Transcript Meeting of the Representatives of UNIFE Members in Brussels

UNIFE investigations in the current economic
crisis and its impact in the rail supply industry
Michael Clausecker
UNIFE Director-General
Current downturn is exceptional
Real GDP growth forecast
2000-07
2008
2009
World
3,9%
3,4%
0,5%
Adv. econ.
2,5%
1,0%
-2,0%
2,7%
1,1%
-1,6%
2,2%
-0,3%
-2,6%
2,2%
1,3%
-2,5%
2,0%
0,8%
-1,9%
2,0%
-0,6%
-2,1%
3,6%
1,2%
-1,7%
2,7%
0,7%
-2,8%
Emerg. econ. 6,4%
6,3%
3,3%
9,9%
9,0%
6,7%
7,1%
7,3%
5,1%
7,0%
6,2%
-0,7%
Industrial production
Decline Sep-Nov 08 vs. Jun-Aug 08
(%)


-10

-15

-16

-20

-21
-25
Source: BCG, April 2009
Sharp volume decline in rail freight
Example with selected rail freight operators
(Year-on-year volume development)
Nov/Dec
Dec
Jan
2009
-13%
-18%-19%
-20%
 The current economic situation
resolves competition between rail
freight operators. Some small rail
freight operators had to close down
 3 reasons account for volume
decline in rail freight:
- drastically declining volumes in
market
- a price decline combined with
dumping prices of established
competitors
- termination of contract by an
important partner.
-10%
-15%
 In January PKP Cargo delivered
37% less goods than last year
-22%
-33%
-37%
-40%
Source: BCG, 2009
Rail freight industry is in troubles
 Hardly any new orders will be placed in 2009 by leasing companies
for freight locomotives
 New orders placed in 2009 for freight wagons are expected to be half
of 2008
 Currently rail freight manufacturers are busy but customers are trying
to postpone deliveries or even to cancel existing orders
 Most options are not exercised
 Some new projects are being discussed due to long lead times and
despite strong demand slowdown
 Newcomers in rail freight operation with small equity base are in
danger of failure which may lead to a drawback in railway
liberalisation
Passenger traffic also start to decline: CEECs
more affected than Western Europe
Central and Eastern Europe passenger development
(passenger-km % growth compared to previous year)
Jan 2009
 Business travel
more affected than
leisure
-4.8%
Dec 2008
-3.7%
Nov 2008
-2.5%
Oct 2008
0.0%
Sep 2008
Aug 2008
-2.0%
Jul 2008
 Public transport
traffic decreasing in
some cities (e.g.
London)
-1.1%
Jun 2008
-2.5%
May 2008
-0.4%
Apr 2008
-8.1%
Mar 2008
-4.9%
Feb 2008
-4.4%
Jan 2008
-7.5%
Total 2008
-15%
 However, city trips
start to slowdown
1.7%
-3.4%
-13%
-11%
-9%
-7%
-5%
-3%
-1%
1%
3%
5%
Source: CER, April 2009
States have massively stepped in to cope
with the crisis
Source: BCG, 2009
 Infrastructure will largely benefit from stimulus packages
USA, China and Western Europe
have specific stimulus packages for rail industry
USA
Western Europe
China
Stimulus package of $11Bn for rail:
• ~30% for infrastructure over
Overall ~€20Bn rail packages:
• France: +€600M for RFF (infra),
further spending in HST expected
• Germany: +€11B
–€2Bn for infra. expansion
–€9Bn for network renovation
• Italy: +€1,4B
–€1Bn for regional services and
new ROS
–€0.4-0.5Bn for infrastructure
• Spain: +€ 140M, mainly for
maintenance/services
• UK: +£1Bn to accelerate major
transport projects in 2009 and an
additional +£300M to buy 200DMUs
• EU package: +€5Bn expected
(€0,5Bn already decided) for
–energy efficiency projects
–implementation of
ETCS/ERTMS
€85Bn anti-crisis package in
China
• Stimulus package to
benefit mainly to local
suppliers
• Major segments
concerned are mainline,
urban and VHS
5 years, mainly in VHS/
Mainline/Urban
• ~50% of $11Bn for ROS, mainline
starting in 2011, VHS starting in
2014
• ~20% for service, over next 3 years,
dedicated to station upgrade and
modernization
Description
Expected
timeline
Expected
segment
focus
•
•
~ 5 years
First investments to be carried out
in in 2009-10
• ~$3-4Bn for infrastructures
•
•
~$5-6Bn for ROS
~$2Bn for service
•
•
~ 5 years
First investments to be carried out
in Germany in 2009
• €5-7Bn for infrastructures
•
•
€4-6Bn for ROS / rail control
€9-10Bn for Services and
Maintenance
•
•
Investment spread over
5-10 years
50% already spent in
2008
• €25-30Bn for
infrastructure
•
€55-60Bn for ROS
Some recovery plans are including a rail
industry’s package…
 Governmental plans to sustain activity and local employment generally
include a package for rail industry but:
 Attribution and final approvals of packages on-going, with an impact
expected over the next 5-10 years
 difficulty to perceive if stimulus packages will generate additional funds
for rail infrastructure investments
 or if they will just accelerate investment plans already in the pipeline
 issue with governments "empty pockets", putting at risk overall market
development perspectives in the long run
 Increased implication of governments expected to come along with a
slowdown of liberalization in the short-term
… however several uncertainties are
subsisting
 Several uncertainties subsist on the rail development perspectives
 Effective implementation of the anti-crisis packages, e.g. development
of high speed in the US
 Further support from European Commission and member states (e.g.
Germany, France)
 Slippage vs. acceleration of modernization programs in Russia,
depending on oil price development
 Funding support in the rest of the world from local governments or
international financing institutions (IMF, EBRD, World Bank...)
 Differentiated impact by regions:
 Confusing situation in Western Europe (investments likely to be
affected in the short term, drop in demand in freight)
 CEECs strongly hit in the short-term (project cancellation or delay,
temporary closing down of existing freight lines in Poland)
PPP- type financing of infrastructure
projects are at risk
A complex equation:
+ reduced availability of loans to private investors and PPP projects
+ altered risk consideration of banks and investors =increased cost of loans
+ temporary slowing down of the transport demand growth
= Higher costs for PPPs
= Increased pressure on price and margins
= Increased project selectivity
= Dramatic effects in the short term if not supported by public budgets/ recovery
programs
= Temporary higher risk aversion as well as reduced bank funds and appetite for
cross border financing
HSL Sud-Europe Atlantique: a PPP case
through the economic crisis
 PPP concession to build and maintain the 300 km Tours – Bordeaux high speed line,
 Expected to reduce Paris – Bordeaux journeys to 2h by 2016
 One of four major railway projects identified by President Sarkozy as part of the French
national economic stimulus package
However: reduction in railway infrastructure expenditure in framework of French
recovery plan announced in May  uncertainty on final structure of PPP
Source: FIF, May 2009
UNIFE initiatives in response to the
economic crisis (1/2)
Monitoring and lobbying for rail investments
 Early analysis of the credit crunch’s impact on the rail supply industry
 Monitoring of EU and various national recovery programs regarding
rail infrastructure investments
 Raising European Commission’s awareness on rail sector’s
challenges and needs (e.g. letters to Commissioners on the need for
an increase and acceleration of rail investments)
 Joint initiative with CER on concrete proposals for measures related
to rail against the economic downturn (PT Tickets in exchange for car
scrapping, tax incentives for long-distance train tickets, withdrawal of
fuel taxes and VAT from rail…)
UNIFE initiatives in response to the
economic crisis (2/2)
Scenario perspectives for the rail industry in 2025 – Strategic project with the
Boston Consulting Group
Context of the project
UNIFE has recently released a detailed market study
of the rail industry
• The Worldwide Rail Market Study 2008 provide
projections till 2016, excluding effects of the crisis
Throughout 2008, the world has progressively
entered an economic crisis, heightening even more
the level of uncertainty, in all sectors of the economy
• A high level review of possible impacts of the
crisis considered as starting point
UNIFE wants to complete the market projections with
a longer term perspective (2025-2030 horizon) to
prepare its members to possible futures
• Contrasted evolution possibilities, including key
megatrends and disruptive effects
• Scenarios on the evolution of the railway industry
Objectives of the project
Highlight potential short and mid-term impact and
uncertainty resulting from the economic crisis
• High level quantification of impact on market
Build scenarios on the evolution of the rail industry to
develop a perspective beyond the 2008 market study
• Screen trends relevant to the industry to identify
key potential drivers and possible disruptions
• Construct industry evolution / transformation
scenarios, using BCG creativity methodology
• Develop a shared vision and scenarios of the
possible futures
Derive possible impact for the rail supply industry
• Investigate effects on dynamics of railway industry
and positions of key players
• Identify possible business opportunities
Providing Competitive Railway Systems
for Increased Rail Traffic
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