Pandemic-driven megatrends present opportunities for rail
The corona pandemic has opened up a window of opportunity for the international railway sector. While hit hard, rail could raise its competitive advantage and bolster its market share vis-a-vis other modes of transport, the Worldwide Railway Organisation (UIC) and Germany consultancy firm Roland Berger conclude in their latest report Mobility post-Covid.
The railway sector has proven itself a vital service provider when society needed it most, having bounced back from hardship itself. And while the long-term effects of the pandemic on mobility and the wider economie remain to be seen, they could offer the railway sector the following stepping stones .
1. Remote work
Remote work is here to stay. Working from home has become engrained to the extent that commuting has changed significantly. Rush hours and packed city centres have become a thing of the past, and might remain so.
While there will be an uptick in recreational travel this year, business travel may take longer to recover and is not expected to return to pre-Covid levels any time soon.
2. Public financing of rail
Railway companies and transportation companies were beneficiaries of government-backed support programme during the pandemic and will remain the recipients of public financing for the foreseeable future. Earlier this week, the European Commission proposed to extend support programmes to June 30, with a further extension to the end of the year on the cards.
The sector has also benefitted from sustained investment in rail in an effort to encourage a modal shift. With air travel under scrutiny, the policy makers tend to view railway investments favourably.
3. Passengers’ environmental concerns
People worry about the environment and what to make a difference. As such, they may be more and more inclined to opt for less CO2-heavy forms of transport. This bodes well for rail services, including freight transport and high-speed trains. In urban areas, the continued development of public transport and mobility solutions might reduce the use of personal cars.
4. EU rail market liberalisation
The corona pandemic has put a damper on liberalisation efforts across Europe, as the slump in traffic raised the barrier to entry for new players significantly. The UIC and Roland Berger foresee a return to normal by 2025, which will translate into increased competition between operators and, in turn, to innovation and efficiency gains. Combined, these two factors could increase the attractiveness of rail, possibly even at the expense of air travel.
5. Development of high-speed infrastructure
The high-speed train is the poster child of the railway sector and could emerge as a real competitor to air travel. The addition of new lines is set to accelerate in the second half of this decade, even though the high costs of development tends to hold the sector back. However, because passengers are likely to favour high-speed trains over airplanes between certain cities, the development of new lines is set to continue.