Another flaw of vertical integration: One operator is on strike, so all the others have to stop as well

BRUSSELS, 29th November 2022: yesterday in Austria, we witnessed yet another example of how the vertically integrated state-owned rail incumbent model is not fit for purpose. Meanwhile in Germany, vertical integration is also failing – the incumbent is hugely in debt while Track Access Fees remain high. To make rail more attractive in the future, this flawed model finally needs to be overhauled.

Yesterday, the Austrian state-owned rail incumbent Austrian Federal Railways (ÖBB) was on strike, meaning that its rail services did not operate. In any normally functioning transport market, this would be inconvenient for a lot of passengers, but there would still normally be an alternative operator to help transport the public.

However, many EU national rail markets still cling on to an outdated model of the past: vertical integration. That means: the state-owned operator is part of the same of the same company as the state-owned infrastructure manager. Therefore, because the ÖBB operator was on strike, then the ÖBB infrastructure manager was on strike as well.

But there are alternative operators in Austria, such as WESTbahn and RegioJet. They were not on strike yesterday and wanted to carry out their services as normal. However, because they are reliant on the ÖBB infrastructure manager, they were not allowed to operate either.

It is totally unacceptable that, just because our competitor was on strike, then our passengers could not be transported either.

WESTbahn Managing Director DI Thomas Posch

Not only does such vertical integration cause a bad experience for the passenger, but it is highly inefficient too: look at neighbouring Germany, where the debt at the vertically integrated rail incumbent German Railways (DB) is already €30 billion – and growing.

Despite all this financial help, the integrated infrastructure manager “DB Netze” still charges a full cost markup for long distance trains. Its Track Access Fees are some of the most expensive in Europe. But is this money being spent on improvements? – it would appear not:

  • After all, according to the German public broadcaster ARD just two months ago: “the rail network is on the brink of collapse”.
  • Not forgetting the cost of the additional bureaucracy at the DB holding company.

All other transport modes are able to innovate and flourish because vertically integrated incumbents are not holding back their development. For example: Volkswagen does not own the motorways.

ALLRAIL Secretary General Nick Brooks

For faster modal shift to rail, EU stakeholders urgently need to overhaul the failed model of vertical integration at the state-owned rail incumbents and replace it with unbundled infrastructure managers that are fit for purpose in an EU Single Rail Area.