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Jean-Pierre Nordmann
  UB No: 02017089
Organisational Modelling                                                  25/02/2010

The topic I will deal with is about transport across Europe. As an exchange
student, I have experimented different way of travelling, and I have made the
conclusion crossing a border is not so easy. My last experience was to come from
Paris to Bradford. After finding a cheap price to go by plane in Liverpool, I had to
go from Liverpool to Bradford. My first idea was to take the train, as I would have
done in France, but a long research on Internet showed me the coach service was
cheaper and faster.
From this experience, I wanted to think of the problem of matching different way
of transports across Europe. Then I decided to separate these different ways of
transport, and just to focus on one of them. The most interesting is, in my
opinion, the train. Indeed, we can see that privatisation has made of the railway
service a mess in England. With the liberalisation across Europe, how could we
avoid what happened in England, and supply the European customer a convenient
European railway service?

Jean-Pierre NORDMANN                                                               1
Organisational Modelling                                                    25/02/2010

                                        Part 1

Criteria of the problem
How to provide European customers a European liberalised railway service?

We will consider only rail network of the West-European countries to make it
clearer and for geographical reasons, I mean the already 15 countries being part
of European Union.

The problem is to liberalised railway service among these countries, it means give
the opportunity to the consumers to choose between different railway companies
to travel across Europe.
Are involved:
    -   Customers of the trains.
    -   Employees of the railway companies.
    -   Railway companies.
    -   Shareholders of the railway companies (including states).
    -   Companies owning the ground where are the railroads.
    -   Citizens (represented by MPs) who votes for or against liberalisation.
    -   European       institutions,   such   as   European   Commission,   European
        Parliament, …

We need to know:
    -   Internal national regulations among each country.
    -   International agreements between some countries or companies.
We know:
    -   Liberalisation in UK has been a failure: prices are more expensive, and
        quality of the service has decreased.
The air transport could be a model for the liberalisation of the train transport.

Jean-Pierre NORDMANN                                                                 2
Organisational Modelling                                                   25/02/2010

Analysis of the current system

History and figures: Need for a revival.
On the whole of the European Community, the railroad ensured in 1970 31,7% of
the carriage of goods and 10,4% of the passenger transport. In 1993, these
figures were respectively 15,4% and 6,6%. The rail-bound transport is not thus
any more the main way of transport, which it had been for a long time.
In this context, the European construction can be a chance of revival for the
railroad. The markets where the train keeps an undeniable relevance are indeed
the international distances with high-speed trains, the carriage of goods, and
regional transport in the zones with strong density of population. In one year of
exploitation, Eurostar acquired a significant share of the market on two of the
European lines where the air traffic was the densest (approximately 40% of the
market for the Paris-London connection and 35% for the London-Brussels

A European aspiration
The Community institutions are conscious of what Europe can bring to the
railroad and clearly want to develop this way of transport, which has numerous
advantages, in terms of safety and environment in particular. Thus in a resolution
of June 19, 1995, the Council of the European Union expressed that they want to
create the adequate conditions to develop the place of the rail-bound transport
and the transport combined in the transport system.
This European aspiration had begun with the adoption in 1991 of an important
directive for the regulation of railroads. Among the objectives of this text, the
need for making the rail transports effective and competitive compared to the
other ways of transport became obvious.
The European Commission proposes today to accentuate the opening to the
competition started in 1991.

Legal aspects
Rights of access to the network: To be able to reach the network of a Member
State other than that to which it belongs, a company must thus constitute an
international grouping or carry on an activity of combined transport. Moreover, in
case of international regrouping, the rights of access are limited to the States in
which the companies taking part of the regrouping are established; in the other
States, they can only transit duties.

Jean-Pierre NORDMANN                                                                3
Organisational Modelling                                                           25/02/2010

Autonomy, transparency, cleansing: this means independence of the railway
companies regard to the States, financial cleansing, separation between activity
of transport and management of the infrastructure, finally rights of access to the

Different national economic models
Great Britain:
In 1993, within the framework of Railway Act, the British authorities decided a
privatisation by fragmentation of the railroads. The British model causes very
strong reserves in France and, in a more general way, in the countries of
continental Europe. In fact, it is more the fruit of ideology than practical

The reform undertaken in Germany is interesting. Deutsche Bahn was before this
reform in a difficult situation with a debt of 35 billion euros (23 billion pounds).
The State began to finance the future investments within the framework of a
refinancing, which means that the company                    must refund the profitable
investments. The company must pay the costs linked with the maintenance of the
infrastructure. The German authorities moreover envisaged investment with a
very significant plan in the rail-bound transport for the years to come: 60 billion
euros (40 billion pounds) having to be assigned to this sector until 2010.
This negotiated reform goes well beyond the regulations of the directive of 1991
and places Germany in a favourable position within the framework of the
progressive opening of the rail-bound transport to competition. (See Appendix for
more details).

Sweden and Netherlands:
Sweden undertook a great reform of its railway system since 1988, i.e. before the
adoption of the directive of 1991 and well before its adhesion in the European
Union. This reform was initially characterized by the division of the public
company      between       the   national   administration    of   the   Swedish    railways
(Bankverkert or BV) and the company of the state railways (Statens Järnvägar or
SJ). Company SJ is regarded as the railway operator travellers principal and holds
the monopoly of railway freight. It must ensure the management of freight and
the travellers on the principal network according to principles' of commercial
We can notice that the situation of the railroads Swedish - almost single case in

Jean-Pierre NORDMANN                                                                        4
Organisational Modelling                                                 25/02/2010

Europe - appreciably improved since infrastructure and operators were separate
(1988) and that an equitable system of royalties for the use of the infrastructures
has been introduced.
The Netherlands also undertook a significant reform of their organization of the
rail-bound transport. The national company NS was divided into two sectors, one
devoted to the commercial activities, the other with the infrastructures. (See
Appendix for more details).

Summary of these examples:
These examples are not an exhaustive catalogue of the state of railway Europe,
but these reforms present a certain number of ideas: clarification of the relations
between the State and the national company, clarification also between the
various activities taking part of the rail-bound transport, financial cleansing,
recognition of a role increased for the regional entities.

Technical aspects
Freedom of movement on the European rail network is still handicapped by a
multitude of technical differences, which relate to the nature of the current of
traction, the gauge of the trains, the indication and the system of distribution of
the tickets. These technical differences are never insurmountable. But they imply
very significant additional costs, which do not support the competitiveness of the
rail-bound transport. For example, Eurostar must be able to run through three
different technical systems; the TGV Thalys, which circulates in Belgium, in
Germany, and in the Netherlands has to run through four different technical
systems. (See Appendix for more details).

Financial aspects
A lot of companies have huge debts (similar as the Deutsche Bahn), which needs
to be taken into account in the liberalization. Indeed, a lot of countries who have
separated railway network and exploitation, have given most of the debt to the
railway network. Sometimes, these States have accepted to pay the interests of
the debt.

Social aspects
In many countries, railway companies have over-needed manpower. This means
a lot of reforms, which will have to take place to reduce the costs linked to this
problem. Some countries such as Germany and Sweden have solved the

Jean-Pierre NORDMANN                                                              5
Organisational Modelling                                                  25/02/2010

problems, but countries like France, with high subscriptions of employees to trade
unions, have not solved the problem.

The liberalization is a need and an aspiration in Europe. We will use innovative
and derivative methods, enabling us to think to some model that could be a
solution to the problem of railway sector in Europe. In the second part, we will try
to see what could be a solution.

Jean-Pierre NORDMANN                                                               6
Organisational Modelling                                                    25/02/2010

                                        Part 2

Politic and economic concerns: which competition?
The railway transport sector has to evolve to an increased competition, which
must facilitate the realization of a unified European space. In this context, the
way in which is exerted this competition is very significant. A policy of
competition adapted to the railroad seems essential.
This sector needs huge investments for a long time with a limited number
operator. Under these conditions, the realization of a unified European space
needs the co-operations between operators. The problem is that these co-
operations are likely to be contradictory with the legislation of competition in the
European Community. Under these conditions, it is significant to keep in mind
that the objective is the development of the rail-bound transport and not the
development of competition for itself.

Need for a social harmonization
In the current context of liberalization and multiplication of the exchanges
between Member States of the Community, we need a social harmonization
(particularly concerning the duration of the working time). Indeed, It is significant
that such a social aspect can be set up, to prevent that the progressive opening
to competition lead to the development of flags of convenience, exploiting the
absence     of    minimal   standards   on   social   matters   in   some   countries.

Need for technical harmonization
Creation of a framework for the establishment of essential requirements,
technical specifications and standards in order to support circulation on the
European network would be essential.

CATWOE criteria
Every citizen and each firm will have the possibility to go or carry its goods in
every country of the European Union.

Jean-Pierre NORDMANN                                                                 7
Organisational Modelling                                                                            25/02/2010

States, Railway companies, employees, firms that need to transport goods,
Transformation Process:
The new relevant system will increase competition, innovation, and revival of
railway transport industry.
Liberalisation and competition do not mean end of public service. Railway
infrastructures will probably not be privatised.
The European Commission will decide the nature and purpose of the relevant
National elections could affect the system.

Conclusion of what could be a relevant system:
First, European railway transport should be liberalized (with common social,
technical and juridical legislations). Second, railway should be safe. Third,
networks should be networking.
Then we could imagine that this organisation could be the ideal organisation:

        15 national authorities of regulation make the European and / or national
        regulations be respected. They make sure the system works and propose
        improvements to the in charge institutions.
            Control.                                                           Take their role of public service.
                                                                 Control.                                           Control.

      Train companies already                                   Every other                  National or Regional
      existing must separate                                    company has the              public companies
                                            Fair competition.

      their activity of transport                               right to establish a         would be kept
      goods and passenger.                                      train service where          where a public
      They must also separate                                   it wants, and not be         service of transport
      international from national                               differentiated with          is needed, and
      transport of goods;                                       the former national          where profitability
      national from regional                                    companies.                   of the service is not
      transport of passengers.                                                               ensured.

                           Make them pay for the use of their Network, Split the Network.

      15 public companies would be responsible for running the network in each of the
      15 States. They make the train companies pay for the use of their network. They
      work together about the technical matters and safety. Supporting by the
      European Union, they pay the interest of the huge debts of railway companies.

Jean-Pierre NORDMANN                                                                                           8
Organisational Modelling                                                   25/02/2010

                                    Part 3

A competition politic:
The method must take into account of all the different models that already exists
and then define the new common model.
By different models that already exist, I mean the different situation of railway
transport among the European countries, but also the different liberalizati on that
are taken place (or have already taken place).

Liberalization of transport of goods, the first step.
The transport of goods is the one who need long distances to be competitive with
other way of transport. It is therefore the first to be liberalized for international
transport. This is the first step of the liberalization, bringing information for the
following steps.

Creation of an organism, whose responsibility would be to split the capacities of
the railway networks in Europe, and control the respect of the competition. This
organism would be similar to what exists for liberalization of telecommunications
for example. This will be the driving organism for liberalization, providing
information for all the different actors (railway companies, politics, citizens
through newspapers…).

Maintain the public service in railway transport
A European organism will have to provide information about the need of train
service in different areas that companies will have to deserve. This organism
would make the link between organism of the European Union and the organism
responsible for competition and liberalisation.

Technical harmonization
A technical committee must define and solve the different technical problems,
regarding the need of railway transport in the future. This technical committee
will provide information on two subjects: technical aspects for train and railway
networks, safety of the train transport.

Jean-Pierre NORDMANN                                                                9
                                     Organisational Modelling                                                 25/02/2010

                                     Legislative harmonization
                                     The European Parliament could be responsible for voting minimum standards that
                                     could avoid the problems linked with 15 national legislations. This would concern
                                     social legislation particularly, to avoid flag of convenience.

                                     This figure represents the flow of information that would happen:

                                                                                                         All the different actors:
Competition Regulator                                                  Provide information                   - Companies
                                                                                                             - States
                                                                                                             - Other institutions
                                                                     Provide information                     - …
                 Make propositions

                                                                                                                      regulations work
                                                                                                                      Make the new
 European Institutions                                          Vote the new regulations and harmonize
 (European Commission,                                          legislations                              National Parliaments
 European Parliament).
   Make propositions

                                                 Provide information

                                                                   Provide information

 Technical committee

                                     Jean-Pierre NORDMANN                                                             10
Organisational Modelling                                                     25/02/2010


German Reform of its Rail network
The rail-bound transports of proximity (urban transport, of suburbs or areas of
less than one hour or of less than fifty kilometres) were entrusted, for their
organization and their financing, in regions. The regions can determine the
principal elements of the service offered on each line and have the possibility to
close a line. Region profit from a subsidy making it possible to ensure the
maintenance of the regional services at the level reaches in 1993-1994.
The Deutsche Bahn was divided into several activities intended to become limited
companies under the aegis of a holding, then possibly, independent companies.
The principle of a generalized competition was accepted.
This reform, which will lead to very strong reductions of manpower, was accepted
by the personnel, which obtained guarantees as for the maintenance of his
It is still difficult to draw up an assessment of this reform that came into effect in
1994. However, it is clear that these deep modifications put the Deutsche Bahn in
a situation, enabling them to take a new departure. This one released in 1994 a
benefit after tax of 90 million euros (60 million pounds).
It seems that the structure of the assessment of the Deutsche Bahn was however
already somewhat degraded with a reduction in its own capital stocks. Moreover,
the German Government, in the current economic situation, tests great difficulties
of holding the investment plan which it had considered at the time of the reform.
It is thus too early to estimate that the Deutsche Bahn is saved.

Swedish and Dutch Reform of its Rail network
In Sweden, the company taken care with the infrastructures, BV, can allot
transport law to other operators that SJ (the national railway company), when
capacities are not used. Thus, a private company, BK Trains, exploit 600 km of
regional lines on three provinces of the South and the North-West of Stockholm.
Lastly, it should be noted that the commercial company was pushed to improve
its financial results and that its internal organization was deeply modified with the
creation of four great centres of profit for the travellers, freight, the materials
travelling and the real estate; manpower were strongly decreased.

In Netherlands, the holding NS Groep NV is in charge of the commercial
exploitation and has three subsidiary companies: Markt BV (travellers, stations,

Jean-Pierre NORDMANN                                                                  11
Organisational Modelling                                                      25/02/2010

rolling stocks and safety); NS Cargo liner NV (freight), Vastgoed BV (real
management). In addition, two companies share the management of the
The reform also led to a clear separation of the responsibilities for the State and
national company; the State is clearly responsible for the infrastructures and their
financing, of the compensation of the obligations of public utility and the
harmonization of the means of transport.

Technical aspects
Technical harmonization is very difficult, and these examples show us the
In France two types of techniques still coexist and, on the Rennes-Paris line, for
example, a change of current intervenes at the entry of the Montparnasse station.
The current of traction used in France (50Hz, 25.000 volts) is very different from
that chosen by Germany (16 2 / 3 Hz, 15.000 volts). Naturally, the generally
quoted example is that of the spacing of the rails different in Spain from that of
the rest of Europe.

Source of information:
     Harry, MJS (2001): Business Information: A Systems Approach.
     : News of
        public services in Europe.
     : Leaflet of a trade
     : Report of French Senate.
     : Interview of a
        far left politic.
     : News of the association
        responsible for linking Lyon to Turin by train.
     : Point of view
        concerning propositions of the European Commission.
     : Leaflet of a
        non-governmental organisation supporting liberalization of railway
     : Point of view
        of a French association.

Jean-Pierre NORDMANN                                                                  12