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Experts in transport and infrastructure conclude that “Competition in the railway sector improves efficiency and quality of service”


The II Workshop on Transport Economics, organized by the Cátedra FEDEA-Abertis and the Barcelona Economic Institute (IEB), has brought together experts in transport and infrastructure experiences in USA and Europe.

II Workshop on Transport Economics

El II Workshop on Transport Economics, (Madrid), which brought together experts in transport and infrastructure from universities around the world, has reached the conclusion that “competition in the railway sector improves efficiency and quality of service”.Analysing European experiences, Professor Chris Nash (University of Leeds) claimed that market competition based on an invitation to tender is the best way to introduce competition in passenger railway services. The experience of regional railway concessions in countries such as Germany, Sweden, Holland, Denmark and Portugal shows that, in general, the quality of services has improved, costs have been reduced and the volume of traffic has grown significantly.

Direct competition in service provision (various operators working simultaneously) has been less frequently adopted in Europe, although a number of successful ventures have been reported in the United Kingdom. Worthy of examination here is the experience in Italy on the country’s high-speed routes, where a second operator plans to offer alternative services to those provided by Trenitalia. The main advantages of direct competition are the greater incentives for innovation and the greater pressure to cut costs. However, in most cases, the services tend to be duplicated, which leads to financial difficulties for operators and excessively high overall costs. Direct competition tends to work only in markets with high volumes of traffic, excess capacity and low network access tariffs. Yet, the absence of these conditions is no reason for not fostering competition, as mechanisms exist to derive the most profits from the situation, including the granting of concessions in open competition.


In the United States, the railways have a market quota of over 40% for freight transport. In contrast with Europe, their service providing companies are also owners of the infrastructure. Marc Ivaldi (Toulouse School of Economics) analysed the consequences of allowing the entry of operators that compete in the same infrastructure network. According to the Professor, direct competition would reduce the incentives of incumbent (existing) firms to invest in infrastructure improvements and, in the long term, the negative consequences of a fall in investment rates would be greater than the potential positive effects of a short-term price reduction. However, as Javier Campos (University of Las Palmas de Gran Canaria) stressed, the situation in the United States cannot be compared with that of Europe where 27 different approaches exist alongside each other, suggesting the need for the creation of a European infrastructure administrator. .


Another of the guest speakers at the Workshop was Pedro Cantos (University of Valencia), who has been examining the relative efficiency of the main railway operators in 23 European countries and the impact that market liberalization has had on their efficiency. His team concludes that the opening up of the market to competition has had a favourable impact on operator efficiency, but that the vertical separation between railway infrastructure and service provision itself has not had such a beneficial effect.


The workshop concluded with a round table at which a consensus was expressed that the liberalization of freight rail transport in Spain has yet to have the expected returns. Unlike the situation in the United Kingdom where, following market liberalization, freight rail traffic increased significantly, in Spain the downward trend in the quota has continued. The reasons for this are varied, but include, among others, the quality of the infrastructure, the regulatory framework and Spain’s peripheral location, which results in a low density of traffic and a high percentage of “empty” traffic.