Can't Anyone Here Run A Railroad?

(2 of 3)

Every regular rail traveler has some version of that story, so it's little surprise that rail has lost out badly as a means of transportation. In the past three decades, travel by private car grew three times as fast as passenger transport by rail — leaving rail's share of journeys at just 6%. The €10 billion rail-freight business has fared even worse: its share of the European Union market has collapsed from 21% in 1970 to just 8% today. (By comparison, about 40% of freight goes by rail in the U.S.) Things have got so bad that Britain's Royal Mail last month ended 173 years of tradition by announcing that it will stop using rail altogether for transporting letters. "Quite simply, other forms of transport can give us the same benefits, in terms of flexibility and quality, but at a lower cost," said Paul Bateson, Royal Mail's managing director for logistics.

But rail's decline may not be terminal. For one thing, competition is finally being injected into the railroad system. Throughout the 1990s, the European Commission forced state railroads to split track management from management of passenger and freight services in an effort to break their stranglehold and pave the way for private rail operators. The liberalization program culminated earlier this year in a cautious first opening of the freight market to international competition. As of March 15, it became possible for private railroad operators to gain access to 50,000 km of track throughout the E.U. Several companies have already applied for licenses in countries where the system was previously closed to competition, including France. As yet, there's no comparable agreement on opening the market for passengers to competition.

Technology is also starting to make a difference. After years of planning and billions of euros of investment — E.U. governments paid out €40 billion in subsidies to their railroads in 2001 alone — a new network of high-speed train lines is finally taking shape in Western Europe. France has been the most aggressive to date: its tgv currently accounts for more than half of Europe's high-speed total. But Germany, Italy, Spain, Belgium and the Netherlands are also busy assembling a comprehensive high-speed network that will be fully in place by the end of the decade, enabling fast connections from Paris to Frankfurt or Amsterdam to Barcelona and beyond. "There's not been as much money going into the rail industry since the railroads were first built in the 19th century," says David Briginshaw, editor of the U.K.-based International Railway Journal. Some say even that's not enough: last week, the European Commission released a report suggesting that a further €235 billion should be spent on rail and other transport links throughout Europe.

Can either approach work? The French experience with high-speed trains suggests that they can win back passengers. Last year, shortly after SNCF opened its €4 billion high-speed route between Paris and Marseilles, cutting travel time from 4 hr. 20 min. to just 3 hr., traffic jumped by 67% to 18 million passengers. SNCF officials say at least 75% of TGV seats are occupied on average.