In the current rail environment in Europe, the lack of options for RUs to have the capacity allocated for several years is a problem that increases their costs, increases uncertainty of customers and lowers RUs' motivation for new investments and introduction of new connections. In most of the countries, it is currently impossible for for RUs to get the capacity allocated for several years. A lot of problems of the current rail transport situation could be solved, or drastically improved, if a good process for multi-annual capacity allocation is introduced.
The legislators in the proposed Regulation on the Use of Railway Infrastructure Capacity (currently in negotiation) expressed intention to introduced the right for RUs to have the mutli-annual allocation via the instruments of Framework Agreements and Rolling Planning. Nevertheless, „the devil is hidden in the detail“, if the final process and its detailed interpretation and unified impementation is not suiting market needs, it would not improve the situation, and can even lead to higher rigidity of the railways, compared to the other competing modes of transport.
In order to provide vision for the future, the FTE initiated a project on both Framework Agreements and Rolling Planning. On this page you may find:
Why multi-annual capacity allocation in needed?
Freight perspective
The freight customer contracts last from months to many years, however, most of the contracts have duration under 3 years. When a freight RU signs a contract, it usually fixes the price/revenue and service conditions for the whole duration. The offered price and service are driven by the production, which is on the other hand dependent on the capacity provided by the IMs. However, since the capacity is allocated only for first operation year(s), there is high level of unpredictability for the other years.
The first and major risk comes from the Temporary Capacity restrictions (TCRs). IMs announce some two years ahead, some only one year ahead, and some are TCRs popping up even later. At the end the freight RU is not be able to run trains on all days and will be re-routed for many contract days. The re-routing is longer, sometimes via another country, and in some cases requires diesel loco. The production costs rise, and this difference usually cannot be charged to the customers. The freight RU experiences loss from the originally profitable contract. Small RUs can get to financial problems. Some RUs might rather step back from the contract with the customer, despite losing reputation (both the company and railway as a mean of transport).
The second risk originates in the fact that the timetables are established every year “from scratch”. Therefore, in the annual timetable process, the allocated path in the second or third year might significantly differ from the first year when freight RU signs the contract with the customer. The capacity might be allocated to another freight RU or even other traffic type, leaving the freight RU to bear the unexpected production costs increase, despite the revenues still being the same.
Understand better the problem in detail examples here, including also the supply-driven freight segment. (to be uploaded)
Passenger PSO perspective
Contracts of passenger RUs with PSO authorities (Public Service Obligation) last usually for 3-15 years. The PSO contracts often fix the amount of compensations for RUs for the whole contract duration, thus in the tenders, the RUs are bidding with lowest possible, but still profitale compensation level. The bid is driven by the production model/costs, which is on the other hand dependent on the capacity provided by the IMs. However, since the capacity is allocated only for first operation year(s), there is high level of unpredictability for the other years.
Despite in many countries to priority of the PSO trains over other trains is safeguarded by the national priority rules, the problem related to Temporary Capacity restrictions (TCRs) persists. Over the PSO contract life cycle, IMs are continuously announcing TCRs, pushing passengers to replacement bus services, requiring more rolling stock to have trains on both sides of the track closure, more loco drivers and cabin crew, due to longer travel times and thus longer shifts. This is an unexpected significant increase in the costs, but the compensation from the PSO authority is fixed. The RU has a choice, it can submit a bid with a higher price for the PSO authority, predicting such a risk. However, in a competitive environment, this is not very likely, thus the costs are taken by RU, which either generates loss from the contract or bankrupts and the PSO authority has to search for a new RU with higher compensation.
Understand better the problem in detail example here. (to be uploaded)
Passenger open-access perspective
An introduction of new open-access connection requires investments such as the purchase of rolling stock, homologation to countries of the operation and also marketing/production expenses to promote and establish the new service. In order to make it profitable (amortise the investment), it is necessary that the RU can operate the service concept for a reasonable duration to justify these investments.
The lack of the multi-annual capacity affects the sector as a whole, because the incentives for investments are low. The motivation to invest in new connections and purchase the new rolling stock is heavily undermined, because passenger RUs do not have the certainty that they will be able to use it as intended, not speaking about difficulties to secure for it private capital funding. Note that Europe is still very far from a single European railway area, and barriers mean there are very limited opportunities where the RU can reallocate the rolling stock and human resources.
Understand better the problem in detail example here. (to be uploaded)
Market needs
The market has the need for capacity contracts available between IMs and RUs throughout Europe, that have a reach beyond annual timetable periods. These contracts should:
- Be multi-network (origin to destination / cross-border), and irrespective of whether the RU/forwarder has a national license in each of the networks
- Include Commercial Conditions, providing compensations for RUs in case IMs do not stick to the commitment, and commitment charge paid to IMs, in case RUs do not order the contracted capacity (for more details see the Commercial Conditions Vision).
- Not consume all available capacity, to make space also for new traffic.
- Not specify detailed paths, but capacity specifications (allowing execution of the traffic with predictable costs and service quality, while allowing optimisation of timetables with other request during the annual timetable construction)
- For freight: be consistent with the duration of RU-end customer contracts.
- For PSO passenger: be consistent with the duration of PSO contracts, thus lower risk for bidders in PSO tenders.
- For open-access passenger: have sufficiant duration to ensure business-customer predictability and allow investment amortisation (Rolling Stock expenses).
Furthermore, a good and market-orientated process shall be introduced, which must be:
- Transparent
- Flexible, to not cause too much rigidity and allow optimisation of timetables
- Not overly bureacratical (e.g. Rolling Planning conclusion on short notice)
- Interpreted and implemented in harmonised way over Europe
How to achieve it? The sector and legislators have now a unique within the negotiation of the Capacity Regulation to:
- Revise the conditions for Framework Agreements, with outlook to harmonise/improve the process via an Implementing Act.
- Introduce the Rolling Planning product, with outlook to harmonise/improve the process via an Implementing Act.
RU-IM Project information
Besides the work on the RU Vision, a joint project was initiated with Rail Net Europe and IMs. A dialog in a joint “Task Force Framework Agreements / Rolling Planning” was established in spring 2024, where both parties can express their needs, share experiences and discuss the open points, with the aim to come to a joint vision and processes at least in the areas where it is possible.
The output of the taskforce aims to serve as input to:
- European Framework for Capacity Management (once introduced with Capacity Regulation)
- Implementing Acts on “Capacity Allocation through Framework Agreements & Rolling Planning”, in case the legislators mandate the European Commission
The Intermediate report on the foreseen provisions and open points of the Task Force was published in November 2024.
Rolling Planning - Framework Agreements Intermediate Report 1 v0.3.2