COVID19 Impact On Railways and Possible Future

Download full article as PDF file. below

Ali Şengöz
Arup, Associate, Europe Rail skills Leader, Design Manager, Turkey

Abstract

Although it is new to everyone, our daily life is now full of Covid19 news. “Stay Home” motto limits our freedom of movement, reducing our serotonin level. Many people, who used to travel a lot for business or leisure, can now only dream of visiting new destinations. Social media now broadcasts bakery and cooking stories instead of seaside views. In addition to social disrupting impact of pandemic, the effect is much more catastrophic for the transport sector. Railway companies are struggling with financial problems due to reduced passenger and freight services while still having to pay for fix costs and trying to find a way out of this crisis. In this short article, reader can find a summary of recent news about the impact of Covid19 on Railways, and suggestions, open to discussion, about possible solutions and the concept of “new normal”.

1. Introduction

Covid19 or Coronavirus is now the most known expression in the world. It already changed the way we live and still the future is not clear, or “new normal” is not defined yet. As “human life” is always top priority; the last few weeks have been focussed on emergency response to the Covid-19 centering on minimising loss of life, search for a vaccine or a medicine and lock downs to protect people from themselves. Meanwhile society has been adapted to the situation of focusing on health care system, adopting themselves to the new extreme situation, working remotely and staying at home. Each sector is dealing with negative outcomes of pandemic and trying to find an exit scenario keeping in mind the protection of people’s life. But what is the next challenge? It is recovery. In order to understand better, how we will deal with pandemic in railway transport, it is important to understand how we are impacted and what has been faced during this period in which almost no one was truly prepared.

First cases of coronavirus in Europe were discovered on January 24 in France followed by cases in Germany and Italy. Countries in continental Europe started to reintroduce border controls after coronavirus cases rose quickly in Italy and Germany. In the beginning, citizens from high-risk countries were not allowed to cross borders to other countries which started the era of travel restrictions.

Since March, Europe has been subject to movement and social distancing restrictions, and the economy is at a standstill in many sectors,

In this short article you’ll find how railways are impacted from Covid19, what was bad, and what was good, and finally based on the observation of the current situation, what will be waiting for us in railway transport in the near future. What helped? What hindered? This article is structured on several news available online along with additional research, which are listed in references section. Thus, a long reference list is available at the end where it will be possible to find more detail about the news that is mentioned.

2. Current Situation

Air traffic has been discussed more on media, but rail traffic has also been impacted seriously. Upon the sudden increase of cases especially in Europe, almost all international traffic is suspended except some freight services. Before going deeper into details, general figures about rail transport before pandemic are given below.

UIC reports in 2017 (based on the data provided by their members) global Rail Passenger transport – Passenger-kilometres (millions) is 2.8m, dominated by Asian and Ocean companies (%80), and Rail Freight transport – Tonne-kilometres (millions) is 9m which is almost equally shared by Russian, American, Asian and Ocean Companies with a small contribution of others.

If we check the information for Europe from Eurostat, passenger number is 472m (not passenger-kilometre stat) in 2018 with a continuous increase trend.

As expected, due to its sustainable nature and efficiency, demand is increasing for rail transport both in freight and passenger. Or at least “was”.

Let’s see what has happened till now and discuss what is expected to be.

3. What has gone bad for railways

It is obvious that most negative impact is the suspension of services which resulted in loss of income and loss of employees to reduce salary costs while fixed expenses has not changed much. These 2 have both financial and also social impact due to job loss, on transport companies. Not only big markets like China, America or Indian (IRCTC) [3] laid off their employees, but also other small companies like Norwegian VY [4] also went for cut of staff. Many companies all around the world like Leo express [5], New York Subway MTA [6], Sound Transit from US [7], declared that their demands were reduced around %5-%20 which is not practical to operate. However, as transport is a critical service that governments or even private companies banded with their contracts, need to keep their operation going. Transportation is a constitutional right and is not possible to shut down simply because of financial problems. This is why it should be considered both as a commercial problem, but also a public service continuation.

One of the main factors that increase the risk of crisis is the fixed costs such as salaries, infrastructure costs, rents, maintenance etc. Similar to Airlines, budget train operators started to be seen in the railway operation market. This was beneficial for increased frequency with lower rates (may be by sacrificing comfort) but, due to the high infrastructure costs and unknown future, some companies like Flixtrains announced not to invest to new lines [8]. Especially during the recovery phase of railways after pandemic, additional operators will be needed to run on rails. Similar commercial circumstances arise in Germany [9] and other countries as well. In this reference you may find what the main costs are for railway operations and the definition for the “fixed costs” [11]. Short-term variable costs can be reduced by some measures during crisis, but the reduction in fixed cost is considerably low. Proposed measures to reduce fixed costs are the ones that you are familiar from news like cutting services, combining trains, slowing train running speeds to conserve fuel, reducing maintenance costs as a result of reduced mileage-run of train cars and locomotives.

Even the cargo and logistics demand is increased especially due to online marketing, number of carloads transported by railways (and by all means of transportation) is reduced. “Since 1988, when our data began, total U.S. rail carloads were lower than they were last week only during a few Christmas and New Year’s weeks, when rail operations are seasonally low.” said AAR Senior Vice President John T. Gray [10].

With the need to mention that US is the best place to find relevant data for railway operations during pandemic, this may be the case as there are more private companies compared with Europe especially. If you want to investigate “real-time true impacts of the COVID-19”, FTR prepared and online tool to share data including recovery index [12]. The Index currently shows that rail volumes in the intermodal and carload sectors “are likely near the bottom,”. “While a recovery is expected following economic restart, the length of the recovery is largely unknown,” FTR says. This unknown future is the “risk” that experts focused on these days.

When it comes to Europe and scenarios for recovery; Rail market analysis specialist SCI Verkehr has published an assessment of the impact of the coronavirus pandemic on European rail traffic, which predicts a 30-50% drop in passenger traffic for 2020 and a slow recovery. They produced three scenarios: rapid recovery, disrupted markets, and the renewed lock-down. SCI does not expect a recovery to pre-crisis levels until 2023 or 2024 with a reduced demand of %40 for passenger and %20 for freight. Two interesting figures are given below.

4. What is promising for railways

Up to now, we have seen several known issues about negative side of pandemic regarding railways, including financial problems and unknown future. Here you will see some good news which may bring you out of pessimistic way of thinking.

It would be expected that infrastructure owners may plan to suspend infrastructure investments, building new lines or large maintenance schemes. On the contrary, we received several good news that tenders are not cancelled and new contracts are awarded. These include; Hong Kong Tung Chung Line metro extension [14], UK’s confirmation of ‘Notice to proceed’ on High Speed 2 [15], submittal of New Munich tram application with an assumption of construction to start this year [16], announcement that Rail Baltica Project is not to be interrupted [17] and opening of a new extension for Sydney Light Rail network [18]. In addition to the design studies which can be completed remotely without interruption, construction works are also not suspended and new tenders are launching. This is also important for the economy of countries as construction market is the lead market for economies.

During first stage of pandemic, some companies even helped to support fight with Covid19. Spain, Renfe and Talgo modified high-speed trains to transport Covid-19 patients [19] which also proved the importance of railways during global crisis, Austria found short term and quick solutions to keep operation alive by granting temporary PSO to ÖBB and Westbahn for Vienna – Salzburg route [20].

Certainly, several countries started to support railway companies by funds and credits or speeding up payments. EU approved an investment package worth more than €1.4bn for 14 large scale infrastructure projects in several European countries [21] which was a life line support for the market. New Zealand speeded up payments [22] as well. German government estimated that the financial impact of the pandemic on DB could reach between €11bn and €13.5bn by 2024 and the government is considering funding around 80% of the increased costs [23]. British Government also agreed a s £1.6bn funding package for Transport for London, a self surviving entity which is not longer able to cover expenses as revenue has dropped drastically [24], but surely, no one should foresee bankruptcy of London Transport and shut down.

Crisis can turn out to be opportunities for those who can plan and set their position correctly. Many operators and infrastructure owners changed their work plan and focused on works, which is difficult to complete while trains continue to run frequently. Having sufficient resources during reduced operation, can be a chance to upgrade the infrastructure [25]. BART also puts small business to work on railroads to keep working during pandemic [26], which keeps people busy and injects cash into the market.

Italy started to recover after having had the lead in number of patients during the pandemic, in Europe, for several months. Italo announced that its high-speed trains would soon be providing a new direct link between Turin and Reggio Calabria in the south, starting from June 14th [27]. They will provide safety kits to the passengers as a measure of protection. China as the epicentre of global pandemic, announced increase in Europe rail freight services [28] and introduced new high speed services [29]. In addition to the pioneering freight service recovery, countries including Belgium started to restore all passenger services too [30]. However, it is important to plan staged recovery as international travel has still not %100 recovered and not expected to do so shortly.

Rail industry also received good news that the growth started upon restarting activities from several locations [31][32].

5. Possible plan of actions

Businesses are trying to survive during this tough period, what governments can do (in addition to cash/ loan support) is to provide required PPEs and ease on paperwork/permits/policies to keep business going. Managers and workers(employees) should not waste their time on obtaining masks or health equipment, and try to cover those expenses. Governments should support these markets with these tools so that people can work, receive their salaries and feel safe. Additionally, managers can focus on building new strategies and altering their products.

Effective and well established asset management system enables operators to decide on maintenance works to be prioritised and staged during reduced traffic and even on halted schedules. Railways can accomplish more with less resources if they can better manage rail information and harness the vast amount of existing rail corridor data in a prioritized plan, assign the work, and monitor the execution and results with technological applications. This system should also be interconnected globally for better coordination.

Passenger trains: Biggest discussion is how to deal with disinfection measures necessary for rail travel. While airlines already denying to allocate a free seat to leave social/physical distance between passengers, should we expect this from rail operators? It is not possible to operate with same rates and reduced passenger numbers. Either ticket fares are expected to be increased (which will naturally reduce demand) or passengers are expected to protect themselves with proper PPE’s and take a certain amount of  risk. This is an unknown problem and I believe solutions will evolve by trial and error approach.

As Italy is proposing for High-speed trains [27], companies should get prepared to deliver “Safety Kits”, which should be long planned and logistics should be resolved before taking action as it is not easy to find proper safety kits..

Changing modes of transport should be discussed broadly between operators and at governments level. Considering French approach to support Air France with a restriction of not flying shorter distances (letting them to be handled by railways) [33], this may increase recovery speed for both transport modes. This can also initiate the discussion on “new normal”. The concept of “The plane should no longer be a means of transporting [people] in one hour which could be done at lower cost of CO₂ by train in two hours or two hours 30” can be globally accepted.

Freight: Rail freight services which hold an important role on transportation,  continued to operate even during the peak days of the pandemic. However, long delivery duration for railways, is still a barrier to compete with air freight. Connection between China and Europe takes about 18 days of travel. [CK1] Investments should continue improving infrastructure to reduce cost and increase speed. Additionally, time lost on border controls is on critical path for delivery. Several days can be saved by digitalizing security checks.

There is a need to increase number and capacity of Rail Ports to connect goods transported by rail to the inland. Flexibility can be achieved by introducing rail transport not only for massive large loads but also serving for huge small cargo demand like Amazon or Aliexpress.

6. Conclusion

Starting from the beginning of global pandemic, Railways are impacted seriously as other modes of transport. During the first few days in which the means of dealing with the pandemic were unknown, dire news were received each day. First days, as it was not known how to deal, bad news were heard each day. However, as companies and governments started to comprehend the situation better, they started to react and brought themselves to put more solutions on table and kept railways alive. Some consequences of negative impacts still remain, but railways are trying to recover. As the recovery is not expected to be quick, it is important to keep the alert level high and continue to look for innovative changes in the system without resistance. Existing known tools can only serve for a short period but there is need for further changes which can be referred to  as “new normal”.

This pandemic and short examination of impacts on railways revealed the importance of “Resilience” as it is not always possible to be prepared for shocks and stresses but planning for recovery is lifesaving. As a result, it can be stated that transport system and companies should concentrate more  on resilient organizations which is the key to fast recovery.

7. References

[1] UIC
[2] Eurostat
[3] India’s IRCTC suspends Tejas trains until 30 April
[4] Vy lays off another 400 employees
[5] Leo Express business at risk due to coronavirus crisis
[6] New York City Subway ridership plummets
[7] Sound Transit reduces Sounder South services
[8] High infrastructure costs force FlixTrain to halt French expansion
[9] Railroad Development Corp pulls out of FlixTrain partnership
[10] AAR: “The Impact of Coronavirus on Railroads Is Growing”
[11] Managing Costs During A Pandemic
[12] Unbiased and actionable intelligence is more important than ever before
[13] SCI Verkehr forecasts huge drop in 2020 European passenger rail traffic
[14] Hong Kong approves Tung Chung Line metro extension project
[15] Government provides construction sector certainty by confirming ‘Notice to proceed’ on High Speed 2
[16] Planning permission sought for new Munich tram line
[17] Rail Baltica project unaffected by coronavirus pandemic
[18] Sydney light rail network completed as final stage opens
[19] Renfe and Talgo modify high-speed trains to transport Covid-19 patients
[20] Austria grants temporary PSO to ÖBB and Westbahn for Vienna – Salzburg route
[21] EU approves €1.4bn for infrastructure projects
[22] NCF donates blankets; New Zealand speeds up payments; VR suspends overnight services
[23] German government considers massive aid package for DB
[24] British government agrees £1.6bn funding package for Transport for London
[25] Traffic Lull Allows For More PTC Work
[26] BART puts small businesses to work on the railroad during pandemic
[27] Italy launches new north-south high speed train route
[28] China – Europe rail freight flows buck economic trend
[29] China introduces new high-speed services
[30] Belgium restores nearly all passenger services
[31] Rail industry faces strong growth post-coronavirus, UBS says
[32] Union Pacific reports Q1 2020 financial results
[33] Air France ordered to curb competition with rail in France