Brussels, March 28th, 2017

Björn Westerberg

ASTOC

- Background

- ASTOC

- Rail traffic in Sweden

- Liberalization

- What are the main opportunities and challenges?

- Infrastructure

- EU-Regulation

- Digitalization

- Boosting the rail mode competitiveness

Agenda

BotniaTåg AB

Keolis Sverige

Nordiska Tåg AB

TMRail AB

Tågåkeriet i Bergslagen AB

Ansaldo STS Sweden AB

Associate members

43 members of which 10 are associate members

Quality - Capacity – Competitiveness

Business

Administration SJ

Green Cargo

Banverket

SJ Ltd

Jernhusen

EuroMaint

SweMaint

Unigrid

TraffiCare

ASG

Swebus

Scandlines

Royal Viking Hotel

Traffic Restaurants

1988 1996 1995 2000 2001

Separation and divestment of SJ

Public ownership

Private ownership

The liberalised railway

Passen

gers

F

reig

ht

Swedish railway 2017

Rolling stock maintenance and renovating

Train manufacturers

Rolling stock owners

Certification/Safety Market control

Infrastructure Manager

EuroMaint Rail Mantena Bombardier Alstom DSB Vedligehold Midwaggon mgw Service

Jernhusen A-train SL kommuner Train Alliance

SJ, Veolia DSB, MTR Arriva A-train Tågkomp.

Motala Trains MiTrans

Bombardier Alstom Stadler Siemens Ansaldo

SPFs memb. Transitio SL SJ DSB

RKTM IBAB Green Cargo Hector Rail TÅGAB RushRail TX Logistik m fl

AlphaTrains Mitsui Railpool Hector Rail Green Cargo

InfraNord Strukton VR Track Baneservice

Infrastructure maintenance

Regional public transport agencies

Train operating companies

Trafikverket Transportstyrelsen Konkurrensverket

Properties Train stations Depots Terminals

Ministry of Industry and Transport

4RP Political Pillar: Market opening and Governance

6

Market opening - Yes

Infrastructure - Integrated model

Infrastructure - Separated model

Market opening - No

• Institutional vertical separation between infrastructure and train

operations

• National multi-modal authority Trafikverket (Swedish Transport

Administration) is the main (80%) infrastructure manager, with

strong focus on procurement from external contractors

• Train operating companies (or other organisers of train services)

apply for access to the track infrastructure and pay charges

• Horizontal separation between passenger and freight operations

Current organisation of the Swedish

railway sector – some characteristics (1)

• Decentralised responsibility for regional passenger services to 21 county

public transport agencies (controlled by municipalities and counties with

their own taxation power)

• Most regional passenger services (and some long-distance) depend on

subsidies and are procured by means of competitive tendering (resulting in

contracts between public transport agencies and train operating companies)

• For tendered services, the procuring authority typically provides the rolling

stock to the train operating company

• Freight services and commercial passenger services are subject to open

access competition. For these services, train operating companies have

their own rolling stock

• The role of the public sector is still very strong (state controlling the main IM

and RUs, county public transport agencies procuring train services)

Current organisation of the Swedish railway

sector – some characteristics (2)

• Increased investments in rail infrastructure

• Strong local and regional commitment to develop

passenger services

• Strong growth in demand

• Improvements in (for example) productivity and safety

• Innovations, new pricing models

• In recent years, decrease in average speed of trains

(mainly due to capacity constraints)

• Punctuality problems a recurrent issue of concern

• Appearance of several new entrants, reducing the market

share of the incumbents

• Tendering leading to reduced need for operating subsidies

but also cases of strategic bidding

Experience and effects

Strong growth of railway services

• Since the early 2000’s both passenger and freight services have experienced a strong growth

• Important factors behind the development:

Structural reforms and market opening

Infrastructure investments (early years)

Low infrastructure charges (level playing field?)

Regional traffic development (passenger PSOs)

Competition (freight)

(Relatively) steady framework conditions

Passen

gers

F

reig

ht

Governance and cooperation

Rolling stock maintenance and renovating

Train manufacturers

Rolling stock owners

Certification/Safety Market control

Infrastructure Manager

EuroMaint Rail Mantena Bombardier Alstom DSB Vedligehold Midwaggon mgw Service

Jernhusen A-train SL kommuner Train Alliance

SJ, Veolia DSB, MTR Arriva A-train Tågkomp.

Motala Trains MiTrans

Bombardier Alstom Stadler Siemens Ansaldo

SPFs memb. Transitio SL SJ DSB

RKTM IBAB Green Cargo Hector Rail TÅGAB RushRail TX Logistik m fl

AlphaTrains Mitsui Railpool Hector Rail Green Cargo

InfraNord Strukton VR Track Baneservice

Infrastructure maintenance

Regional public transport agencies

Train operating companies

Trafikverket Transportstyrelsen Konkurrensverket

Properties Train stations Depots Terminals

Ministry of Industry and Transport

Railway Sector Cooperation Forum

Railway Sector Cooperation Forum

(JBS)

Punctuality 12 WS

Maintenance 4 WS

Capacity Recruiting & branding

Culture Innovation

- Background

- ASTOC

- Rail traffic in Sweden

- Deregulation

- Governance

- What are the main opportunities and challenges?

- EU-Regulation

- Digitalization

- Boosting the rail mode competitiveness

Agenda

14

• Sweden has more than 12,000 km of railway track

– 2,000 km double tracks

– 10,000 km single tracks

Rail traffic in Sweden

Train operating companies

Source: Jakob Wajsman, Trafikverket

0

5

10

15

20

25

30

35

1988 1992 1996 2000 2004 2008 2012

An

tal o

per

atö

rer

Godstrafik Persontrafik Person- o GodstrafikFreight Passenger and

freight

Passenger

The car is the train’s major competitor, when it comes to traveling further than 10 miles

8% 15%

6%

Norwegian

SAS

Malmö Aviation

Sverigeflyg

Swebus

Bus4You

Arriva Abellio

SJ

MTR

Arriva

Abellio

Transdev

Tågkompaniet

Blå Tåget Länstrafikoperatör

er (RKTM)

70%

Advantage Passenger Rail

sid 17

Källa: Trafikanalys

Index 1

992

Examples of long distance trains

Rail infrastructure investments and

maintenance

Source: Trafikverket, and own calculations

0.0

5.0

10.0

15.0

20.01

98

9

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

Exp

en

dit

ure (

billio

n S

EK

, 2

01

4

pric

es)

New investments Maintenance Reinvestments

Source: Nelldal et al (2012)

CPTA monthly

travel card

SJ 2000

highest price

SJ 2000

lowest price

SJ IC/Regional

normal price

SJ 2000

discounted

price

Ticket price development

Market share - Air and train travel -

Malmö-Sto Train Air

2001 23% 77%

2011 30% 70%

21

Gtb-Sto Train Air

2001 49% 51%

2011 69% 31%

Sundsvall-Sto Train Flyg

2001 30% 70%

2011 66% 34%

Karlstad-Sto Train Air

2001 66% 34%

2011 90% 10%

Regional traffic system 1990-2016

Nya regionala

tågtrafiksystem

1 januari 2000

Stockholm

Göteborg

Uppsala

Gävle

Sundsvall

Kalmar

Linköping

Karlskrona

Halmstad

Helsingborg

Malmö

Nya regionala

tågtrafiksystem

1 januari 1990

Stockholm

Göteborg

Halmstad

Nässjö

Helsingborg

Malmö

Nya regionala

tågtrafiksystem

1 januari 2010

Stockholm

Göteborg

Uppsala

Gävle

Sundsvall

Kalmar

Oslo

Linköping

Helsingborg

HalmstadVäxjö

KarlskronaMalmöKöpenhamn

Nya regionala

tågtrafiksystem

1 januari 2016

Umeå

Stockholm

Göteborg

Malmö

Uppsala

Gävle

Sundsvall

Kalmar

Köpenhamn

Linköping

Luleå

HelsingborgKarlskrona

HalmstadVäxjö

Källa: Oskar Fröidh, KTH

22

- Background

- ASTOC

- Rail traffic in Sweden

- Liberalization

- What are the main opportunities and challenges?

- Infrastructure

- EU-Regulation

- Digitalization

- Boosting the rail mode competitiveness

Agenda

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

-15% -10% -5% 0% 5% 10% 15% 20% 25% 30%

Growth in value added

Gro

wth

no

of

emp

loye

es Growth in value added and no of employees 2009-2015

2015-10-21 © Bisnode 2015

Road rassengers grows in value added and number of employees.

Passenger rail increases in value added similar to bus but does not grow in no of employees

Rail freight drops in both employees and value added Road freight has huge growth in both employees and value added.

Freight transport by road is 16 times larger than the freight transport by train

24

Bussector Road Freight

Train Freight

Passenger Train

• Sweden is in the frontline of liberalization as well as market opening in Europe, closely followed by the UK. New EU regulations for the railway sector highly affects the Swedish railway, which is different from the European railways.

• The increasing level of regulation, especially on the technical side, might imply increasing costs and non-optimized solutions. Sweden has an important role and needs to push towards a market and customer focused development of regulations based on functional criterias instead of technical criterias.

• A key to success is to secure that EU regulations are customized to an open market. The open market encourages innovation and digitalization

• The majority of the CER members are represented by state owned companies making the role of ASTOC complex.

The impact of EU for the Swedish railway

2017-03-28 25

Key issues for the European railway from Swedish operators perspective

• Rail is key to reach the objectives of the White Paper and the reduction of CO2 emissions in EU and Sweden.

• Accessibility and availability, drives the need of standards (ERA), simplified administration, investments in bottlenecks

• Functional specifications and less regulation

• ERTMS, verification and funding

• Corridors in Europe, TEN-T, need of a management committee with the right resources

• Funding opportunities of TEN-T

• Taxation, harmonizing the different modes of transportation, climate taxation and VAT

• Implementation of the 4th Railway Package

• Fair competition from trucks

• The increased need for European infrastructure investments (rolling stock, maintenance etc.) requires external funding

BLS-visit 2009-07-09 27

Facing full-fledged deregulation

Customer satisfaction Improved quality of service

Employee contribution Increased participation

Sustained profitability Improved productivity

Expansion New markets

Challenges

Incumbent’s journey of change

… to SJ specifics

… to SJ is good for

… to SJ & sustainability

From TRAIN generics…

From TRAIN is good for…

From TRAIN & sustainability

… to serving people From operating TRAINs

… to dialogue From information

29

Digitalization is underway; maturity varies by industry, but most potential is yet untapped

Rail

Freight forwarders and carriers

Mail, courier, express, parcel delivery providers

Hotels

Contract logistics providers

Airlines

Car rental

Digital maturity

• Efforts to date have mostly digitized the business “as-is”

• Organizations either haven’t

recognized the real digitalization opportunities yet, or aren’t capable of implementing them

30

SOURCE: McKinsey & Company

Time

Innovative

startups create

disruptive

business models

New trends

emerge

Early adopters

start

embracing the

new models

Advanced

incumbents start

adapting to the

new model

Mainstream

customers

adopt

Tipping

point

Urban Transit

Travel platforms Advanced

incumbents and

established

“startups”

constitute the

new normal

Laggard

incumbents

die

Shipping and ports

Airlines

Industry revenues rapidly compressing and shifting away from incumbents

Flow of value to adjacent industries

Margin compression

Tourism

Logistics

The rail industry may soon face the tipping point of the digital lifecycle

Digitalisation Examples from Passenger operator

Migration from manual to digital channels

31

Offline/FullService Online/SelfService

Direct/Own Travel shop Contact Center

SJ.se, Mobil.sj.se Mobile app Vending machines

Indirect/Agent Travel agency Resellers

Micro sites / widgets Partners / affiliates

94 %

Strategy • Meet new customer habits • More efficient sales & service

Active shift for digitalisation

Goal • 94% sales via own

digital channels

Energy Transport Public Safety

Manu- facturing Media

Applications &

Analytics

Cloud &

Connectivity

Devices &

Sensors

Monetization

of Service

Telecom Operators

IoT

Other industries…..

Health— care

Internet of Things Enabling technologies

33

6 disruptions could fundamentally change the travel and transportation industry

Upcoming disruptions

Current disruptions

"The door opener for innovative startups in the

industry?"

Expansion of large technology companies

Online platforms Advanced robotics

"The 'big hit' to the logistics industry?"

"Cost structures, opportunities, competitors – will everything

change?"

"Fear of the hungry tech giants?"

"Traditional TTL companies as

capacity providers only?"

"Fundamental changes to cost structures?"

Autonomous vehicles Asset sharing Additive manufacturing

Organizing digital mobility Reconfigure or be reconfigured

– Rail as prime mover..?

Local

world

Global,

geographical

unlimited world

World of physical assets

Virtual/digital world of

dematerialised assets

Traditional company

”Prime Mover”

”Train operator”

”Offering

Design”

Value chain -

logic

Reallocation

Time/Space

”Innovator”

- Background

- ASTOC

- Rail traffic in Sweden

- Deregulation

- Governance

- What are the main opportunities and challenges?

- EU-Regulation

- Digitalization

- Boosting the rail mode competitiveness

Agenda

New business opportunities created by new capacity

Fehmarn Bält 2024

Ostlänken 2028

New High Speed tracks 2035

sid 37

Vision Railway 2050!

x2 x3

- Intentions behind the 4th RP

- Separation and market opening – it works!

- Balanced track access charges

- Be careful regarding severe consequences of detailed regulation

Summary

Thank you!

Björn Westerberg, CEO, ASTOC

Mobil: +4673 - 802 67 11

E-post: bjorn.westerberg@tagoperatorerna.se

Quality - Capacity – Competitiveness