Railways on track to open competition

After years of battling for a stake in the railway market, RegioJet and other private operators will have a chance to bid on long-distance routes after a ministry decision to promote liberalization of the market was finalized Oct. 12.

Transport Minister Vít Bárta put into motion a new plan negotiated between the ministry, transportation unions and railway operators by signing a request to the Official Journal of the European Union to publish upcoming tenders for long-distance railways - the first step under European law for putting a tender up for bid.

"Gradual opening of the railway market is a priority for Transport Minister Bárta mainly because he is seeking more efficiency of spending public funds in this area, and it will increase the quality of offered services in railway transport," said Tomáš Dombrovský, a spokesman for the ministry.

The tenders to be advertised will be up for bidding next year and include railways extending from Ostrava to Jeseník, which will begin operation in 2013 or 2014, and Prague to Děčín, which will begin operation sometime between 2013 and 2015, according to the ministry. They are the first in a series of 10 tenders offered over a period of 10 years, said Jiří Schmidt, sales director of RegioJet. He described the tenders as packages that include between two and five long-distance rail routes, and added that after the 10-year cycle, all the tenders will go up for bidding again.

Veolia Transport is another private operator that will benefit from the change. Daniel Adamka, a spokesman for the Czech branch of the company, said the company has been fighting for five years to enter the market.

"[This] is the only way to open the market with the contract that Czech Railways has," he said. "Also, it will give an opportunity to everybody to answer tenders and not just the big companies."

State support offered to the private operators will total 4 billion Kč ($226.2 million) for all 10 tenders, or about 400 million Kč per tender, according to Schmidt. Dombrovský confirmed the limit of support for long-distance railway transport is 4 billion Kč, but said how that will be distributed is still unknown.

The decision comes after intense criticism of 10-year contracts worth 80 billion Kč signed last year that made state-owned Czech Railways (ČD) the primary operator for regional and national railways, as well as the sole operator for high-speed trains. Putting these rail packages up for bidding has not negated any of those contracts, according to Petr Šťáhlavský, a spokesman for ČD. The long-distance railway contract allowed for a maximum of 15 percent of routes to go up for bid each year with a cap of 75 percent total by the end of the 10-year contract term, he said.

"ČD will participate in these competitions, and we expect we will win many of them," Šťáhlavský said. "Competition will help narrow the system of funding ... and the further modernization of trains."

RegioJet, a subsidiary of Student Agency that took part in the negotiations, has been engaged in a drawn-out struggle to enter the rail market after announcing in 2008 it would launch its own railway company. Last year, it filed a complaint with the European Commission accusing the state of monopolizing the industry. Schmidt said the complaint has not been withdrawn, and an investigation by the commission into contracts and compensation awarded to ČD under the last administration will take place in the near future.

In addition to the contract, ČD was awarded 3.2 billion Kč in state subsidies in June 2009 to fund regional operations - support that the company said allowed it to continue running unprofitable routes that the government supported. Then in August, the government announced it would give regions a total of 2.65 billion Kč annually from the state budget for the next 10 years, after which all regions agreed to sign 10-year contracts with ČD.

After the new government took over in July this year, an investigation of ČD was launched following a KPMG audit that allegedly showed the company signed contracts that were under cost and ran at a loss for the railway company.

Although the changes are a big step in opening the railway market, Schmidt said there is still the issue of opening up the regional rails for competition.

"Maybe now that the whole market environment has changed, the regional market will be better in the near future," he said, adding that one tender has already been offered in the south Bohemia region. "We think the regional governments will now see that open railways would be much more positive for them in terms of quality and costs, so maybe this year or next year we will see other tenders in regional traffic."

The next big challenge will be stepping up to the competition that they've waited so long for, Schmidt said.

"The other side of the competition is quite tough," he said. "If we are successful in one or two tenders, it will be very satisfying. The market is really tough, but we are happy there are other players. It's very good for everyone, and when there is competition, there is quality."

- Filip Šenk contributed to this report.

Cat Contiguglia can be reached at
ccontiguglia@praguepost.com