“Overcome the dry spell until the opening of the NEAT”

Chiasso, 7.2.2008 - From 2001 to 2006, combined transport in Alpine transit through Switzerland grew by more than 70%. The new law on the modal shift of goods transport 2011-2018 is supposed to create the framework for the further development of the railways.

Interview with Peter Hafner, Director of Finance and Administration for the Hupac Group, on the subsidy policy of the Swiss Confederation and operating subsidies in combined transport

Mr Hafner, what are your expectations of the new law on the shift of goods transport for the period 2011-2018?
For a start, a clear focus on UCT (unaccompanied combined transport) with complementary promotion of the Rolling Highway (Rola). It is beyond dispute that UCT is a more efficient means of modal shift than the Rola. The artificial expansion of the Rola to 400,000 spaces per year would massively impede the development of UCT, which for years has proven to be a real driver of transport shift, and ultimately cause a shift back to the roads.

The Swiss Federal Council draft on the goods transport law provides for subsidies of 1.6 billion in support of combined transport. Does this allow the shift target of a reduction to 650,000 road shipments per year to be achieved?
There would be fewer funds available per year than in the current period, which expires in 2010. For the shift target to be achieved, the present volume of combined transport must be increased from just under a million road shipments by a factor of two-and-a-half. As to whether this ambitious target can be achieved with lower annual subsidies than at present, we have our doubts.

All the same, the subsidies are supposed to fall for each shipment shifted.
That is what they do already. By 2006 the average amounts used per shipment had already fallen by 30% compared to 2001. In the coming years the subsidies per shipment will fall constantly lower, as the total amount is capped and used for growing CT volumes. In 2018 the subsidies per shipment will be 76% lower than in 2001 – that is assuming growth in line with targets for combined transport, which must increase by an average of 8% per year with a general growth rate of 3% in the transport market if we are to achieve the shift target. Until now it has been possible to compensate for the falling operating subsidies through various improvements in productivity. Until the opening of the flat railway through the Gotthard base tunnel, though, we are still dependent on a cost-intensive, 125-year-old mountain line; there is limited scope here for improvements in productivity.

What would be the consequences of the reduction in operating subsidies?
With the general cost trend in the railway sector and a simultaneous drastic reduction in the operating subsidies, there are a number of conceivable scenarios: from a slowdown in growth to stagnation all the way to a shift back to the roads. One thing is certain: combined transport needs adequate state support in order to guarantee the intended growth in the future. The goods transport law 2011-2018 must bridge the dry spell until the opening of the NEAT.

What financial framework do you consider adequate?
We consider a financial framework of CHF 2.0 billion for the eight-year period 2011-2018 imperative, so that we can successfully continue the shift process. In this scenario the reduction of the operating subsidies would turn out to be slightly more moderate, which would have a positive effect on the market opportunities for combined transport.

What are operating subsidies in fact?
Operating subsidies are payments granted by the Confederation to compensate for the CT operators’ costs not covered by the market for their transalpine and, to a lesser extent, their import-export transport. They are paid so that the operators can set market prices and combined transport therefore remains competitive in comparison to the roads. One particular reason why the subsidies are needed are the increased production costs on the mountain lines. Goods trains are many times heavier than passenger trains and, depending on the train length, need two or three locomotives to cope with the gradients.

How did the present subsidy model come into being?
Until the end of 1999 the Federal Office of Transport (FOT) paid the compensation for combined transport directly to the railways. Compensation was paid for the difference between the full railway production costs and the traction prices charged, which had to be geared to the road market price. This system was changed in 2000 in the course of the railway liberalisation, in order to encourage competition between the railways. In the present subsidy model, the Confederation no longer supports the railways directly but in fact indirectly via the CT companies: the railways charge the full costs to the CT company; the CT company receives operating subsidies determined in consideration of factors including the calculated market price, exclusively for the scheduled trains that have actually run.

What advantages does the present system of operating subsidies offer?
It has set two important processes in motion. For one thing, it has stimulated competition among the CT operators. Until the year 2000 there were three CT operators in Switzerland, today there are just under 20. As a result, combined transport has become more attractive and grown. For another thing, the Confederation can gradually reduce the operating subsidies per shipment kilometre. More and more transport is being shifted with the same funds. The CT subsidy per shipment kilometre fell by 30% between 2001 and 2006 for Hupac transport.

How long will operating subsidies be needed in Switzerland?
The operating subsidies can only be abolished when the Gotthard base tunnel delivers a productivity boost. The Lötschberg base tunnel is already open but offers no solution, because this route still has to be regarded as a mountain line because of the high gradients on the southern slope of the Simplon Pass.