European Train Travel: Working on the Railroad

Still, no one is predicting railroads will put airlines out of business. Railteam, a ticketing consortium of seven leading high-speed rail operators, aims to boost the number of people who now use fast trains for international European travel each year from 15 million to 25 million by 2011. That compares with some 160 million who travel across borders by air in Europe every year, a number that is expected to double by 2020. The railroads' relatively modest growth expectations are grounded in some harsh economic realities: new high-speed rail lines take years to plan and build as well as billions of dollars in investment. Moreover, Europe's rail operators are just beginning a chaotic period of industry restructuring and consolidation that usually accompanies deregulation.

In an effort to gain operating efficiencies and to outmaneuver rivals, some of Europe's main rail operators are already forming partnerships. SNCF, for example, runs a high-speed Paris-Brussels-Amsterdam-Cologne service called Thalys along with Belgian rail operator Société Nationale des Chemins de Fer Belge (SNCB) and Germany's Deutsche Bahn (DB). DB also uses the French company's track to operate its high-speed Intercity-Express (ICE) trains between eastern France and Paris. But, despite their cooperation on some routes, DB and SNCF are locking horns over Eurostar. The French have a majority stake in Eurostar, which also includes the Belgians and the U.K.'s London and Continental Railways (LCR). DB has made no secret that it is looking to buy LCR's 33% stake — which the French also covet, in part to deny DB its dream of extending its routes into the U.K. Meanwhile, the German group has ordered 15 new ICE locomotives with a full range of signaling technology that can be adapted to virtually any rail system in the E.U.

To further complicate matters, new companies are looking to muscle their way onto the tracks. Italian start-up Nuovo Trasporto Viaggiatori (NTV) is set to launch Europe's first privately operated high-speed service in Italy in 2011, in competition with Italy's former rail monopoly Trenitalia. Headed by Fiat and Ferrari CEO Luca Cordero di Montezemolo, NTV plans to establish a broad network of high-speed Italian services that dovetail with French routes run by SNCF, which owns 20% of NTV.

Of course, such market tumult ultimately means some railroads may find the going tough. To get an idea of what competition might do to the passenger-train industry, take a look at the freight sector, which was opened up to cross-border rivalries in late 2005. In France, nine new operators that stepped in to take on SNCF's freight service have captured 11% of the market in just five years. That may not sound like much, but the smaller players are making money while the state-owned giant is not. "What's significant in this isn't the element of competition alone, but the more efficient business models new players brought to old markets," says Alain Bonnafous, a rail expert at Lyon's Laboratory of Transport Economics. "Better organization and increasing return on investment makes all the difference."

As railroads begin competing on price and quality of service, the big winners are bound to be passengers. Further deregulation is in store: in 2012, national markets, not just international routes, are slated to be opened to more competition. "Travel as we've known it recently is being turned on its head, with larger numbers of people using high-speed rail to avoid the hassles, delays and stress of taking an airplane," says Mark Smith, a U.K.-based industry expert and founder of rail-travel website seat61.com. "On routes of three hours or less, you get to your destination faster and more comfortably than by air. And which is more glamorous these days: a high-tech Eurostar train with interiors designed by Philippe Starck and Christian Lacroix, or a crammed Ryanair plane that asks you to pay to use the restroom?" Perhaps train travel will become quintessentially European once again.

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