OUTLOOK EUROPEAN RAILWAYS MORE THREATS … · •Clients and network all over the world ... CHALLENGES FOR RAIL 11 Infrastructure ... DIGITAL INNOVATION BOOSTS DEMAND FOR PROCEDURAL

MARIA LEENEN, VIENNA/HAMBURG, 18.02.2016

OUTLOOK EUROPEAN RAILWAYS – MORE THREATS THAN OPPORTUNITIES?

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / 18.02.2016

PROFESSIONAL CONSULTANCY FROM SCI VERKEHR

• Independent consultancy company since 1994

• Focused on strategic advice to the railway and logistics industry

• Clients and network all over the world

• Unique database with assets and projects in the global railway industry

• Based in Hamburg, Berlin, Cologne

• Shareholder: Maria Leenen

SCI Verkehr GmbH / Büro Hamburg / +49 (40) 50 71 97-0

NAVIGATOR

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• Strategy development

• Portfolio assessments

• Merger and acquisitions (M&A)

• Asset value assessments

• Market and competition analyses

• Operational excellence - process optimisation

WORLDWIDE CUSTOMERS ASK FOR SCI’S EXPERTISE

SCI Verkehr GmbH / Büro Hamburg / +49 (40) 50 71 97-0

CUSTOMERS

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• AAE Ahaus Alstätter Eisenbahn AG • ABB Schweiz Ltd. • AEG SVS Power Sypply Systems • Alcan Composite Structures • Allco Leasing GmbH • Alstom Transportation • Amtrak Office of Inspector General• Angel Trains Cargo • Ansaldo Signal N.V. • AnsaldoBreda spa • Arriva International UK • Auctus Management GmbH & Co. KG • Axtone GmbH • Babcock Brown London • BAE Systems Ltd. • Balfour Beatty Rail GmbH • Bank of America • Bayer Material Science AG • Bayerische Landesbank • Bearing Point SAS • Behr Industry GmbH & Co. KG • Bochumer Verein Verkehrstechnik GmbH • Bombardier Transportation • Bonatrans a.s. • Calyon • Cargocare AG • China South Locomotives & Rolling Stock Corp. Ltd. • CKD Vagonka a.s. • Connex • Cummins • Dellner Kupplungen GmbH • Deuta-Werke GmbH • Deutsche Bahn AG • Deutsche Beteiligungs AG • Deutsche Binnenschiffreederei • Deutsche Messe AG • Deutscher Gewerkschaftsbund • Dimetronic S.A. • DuPont Performance Coatings GmbH & Co. KG • Durtrack AG • ELIN EBG traction GmbH • ESW GmbH • EWS Railway LTD • Extel Systems Wedel • Fahrleitungsbau GmbH • Faiveley Transport • Ferrostaal AG • Fooke GmbH • Furrer+Frey AG • GE Transportation Systems • Greenbrier Equity Group LLC • Group Ermewa SA • Gutehoffnungshütte Radsatz GmbH • Hanning & Kahl GmbH • Hans Böckler Stiftung • Heitkamp Rail GmbH • Hitachi Europe Ltd. • HSH Nordbank AG • Hübner GmbH • I.T.I. Finanziaria S.P.A. • ING Bank N.V. • Interpipe • INVEST Financial Corporation • KfW IPEX-Bank GmbH • Knorr-Bremse • Korea Railroad Research Institut • Lavoisier SAS • Lease Valuation International Inc. • Leonhard Moll Betonwerke • Liebherr Transportation Systems GmbH • LLOYDS TSB Bank PLC • MAN • Marubeni Corporation • Microelectrica Scientifica Spa • Mitron OY • Mitsui & Co. • Molinari Consulting AG • MTU Friedrichshafen • Nahverkehr Rheinland GmbH • National Australia Bank • NedTrain Consulting • Nexans • Odenwald & Compagnie • ÖBB • One Equity Partners Europe GmbH • Ox-traction N.V. • Oxford Analytica Ltd. • Paribus-SK-Rail Management • Parsons Brinkerhoff Pte Ltd • Patentes Talgo S.A. • Pfleiderer Infrastrukturtechnik GmbH & Co. KG • Phoenix Dichtungstechnik GmbH • Pintsch Bamag GmbH • Plasser & Theurer Export von Bahnbaumaschinen GmbH • Prover Technology AB • Prysmian Spa • Rail Cargo Austria • Rail Interiors S.p.A. • Rail One GmbH • Rexwal Services SA • Rexxon Services SA • Rotem Company • Royal Bank of Scotland • Sabler Consult GmbH Wien • SAFOP SAP • Saft‘s Industrial Battery Group • SBB Cargo AG • Schalker Eisenhütte GmbH • Schaltbau AG • Scheidt & Bachmann GmbH • Schreck-Mieves GmbH • Schweizer Elektronic AG • Secheron SA • Serco-NedRailways • SGL Carbon SE • Siemens AG • Sika Schweiz AG • SIRTI S.p.A. • SKF Group • Skoda Transportation s.r.o. • Société Générale Group • Solaris Bus & Coach S.A. • Stadler Rail AG • Steer Davies Gleave • Stemmann-Technik GmbH • Stinnes AG • Stratorg S.A. • Strukton Systems • SüdLeasing GmbH • Sumitomo Mitsui Banking Corp. Europe Ltd. • Syndex • Synosys Inc. • Tatravagonka a.s. • Terra Firma Investments 2 Ltd. • Telenor Sverige AB • TFK Transportforschung GmbH • Thermo King Deutschland • Thyssen Krupp GfT Gleistechnik GmbH • Tiefenbach GmbH • Toyo Engineering Corporation • Traktionssysteme Austria GmBH • Tram S.A. • Transpetro GmbH • Transtechnik GmbH & Co. KG • Transwerk South Africa • Trinity Rail GmbH • TÜV Rheinland • U.S. Government • Universal de Productos Electricos S.A. • VAE GmbH • Valspar Industries GmbH • Veolia Transport • Verband der Bahnindustrie Germany • Verkehrs Industrie Systeme GmbH • Verkehrsbetriebe Zürich • Voestalpine Bahnsysteme GmbH • Voith Turbo • VolkerRail • Vossloh AG • Vossloh Kiepe GmbH • VR Leasing AG • VTG AG • Wagony Swidnica S.A. • Walter Bau AG • Wacosa AG • Weilburg Coatings GmbH • WestLB AG • Wincanton GmbH • Wirtschaftsministerium Baden-Württemberg • ZAO Transmashholding • ZF Sachs AG • Zuken GmbH

RAILWAY MARKETS, ASSETS AND PROCESSES ARE CONSTANTLY IN OUR FOCUS


MARKETS & PROCESSES

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• Demand Prognoses

• Budgets

• Projects

• Players

• Fitting of products and services

Markets

• Railway fleets

• Maintenance

• Infrastructure

• M&A

Assets

• Operational Excellence

• Change management

• Process and tendering support

• Implemantaion of new developments and IT

Processes


TITLE

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….. VARIOUS ISSUES ARE CHALLENGING RAILWAYS‘ CURRENT AND FUTURE POSITION….

…. BUT THE LARGE PRODUCTIVITY RESERVES

AND THE ONGOING CHANGES IN OTHER SEGMENTS OPEN A WINDOW TO BRING THE

RAIL INDUSTRY ON THE RIGHT TRACK!

“OUTLOOK EUROPEAN RAILWAYS – MORE THREATS THAN OPPORTUNITIES?”

Source: Eurostat, SCI Verkehr

DESPITE LARGE INVESTMENTS AND OVERALL GROWTH, RAIL COULD NOT INCREASE ITS MODAL SHARE IN FREIGHT TRANSPORT


RAIL FREIGHT

Transport performance (b tkm) vs modal split in the EU-28 in freight transport (tkm)

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300

400

500

2001 2003 2005 2007 2009 2011 2013

1 2 3

1 Rail performance increases

2 Rail hit hard in crisis years

3 Rail recovers partly

Rail experienced a slight growth

There has been no significant shift in the modal split from

2001 to 2014.

75% 75%

19% 18%

6% 7%

. 2001 .. 2014 ….

Road

Rail

Water

FOR YEARS, RAIL FREIGHT OPERATORS HAVE HAD DIFFICULTIES REACHING SATISFYING OR EVEN POSITIVE MARGINS


RAIL FREIGHT

0

0,02

0,04

0,06

0,08

0,1

-600 -500 -400 -300 -200 -100 0 100 200

0

0,01

0,02

0,03

0,04

0,05

0,06

-150 -100 -50 0 50 100 150

Development of railway operators in Europe [2014]

DB SR

RCG

Fret SNCF

Turnover/tkm, EUR

EBIT, EUR million

TCDD

DB SR

PKP Cargo

Trenitalia Cargo

CD Cargo

SBB Cargo

Green Cargo

Renfe Mercancias

EBIT, EUR million

LDz

CFR Marfa

ZSSK Cargo

SNCB Logistics

Turnover/tkm, EUR

LDz

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Source: investing.com; analysed by SCI Verkehr; picture: BMVI

OIL PRICES AT A HISTORICALLY LOW LEVEL – PRIVATE TRANSPORT AND (MEGA-) TRUCKS TAKING ADVANTAGE


COMPETITION

0

20

40

60

80

100

120

140

Weekly price per barrel Brent oil [2010-15, in USD]

2010 2011 2012 2013 2014 2015

EuroCombi / Gigaliner on European highways

• Concept of longer road vehicles has been tested in many European countries

• In addition to the reduction of conventional trucks on highways, it is also expected that a large-scale introduction will affect rail transport volumes negatively

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Picture: Pixabay

GERMAN LONG-DISTANCE BUSSES ARE WINNING IMPORTANT MARKET SHARES FROM RAILWAYS


COMPETITION

2013 2014

2015

8.2 m riders

in 2013 3.0 m riders

in 2012

16 m riders

in 2014

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The German bus market after liberalisation:

• Very high growth rates

• Destructive competition ("cut-throat")

• Market shakeout expected to continue

1st Jan 2013 Liberalisation of long-distance bus market

Around 40 operators offer services

10th Aug 2015 Bill passed on

liberalisation in France

THE RAIL SYSTEM IS TRAPPED IN THEIR STRUCTURES


CHALLENGES FOR RAIL

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Infrastructure bottlenecks lead to delays

Digitalisation in rail takes decades

Margins drop due to volatility of

transport demand and old fashioned

processes

Existing regulatory framework limits innovation

Pictures: Uber, Drive Now, Scania, Amazon, IAV

FUNDAMENTAL CHANGES IN MOBILITY


CHANGES IN TRANSPORTATION

Electrified roadways

"undermine" one major advantage

of railways

New logistic concepts allow for drastic reduction of delivery times

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Digitalisation changes the

overall approach of industries and

transportation Car-sharing

services change (urban) mobility

patterns

Driver assistance progresses on the road

Is the rail industry outdated in the long run?

Picture: Pixabay

MANY HISTORICAL BARRIERS FOR A FAST AND EASY CATCH-UP – BUT ALSO BIG-POINT ADVANTAGES FOR RAILWAY FUTURE


CHANGES IN THE RAIL INDUSTRY

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• Mostly former state railways (high public interest)

• Assets with very long life time and amortization periods

• Highly specific know-how due to complexity of rail system: “we are different – we are (railway) family”

• Megatrends like

metropolisation,

– environmental problems and

– globalisation

… force railway solutions due to it’s high capacities and automatisation opportunities

UNSURPRISINGLY, MOST EUROPEAN RAILWAYS HAVE ALREADY INITIATED ACTION PLANS AND OPTIMISATION MEASURES

SCI Verkehr GmbH / Büro Hamburg / +49 (40) 50 71 97-0 / February 2016

NECESSARY ADJUSTMENTS

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List taken from SCI's new MultiClient study European Rail Freight Transport Market 2016

Keywords from plans

• Organisational restructuring

• Optimisation of processes and asset management

• Digitalisation

• Energy efficiency

• New business models

MANAGEMENT OF PRODUCTIVITY AND QUALITY MUST BECOME CORE ELEMENT OF RAILWAY COMPANIES



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Investment and innovation for customer orientation, productivity and quality

• Strengthening of financial results remains major task of railway operators

• Investments in innovative and competitive assets, organisations and processes become urgent

• Logistical solutions are necessary:

– reliable and efficient processes and structures

– customer orientation as well as custom-fit and flexible asset use

Business model innovation

Technical innovation Organisation and process innovation

Marketing and sales innovation

Picture: Pixabay

DIGITAL INNOVATION BOOSTS DEMAND FOR PROCEDURAL AND STRUCTURAL CHANGE



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• Analysis of current transport flows

• Analysis of assets

• Improved prognoses

Identification of bottle necks

Fewer breakdowns through predictive maintenance

of rail technology

Improved disposition

Improved trouble-shooting

…

Understanding and changing processes

OPERATORS NEED TO STRENGTHEN PROFITABILITY BY EFFICIENT PROCESSES AND ORGANISATION



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Opportunities for productivity improvements exist at all links of the value chain

Improvements of order to cash processes tackle:

• Production processes

• Marketing and sales processes

• Additional services processes

• Quality performance

SCI Verkehr assumes opportunity to strengthen productivity of companies up to 30%

Order to cash process (schematic)

Customer Order Planning Operation Disposition Invoicing Customer

• Capacity management • Freight handling • Rail car management • Shunting process management • Traction management • Staff management • Information management • …

30% productivity

Demand for effective change management :

• Understanding of the railway business

• Understanding of process improvment and methodology

• Know-how of technology, IT, and innovation knowledge

• Understanding of legal and safety requirements

• Process and organisation reliability

• Know-how of stakeholder interests

• Communication skills

EFFECTIVE CHANGE MANAGEMENT NEEDS BOTH: RAILWAY- AND PROCESS EXPERIENCE



Productivity improvement

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SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / 18.02.2016 19

VARIOUS ISSUES ARE CHALLENGING RAILWAYS‘ CURRENT AND FUTURE POSITION….

…. BUT THE LARGE PRODUCTIVITY RESERVES AND THE ONGOING CHANGES IN OTHER

SEGMENTS OPEN A WIDE WINDOW TO BRING THE RAIL INDUSTRY ON THE RIGHT TRACK

CONTACT


CONTACT

Maria Leenen,

SCI Verkehr GmbH

Schanzenstraße 117

20357 Hamburg

Germany

fon: +49 (40) 507 197 10

fax: +49 (40) 507 197 20

e-mail: [email protected]

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Documents

OUTLOOK EUROPEAN RAILWAYS MORE THREATS … · •Clients and network all over the world ... CHALLENGES FOR RAIL 11 Infrastructure ... DIGITAL INNOVATION BOOSTS DEMAND FOR PROCEDURAL