SJ prepares to defend its market share

An ambitious program of improved services is underway for Swedish State Railways as it squares up to face fierce competition from land, sea and air, including other rail operators in the regional market.

Sweden was the pioneer of the vertically-separated railway model that is now found throughout Europe. Banverket, the track authority, was split off from SJ, the railway operating company, in 1988. The idea was that Banverket would be like the roads authority, with operators paying for licences to run over the railways.

A crucial difference to the later British model was that, unlike Railtrack, Banverket was not expected to earn all its money from operators paying to use its tracks; it would instead be like the roads authority in that the state would pay to have an adequate rail network.

Meanwhile, competition was introduced on the rails, with the Swedish regional governments able to put their local rail networks out to tender. The rolling stock generally belongs to the regions, which makes it easier to change over between operators. Private sector companies, such as home-grown BK Tag and French-owned Connex, came in to serve this market. Some of these firms have made a success of the business, with Connex operating important commuter services around Stockholm, while others such as BK Tag have gone out of business.

Unlike the British model, where state-owned British Rail was prevented from bidding for franchises, in Sweden, SJ was – and is – allowed to compete. Jan Forsberg, Managing Director of SJ AB, told Global Railway Review that the state-owned company has retained about 70 per cent of the regional networks that have been put out to tender. The franchises for operating local lines typically last five years, although in some cases the franchises last seven or even ten years. SJ faces a major competitive challenge in 2007, when most of the local lines that it operates will come up for tender.

Long-distance services

While the government was keen to stimulate competition in the regional rail sector, SJ’s position in the inter-regional market between major city pairs like Stockholm and Gothenburg was protected. This has been a controversial issue, with some politicians arguing that SJ’s monopoly should be broken; the Swedish parliament is due to decide on the question this autumn. But Mr Forsberg argues that SJ does not need any more competition on the rails – as the company already has enough competition from other modes to force it to run an efficient operation.

“We compete with cars, buses and aeroplanes,” he says. “For example, between Stockholm and Gothenburg, there are four airlines operating in competition with SJ.” At around 500km and a three hour rail trip, the journey between Sweden’s two largest cities is a battleground between air and rail. Mr Forsberg says that SJ is the dominant carrier on the route, with a market share hovering between 52 and 55 per cent.

Lowering journey times

SJ is constantly looking for new ideas to improve its competitive position, including, for instance, the Stockholm-Gothenburg route where a journey time of two hours and 40 minutes should come in to force over the next year. “This will be possible due to a combination of improved infrastructure and cutting out intermediate stops: in the peak times we could run services without any stops, or perhaps just one or two”, explains Mr Forsberg. The operator is also looking at raising the top speed on its X-2000 tilting train services from 200km/h to 220km/h.

A ?50 million refurbishment of the ten year old X-2000 fleet is underway. “From the passengers’ point of view it seems like a new train,” says Mr Forsberg. “We expect this refurbishment to make the trains suitable for another ten years of front-rank service.” Besides having a face-lifted interior and exterior, the refurbished trains are being fitted with equipment that allows internet and mobile phone use throughout the journey. The restaurant cars are being made suitable for a new range of food offerings.

The tender for the refurbishment job was won by Euromaint, a private company spun off from SJ that operates former state railway workshops close to Malmo. Work is proceeding at the rate of one train a month: so far, six of the 36-strong fleet has been treated.

International routes

Scandinavia is difficult territory for railways. The mountainous nature of much of the terrain often forces railways to take circuitous routes, whereas aeroplanes just fly over the top of all natural obstacles. This factor has affected the international route between the Swedish and Norwegian capitals, Stockholm and Oslo.

The two state railways did set up a new operation called Linx with the aim of improving links between the two cities. But with a five hour journey time by train, as against 45 minutes by air for a similar ticket price, it was impossible to compete and Linx was closed down, so that there are no longer any through daytime trains between the two cities.

“Now we are taking a new approach. By introducing a lot of passenger amenities on board and making the journey an interesting experience, we aim to make time our friend rather than our worst enemy.” The idea draws from the experience of the ferries that ply between Sweden and Finland, where fine dining and the opportunity to enjoy onboard night life inspire many people to fly one way on business trips and return overnight by ship.

A similar approach is to be tried on the night service between Stockholm and Oslo, and also on SJ’s internal sleeper routes from Stockholm to Malmo and Ostersund, a ski resort about 700km north of the capital. “I think we can provide interesting services, where there is an opportunity for a good night’s rest, a bar and other amenities,” says Mr Forsberg.

On the international route from Sweden to the Danish capital, Copenhagen, services were much improved when the fixed link over the Oresund straits opened in 2000. At the time it was thought that a single economic area might emerge based on Copenhagen and Malmo, thereby rendering virtually irrelevant the fact that the cities are in two different countries. “We haven’t really seen that happen, as there are different cultures and different markets on the two sides of the straits,” says Mr Forsberg. “But we have seen the bridge makes it easier for people to travel to jobs in the other country.”

Services will be further improved in 2010 when the Malmo city tunnel project, for which work is well under way, is completed. This will provide a link under the city from the Oresund Bridge to the main line to Stockholm, meaning long-distance services will no longer have to take a circuitous route around the city and then reverse in Malmo central station. It will also improve commuter services in the city of Malmo itself.

The project comprises two single track tunnels approximately 6km long, of which 4.5km is bored tunnel and the rest cut-and-cover. Malmo Central station will be altered to accommodate the new services from the tunnel, and two new stations will be built on the new stretch of railway. Hyllie station will be at surface level, while Triangeln station will be in the bored section of tunnel. Triangeln will serve the cultural and commercial heart of the city.

Stockholm city tunnel

Another tunnel project is under construction in Stockholm. This will increase rail capacity in the city centre by about 35 per cent when it is finished in 2010. “The idea is to put the commuter traffic in the new tunnel, which will free up capacity on the existing surface lines for long-distance services,” explains Mr Forsberg. “This is the single most important rail project under way in Sweden today and will remove a major bottleneck for us.”

Expansion abroad?

Some of Europe’s state railways have expanded into markets outside their home countries. For example, Keolis, a subsidiary of SNCF (French National Railways), is a partner in franchise operations in Britain, and the Danish state railway, DSB, has gone into partnership with the freight hauler English, Welsh & Scottish Railway to bid for British franchises. Would SJ be going down the same path?

“Step one for us is to put our own house in order, and achieve a healthy financial situation,” says Mr Forsberg. “Step two is to focus on the big round of franchising that is coming up in Sweden. Then we could think about expanding outside Sweden, but that would not be until after 2007.”