Rail Professional interview: Alain Thauvette
DB Schenker Rail has just launched a weekly freight service from Poland to the UK. But its success with international services comes on the back of cut backs at home, following several tough years of recession. UK CEO Alain Thauvette speaks to Katie Silvester
Alain Thauvette has a lot on his plate. The head of DB Schenker Rail Region West runs all of DB Schenker’s business in the UK, France and Spain, which sees him splitting his time between the UK, Paris and Germany, with Spain within his remit too. The French Canadian relocated to Paris with his family in 2005 to run French freight operator Euro Cargo Rail, then part of EWS, now owned by DB Schenker. Last year he took the Region West helm from fellow Canadian Keith Heller on his retirement.
Since then, DB Schenker has been renewing its efforts to increase its business between the UK and the Continent, via the Channel Tunnel. In November, it launched the first ever service between Poland and the UK, which is to be a regular weekly round trip. The initial service arrived in the UK six minutes early on 11 November. ‘We were looking for a place where’s there’s traffic to and from the UK, that’s far enough that the cost could be borne by it,’ says Thauvette. ‘With France, for example, there’s too much competition, and it’s too close. But Poland is a big market. There was a good mix of product that wanted to come to the UK and vice versa.’
Formerly known as EWS (English, Welsh and Scottish Railway), the operator has always had a greater interest in running services to the Continent than any of the other British-based rail freight companies. The purchase of EWS by Deutsche Bahn subsidiary DB Schenker in 2008 made it part of a European-wide freight operation, which has made running international services even more of a focus for its new CEO. Canadian National Railway (CN) had shares in EWS, which is why both Thauvette and Heller originally came from CN. This North American influence has also reinforced the idea that rail freight only comes into its own over long distances where the economics begin to have the advantage over road haulage.
The main hurdle that DB Schenker has had to get over is winning approval for its locomotives for use on High Speed One (HS1), the new line that runs between the Tunnel and St Pancras. Without access to that, freight can only go as far as Dollands Moor freight yard in Kent. HS1 has been built to the full European loading gauge, which means that European-sized rolling stock can continue from the Continent as far as Barking – the terminal for the new Polish service. In order to get approval to use HS1, DB Schenker has had to modify ive of its Class 92 locomotives, mainly to install in-cab signalling capabilities. Although some EU funding was available to support this, DB Schenker has had to contribute several million pounds of its own.
‘We applied for Marco Polo funding to help us do that because, once it’s done, it’s for everybody,’ explains Thauvette. ‘Anyone else who’s got a Class 92 can get it modified once it’s approved.’
Is there a timescale for the company to re-coup this investment?
‘It’s like investing in the future. You can’t always count in days or months, but I think, over the next few years, the goal is to get the traffic up on HS1. Our aim is to modify five or six Class 92s.’
Using the Channel Tunnel at all has always been problematic. Initial forecasts of freight usage fell far short of expectations when it first opened. Most freight operators have been put off by steep access charges and the French bureaucracy that has to be negotiated in order to access the railway at the other side. However, GB Railfreight has now been bought by Eurotunnel subsidiary Europorte, with the intention of running its own cross-Channel services, as well as making the tunnel more attractive to other operators. Has GB Railfreight’s involvement made the Tunnel any easier to use?
‘It changes nothing for us in the UK – sometimes GB Railfreight is a partner, sometimes we compete. C’est la vie. I think its involvement in Europorte will help to broaden people’s minds as to what’s required for the tunnel because they will encounter the same hurdles we are meeting.’
But, he adds, using the Tunnel is never really straightforward, with operating costs remaining high. DB Schenker currently has 16 trains going each way through the Tunnel weekly, which it wants to expand as quickly as it can. ‘What’s interesting with HS1 is that it wasn’t a priority to get freight on it for a long time. It’s always been an impediment for the UK that you need a different type of wagon if you’re coming from the mainland. The tunnel was built with the foresight to let continental gauge wagons come through and HS1 finally fulfills that. But we’ve trained everybody to understand you can’t bring continental wagons into the UK and now we have to untrain them! We can now go as far as Barking, but we’d like to have the infrastructure to go further.’
Commodities carried on the Polish service so far include manufactured parts and components for the automotive sector, as well as food and other goods for the retail market.
‘We were happy with a 90 per cent load on that first train. We’re looking to lengthen the train by stopping off in Germany. Then we’ll have a 750-metre train and that would be at the limit of what’s permitted, so we’ll begin a second service. By having the first train as a showcase, we can have the second service full before long. We’ve been running trains from Italy for a long time, so we know it’s do-able.’
A second service from Poland may go via the Netherlands, with the aim of dropping off and collecting boxes there too. Thauvette would like to increase the number of DB Schenker trains using the tunnel from the current 16 return services a week to 22 over the next year.
‘We’re looking at additional traffic coming from Spain too,’ says Thauvette. ‘It’s a nice distance from Spain, over 1,000km, and there’s a lot of trade. It’s steel; it’s intermodal; we have trains going to Italy, Germany; we have clay, we have automotive parts and finished vehicles, mineral water and liquor. So 16 return moves and we want to add six more. We want to run more traffic from Spain, more fresh products. For Poland we’re looking at, by February, having a second train, but we don’t want to bite off more than we can chew.’
At the moment, most of the boxes arriving at Barking from the Continent are for distribution in the London area. But if they are to continue their journey further north by rail, they would have be transferred to smaller wagons to fit the tighter loading gauge that is the UK standard. A few key routes have been ‘gauge enhanced’ by Network Rail, so that wider wagons can use them, but most remain quite restricted. The problem is particularly acute with 9-foot 6-inch, or ‘high cube’ boxes, which require specially adapted wagons to carry them, as traditional British wagons would see the boxes colliding with platform edges, bridges and tunnels on all but the gauge enhanced routes.
DB Schenker would particularly like to see gauge enhancement on freight routes from Felixstowe to Nuneaton, Southampton to the WCML, Water Orton to Doncaster and on the ECML/Joint line.
‘We’re looking at sending product further north by rail. But for sure it’s going to end up on the road at some point or other!’ says Thauvette. ‘Sometimes, putting it onto a truck isn’t actually all that cheap. In the London area, a truck won’t get that far in a day.’
All DB Schenker UK’s efforts to build its presence internationally, however, mask the fact that there have been several tough years in the home market. Like all the UK’s freight operators, the company saw a huge drop off in business when the recession began, and some traffic is still not back up to pre-recession levels. The company has had to make some redundancies and incurred a loss in its last financial year. Its depots at Trafford Park and Rugby closed for a while, but Trafford is already open again, with Rugby set to follow suit. ‘I had to carry out some drastic medicine and re-arrange the business units,’ admits Thauvette. ‘I reduced it from four business units to three business units and re-arranged the way the business units were working. Before we had four business units that operated like different companies, and sales was done as an independent branch of the company. Now, sales has been incorporated into the business units. We only really have two business units, which are Industrial and Construction. The third business unit, Logistics, is a collection of all the businesses that we have that were spread all over: passenger service, charter trains, wagon load, intermodal, both domestic and international, track maintenance. The old Energy unit lost 50 per cent of its coal business during the recession. The recession put the business in pretty dire straits.’
Now, however, coal movements are up on last year, and the quantity of cars being transported has begun to increase. The year 2011 will see the company make a profit in the UK, Thauvette assures me. On the domestic front, DB Schenker is now focusing on increasing its market share – not by pinching clients from other rail operators, but by persuading more customers to chose rail over road.
‘I always hear people say there’s not really a market for freight in the UK. There’s always a market, but it’s how you rationalise it and what kind of package you can put together for the customer to entice them back. Everyone thinks intermodal is a growing business and it’s going to grow like crazy, but the issue with intermodal is that it’s an expensive solution, because there’s a lot of handling and the distances are short. You need to look at where the trade lanes are and see if you can find something no one ever saw before – and you need to convince the customer that you have a better solution for them.
‘Domestically, we have the last wagonload system that exists and we are looking at adding more wagons and we’re looking at improving the offer, with more trains, more destinations.’
DB Schenker operates out of Southampton, Felixstowe, Tilbury, Teesport and Workington. Thauvette would like to increase traffic from each port.
‘Everybody focuses on the rail competition. We trade things between each other, but that’s a fool’s game. The real competition is what goes on the highway.
‘I think it’s more about growing your customers, giving them new solutions, not only taking your wagon further, but doing other things – managing your inventory, managing your wagons and taking that burden away from the customer.’
Thauvette was involved in the McNulty report and sits on the Rail Delivery Group (RDG), which has been doing good work, he says.
‘Peter Maybury, from Freightliner, and I were interviewed together for the report and we have a seat on the RDG. We are active participants and I think that’s a very good thing, because, when British Rail was taken apart, you lost this voice to counteract the DfT.’
What else needs to happen in the UK to help you grow your freight business over here? ‘Shorter trucks! I think the government is doing a good job in trying to keep a balance between the different modes. If you go to longer trucks it makes us less competitive. A freight wagon is usually the equivalent of two trucks, but if you get a truck that can carry the equivalent of a freight wagon, well you just lost something there and you’re going to encourage modal shift back towards road. There might be some corridors where you do need longer trucks, so I’m not saying you can have a blanket ban on long trucks. But the railroads are not known for horrendous profit margins, so anytime you upset the applecart, it’s dangerous.’