Gaining a long-haul competitive advantage in the railway industry

Over the last decades, the European Union (EU) market liberalisation movement. has rejuvenated the region’s rail sector. The overarching goal has been to bolster competitiveness and attract innovative contributions to railway sustainability and efficiency from new incumbents and firms operating in diverse transport markets.

Different countries have chosen different paths, leading to varying results. And for the many successes, there have been failures too. In this article, we evaluate the lessons learned from railway market liberalisation. We also highlight why a robust and proactive supply chain strategy makes the difference between those who retain a competitive advantage and those firms who get derailed after tender victory. 

Market Liberalisation – Leading by Example

Eliminating the exclusive rights of existing operators for commercial long-distance railways has been a core objective of the EU’s railway liberalisation movement. The initiative was first introduced with the fourth railway package back in 2016. 

The first railway package came into effect in 2001. The legislation was a significant evolution in rail market liberalisation, making public tendering a standard process.  Railway companies, for the first time, were given the chance to enter this market under a free competition model that respects the principles of transparency and non-discrimination. This opened up opportunities in the European railway market for any European rail operator, public or private, from any country. Competition between incumbents and new players created greater capacity and inspired new technology innovation and services for travellers. 

Today, SNCF cominates France’s passenger rail market. The market is heralded as achieving the most significant transformation by railway liberalisation. The shift has created many opportunities for new incumbents to win contracts formerly reserved for national operators. For example, Italian rail operator Trenitalia has operated Frecciarossa trains on the Paris–Lyon line since autumn 2021. Likewise, Spanish rail operator Renfe has served the Paris–Marseille corridor since 2024. France has seen a significant increase in the number of private rail operators. These operators offer a range of services from high-speed trains to regional commuter services. Also, companies such as Ouigo, a subsidiary of SNCF have disrupted the traditional rail market. They’ve done this by offering low-cost, high-quality services that appeal to a wider range of passengers.

Challenges and setbacks 

However, for the many tender successes, there have been failures too. The open-access rail co-operative Railcoop had been hoping to rejuvenate the Bordeaux to Lyon route but failed to ever launch the passenger service and went into liquidation. While it is not clear what exactly went wrong, what we can be sure of is that Railcoop was unable to match its intentions outlined in the tender application. A compelling entry-level strategy was not backed up by a robust supply chain management infrastructure and a sustainable operating model. 

The opportunity for private companies to contribute to the development of the country’s railway infrastructure is a highly lucrative one for companies of all sizes and specialties. Only if they get it right for the long haul. Entering a highly competitive new market presents uncertainties and risks, and strict compliance procedures need to be adhered to. On top of this, an aggressive price strategy coupled with a low carbon footprint should always be a top priority for any tender application.

At Milexia, we recommend a strategic four-stage process to gain and maintain a footing in a competitive railway liberalisation market. With grave consideration, that the successes of stages one and two will become irrelevant if they cannot be backed up and reinforced by stages three and four. 

Stage One: The Qualification Phase

The tendering of rail services subject to Public Service Orders (PSOs) is a long and complex process and sets limited timescales for bids meaning bidders have limited time to prepare their offers.

The perimeter of the tender must be properly defined and qualified from the outset. New entries should identify the robustness of their value proposition against the perimeters of the tender, including operating costs, maintenance costs, and rolling stock availability. 

Ensuring that rolling stock is available to enter the market in the timeframe set by the tender requires an agile business model to be in place to adapt to changing market conditions and demands. Any tender application must demonstrate a commitment to safety, quality, decarbonisation, and sustainability, showcasing relevant certifications and innovative practices. And must be backed with hard evidence. 

Stage Two: Project Tenders Offer 

For driving the contract forward ideally, new entrants into the railway market should consider assigning or outsourcing a skilled bid team – experts in rail engineering with strong technical skills, project management, and financial expertise. And who can advise on how best to utilise existing in-house solutions and optimal procurement needs and standards in line with a roadmap for new product development. 

Stage Three: Supply Chain Management

From stock availability, quantities according to their needs, and adapting the multiple small sites available to serve the infrastructure.  The winning organisations are those that can develop a forward-thinking approach for every part of the supply chain. This should range from rolling stock procurement and demand planning to parts delivery and maintenance. And show agility for production delivery in line with defined timelines and with stock approved by the relevant authorities.  

Stage Four: Ongoing Installation and Maintenance

Effective planning, coordination, and execution are essential. Without them, it’s impossible toensure the timely completion of projects while maintaining high standards of quality and safety. And must be backed by a solid financial foundation for market agility. We recommend having access to financial capital for at least four years. Additionally having a dynamic outfit that can ramp up and adapt to fluctuating market dynamics is also valuable.

It is about being meticulous with the coordination of the lifetime of a project and building strategies aligned to KPIs. From planning and scheduling site installations, implementing safety protocols and regulations for compliance to managing resources, and organising logistics. 

For a typical rail operator project, this should include: 

1. Implementation and monitoring of the renovation operation.
2. Proper identification of the components necessary for each application and meeting the operator’s technical requirements. 
3. Complete traceability of the source, origin, and quality of the components supplied.
4. First-class productivity and industrial performance through the implementation of a structured process. 
5. The delivery of ready-to-use named-out kits made available for the trains undergoing maintenance, in line with the schedule requested by the operator.
6. Economic performance indicators and reporting for the operator.   

Conclusion: Staying On Track with Railway Liberalisation

There is a huge opportunity for new incumbents to make their mark and profit from the railway liberalisation movement, but winning the tender means nothing without a robust supply chain infrastructure in place. 

Navigating opportunities from EU rail liberalisation must be guided by specialised expertise for the definition, realisation, monitoring, and maintenance of any project. Only then can new incumbents bring and sustain an active contribution to the sustainability and effectiveness of our railways.