The CEE and Baltic states rank last in the 2015 railway performance index report carried out by the Boston Consulting Group (BCG), titled The 2015 European Railway Performance Index: Exploring the Link Between Performance and Public Cost.
For national railway systems in Europe, public subsidies provide essential funds to support infrastructure maintenance and passenger and freight operations. Some countries allocate the lion’s share of public subsidies to either infrastructure managers or train-operating companies, while others allocate subsidies relatively evenly between these organizations. “Our study indicates that the model for allocating public subsidies correlates with a railway system’s performance,” says Sylvain Duranton, a BCG senior partner and a coauthor of the report. “Simply put, countries that get the most value from public spending on railway systems also allocate the highest percentage of subsidies to infrastructure managers.”
“This correlation does not mean that more effective subsidy allocation is a magic bullet for improving railway performance,” cautions Agnès Audier, a BCG partner and a coauthor of the report. “However, it suggests that national governments and railway companies can gain valuable insights into what drives railway performance by taking a fresh look at their country’s model for allocating public subsidies.
The report benchmarks Europe’s railway systems by analysing the intensity of use, quality of service and safety. Three groupings emerged from the analysis:
- In tier one, six countries have high-performing railway systems: Switzerland, Sweden, Denmark, France, Finland, and Germany.
- In tier two, nine countries perform generally well, but their results vary widely among the three dimensions: Austria, Great Britain, Czech Republic, the Netherlands, Luxembourg, Spain, Italy, Belgium, and Norway.
- In tier three, ten countries have low overall ratings, in most cases because of poor safety: Slovenia, Ireland, Lithuania, Hungary, Latvia, Slovakia, Romania, Poland, Portugal, and Bulgaria.
Overall, the results of BCG’s 2015 study are consistent with the first study, in 2012. For example, Switzerland, Sweden, France, and Germany are still among the countries with the best-performing railway systems, while ratings for safety continued to show the greatest variation among countries
Key Performance Drivers: Public Cost and Subsidy Allocation
The 2015 RPI again found that a railway system’s overall performance typically correlates with the level of public cost (the sum of public subsidies and investments in the system). Probing deeper into this relationship, the authors also found that the value that countries derive from their public cost typically correlates with the percentage of public subsidies allocated to infrastructure managers.
Directing subsidies to a national railway’s infrastructure manager appears to correlate with greater efficiency and effectiveness compared with spreading the funds among multiple train-operating companies. It is important to emphasize that the study found merely a correlation—not a direct cause-and-effect connection—between railway performance and the model for allocating public subsidies. Other factors, such as a country’s consistently high investments in the system over time, play strong roles in determining the extent to which public spending on railway systems generates value for a country. Variations in how railway systems have applied traditional optimization levers also contribute to current differences in performance.
“Many factors come into play in promoting high performance, such as asset and network optimization, marketing effectiveness, operations performance, strategic workforce planning, and governance efficiency,” says Hazan. “Even so, the study’s finding should encourage stakeholders to closely examine the options for increasing public support of infrastructure managers—whether by increasing the amount of public subsidies overall or the percentage allocated to infrastructure managers.”