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Cross-border co-operation

October 2012

Ron Smith

Ron Smith meets the head of a Swiss freight operator, which is part private and part public owned, to find out why rail liberation is important for freight operators in all business models

Hupac (from the German word Huckepack, meaning ‘piggyback’) was formed in 1967 in Chiasso, on the Swiss/Italian border. Its shareholders are 72 per cent private transport companies, and 28 per cent Swiss national railways. Hupac is concerned solely with transporting intermodal freight, and has the most energy efficient, effective and busy terminals in Europe at Busto Arsizio, Italy.

Its volumes transported show a continual growth, taking out fluctuations caused by economic crises, with its traditional routes being from the North Sea ports to Italy, including rolling road from Germany to Italy. Increasingly, it is moving more traffic east to west, including founding a Russian subsidiary Intermodal Express LLC in Moscow in July 2011. Hupac believes strongly in a liberated railway market.

RP: You have recently expressed your views on the state of the open market for rail. What do you see as the problem?

Burnard Kunz, managing director of Hupac (BK): The European Commission has set itself some ambitious goals in the 2010 White Paper – 30 per cent of long distance traffic should be handled by rail by 2030, with a target of 50 per cent by 2050. Yet the railway system enters the race with considerable handicaps. In many cases, national and geopolitical interests dominate the state owned railways. As a result, while the EU calls for the creation of a European rail market, certain railways are delaying the implementation of liberalisation, harmonisation and interoperability; in fact they are raising the barriers even higher. The only winner in this game is the road – all of us are the losers.

RP: What do you suggest?

BK: Europe needs an open, efficient market for rail freight transport if it is to achieve its transport policy objectives. Hupac aims to stimulate the future of the railways with a 10-point plan and a call of ‘Just do it’.

RP: Liberalisation so far has not produced many new entrants into the rail freight market – why do you think this is?

BK: There was plenty of optimism when the liberalisation process began more than a decade ago. Many new railway undertakings (RUs) entered the freight market and on the axes where competition worked, the market flourished. The number of private RUs still in existence today is more sobering. The young companies suffered greatly from the 2008 crisis, which led to much consolidation in the market. Forced to rely on the private capital market for money, the RUs faced liquidity problems during the crisis and were no longer supported by the banks. Such problems are unfamiliar to the state-owned rail freight companies, which survive despite large deficits on their balance sheets.

RP: There has also been a consolidation of the market where, for instance, Deutsche Bahn has bought up some of the independent operators – where do you see the market going?

BK: Rail freight is a capital-intensive business. A number of new railway undertakings had to give up. We strongly believe in the benefits of an open rail market, such as we have experienced it on the north-south axis via Switzerland in the last decade. Keeping the market open was our main goal when we recently entered as shareholders into the newly founded SBB Cargo International. Our strategy is to co-operate with a large number of strong railway partners. The focus lies on quality and productivity in order to compete with road transportation.

RP: How do you see the competition with road developing?

BK: Most experts agree that the volume of freight within Europe will increase substantially in the next 20 years. So ways and means must be found to handle this volume as efficiently and ecologically as possible.

Rail and road, which together account for approximately 90 per cent of the transported freight volume, have been in unequal competition for years. There are considerable differences between the two modes of transport in terms of their competitiveness. The formation of the EU brought a number of substantial advantages for the road. In contrast, liberalisation of the railways began much later and is still in its infancy in many areas today. Whereas a truck licensed in Sweden or Italy can travel freely throughout Europe, the system of rail transport is tied to a rigid and complex transport network. Every locomotive must be individually licensed for each country, because Europe’s railways face dozens of different signalling and safety systems, licensing regulations, voltages and operating regulations. In contrast, the technical regulations within Europe for road vehicles differ only in terms of detail. The costs of licensing are also miles apart. European rail freight transport thus urgently needs harmonised operating systems.

RP: One of the areas of harmonisation under way is the adoption of European Rail Traffic Management System (ERTMS) across Europe. Do you think this will solve some of the interoperability problems?

BK: Of course it will. The question is whether the railways are willing to invest and adopt the new standard in due time.

RP: Hupac has traditionally operated from north to south. Recently you have opened a branch in Moscow and have sent trial containers by land to Shanghai, in November 2010. What do you see as the areas for future expansion for Hupac?

BK: The north-south axis is the main intermodal transport axis in Europe and it will remain so in future. There is still a lot of traffic that can be converted on rail, of course, depending on the political will to promote modal shift and to invest in rail infrastructures.

In recent times, transport volumes have grown remarkably on the east-west axis. In order to serve our customers, we have developed transport services from Benelux/Germany to Poland and Russia, to Austria, Hungary and Romania, as well as to Spain. The developing of Far East services is quite a big challenge. We operate together with local partners. Our recent test transportations to China and South Korea were successful. We expect an increasing demand for the land bridge to the Pacific area in the coming years.

RP: A growing flow of rail freight traffic is on EU corridor 10, through Slovenia and the Balkans, leading to Greece and Turkey. Does Hupac have any plans to develop traffic on this axis?

BK: We are looking with interest at this corridor, even if at present we do not offer transport services in this area.

RP: There are many bottlenecks in the network, for example, in Germany to connect with the Scandinavian flows, and also to connect with the new Gotthard tunnel when it opens, and in Italy, Do you think that there is enough ‘joined up thinking’ by the national railway authorities to look beyond their frontiers?

BK: The various national strategies and priorities hinder the overcoming of the existing technical barriers. As a consequence, international transport corridors with harmonised parameters are still waiting to become reality. This has negative consequences on efficiency, quality and competitiveness of rail transport.

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Burnard KunzBurnard Kunz, managing director of Hupac
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