But do nothing is not an option and if the rail freight industry improved its cost efficiency relative to road by 2% a year and also improved quality of service, the figure could rise to 31bn after 10 years almost double the present level.
To meet this demand existing capacity would have to be used more effectively with Railtrack implementing enhancement schemes that can be justified on commercial grounds. The new Institution of Operators will be delighted to hear that Railtrack's Head of Freight believes that more disciplined scheduling, improved reliability and similar operational improvements would allow potential paths at present left unused as a contingency allowance – the so called ‘white space' in the timetable – to be used.
But when annual traffic rises above 31bn net tonne km, the cost of the necessary capacity enhancement schemes means that they cannot be funded through access charges – at least initially. Above the 30bn barrier, rail has to break into market sectors where today's railway is not competitive. This would be a slow process but the upgrades to make rail a viable option for these new customers would cost millions,
But if it did happen, at the end of 10 years freight traffic could reach 56bn net tonne km, equivalent to a 19% market share. Nick Ford described this aspiration as ‘ambitious but attainable if government and industry play their part'. I preferred his later, less corporate description of what would be needed as ‘all the turbochargers being turned on' including cost reductions, increased services and government subsidy.
SoundbiteThe potential freight market is enormous. The potential value to the country is big. Railtrack and the freight operators are up for their share. Is the government up for growth? Nick Ford Head of Freight Railtrack |
But, note that this assumes Government subsidy to support what Railtrack sees as uncommercial infrastructure investment. Why should the taxpayer do this? Silly question, because of the environmental benefits. As you might expect, Railtrack's study evaluated the societal benefit of modal transfer. At the 56 net tonne km traffic levels it came to £700m over the 10 year period.
Of course, this is angels on the head of a pin stuff, or as Ford puts it ‘freight is an economists' paradise'. But if you tweak an assumption here and premise their he reckons that the benefit could increase to up to £1.2bn.
That's a lot of subsidy. Well yes, ‘but we are not greedy', says Ford, ‘ Railfreight must be economically viable and the Government must back us'.
And if it doesn't? Well, the study also shows that if today's track access charges were set at a level which at least covers costs, some traffics which are now marginal financially, wouldn't cover costs. Meanwhile the Regulator has just launched a consultation paper on the criteria for freight access charges.
This, of course opens up yet another can of consultants' studies, just as this column is running out of space. According to Ford, the concept of the notional stand alone freight railway devised by the first Regulator would cost more to run than Railtrack's current freight revenue.
But two comparative studies of track maintenance costs in Britain and the United States suggest that Railtrack's freight access charges are three times the infrastructure costs of class 1 Railroads in the USA . Nick Ford has described the studies' findings as ‘extremely misleading' and ‘flawed'.
This one seems set to run and run.
Meanwhile I leave you with two statistics from the Railfreight Conference on 6 June. Chiltern Director Adrian Shooter gave the re-creation of the Royal Mail business under BR as the paradigm for freight in the e-commerce era. To emphasis the need for change he quoted a friend who runs a fleet of 160 lorries specified for 44 tonnes. The total cost per mile is £1.25. ‘If Railfreight is competing on price, and given that the lorry has a driver to look after the consignment, Railfreight won't work', Shooter warned.
There was also a paper by a European Community official on moves to overcome the obstacles to cross border freight traffic. One example was BELIFRET a Belgium-Italy freight corridor. The 2 000 th train had just run on this corridor, but the trains were still loading, on average, at 7% of capacity.
All the talk of doubling and tripling is pointless if you don't give customers what they want.