In the European Year of Rail, Milan Marcus looks at how European trains can become more competitive with short-haul flights.
After decades of growth, international travel has been hit hard by the Covid-19 pandemic. Travel demand has plummeted in light of border closures and quarantine requirements. With continued uncertainty surrounding the economic recovery, passenger aviation is only expected to return to 2019 traffic levels by 2023 or 2024. Without a doubt, Europe’s ‘generation EasyJet’ is yearning for a return to ‘normal’, which for many includes summer holidays in France or Italy and city breaks in Barcelona or Prague. While the Covid-crisis continues to dominate headlines, the climate crisis may cause more long-term disruption for the travel industry. Transport is responsible for 16%of global greenhouse gas emissions, and unlike most other sectors, transport emissions are rising. Although most of these emissions originate from road transport, recent campaigns like the ‘flight shame’ movement have concentrated on keeping flights on the ground. They offer an alternative: ‘train bragging’.
Liberalisation Gains and Pains
Europeans are avid travellers; few countries boast more international trips per capita than the EU27. However, high incomes and relatively short distances between European countries alone cannot explain the proliferation of low-cost airlines like Ryanair and Easyjet, which allow jetsetters to hop from one country to another for less than €10. Instead, one should look back a quarter century to the creation of the EU’s internal aviation market. Since 1992, EU-registered airlines can operate flights between any two airports within the EU. This liberalisation has allowed more competition between airlines, and therefore has been a key driver of the low-cost airline model’s success in Europe, creating more travel options and lower fares for consumers. Previously, national flag-carriers (like British Airways or Lufthansa) essentially had a quasi-monopoly on domestic flights, while international air travel was heavily regulated through bilateral agreements on which airlines were allowed to operate which routes. Now, within the internal aviation market, Ryanair, based in Ireland, can take German holidaymakers to Mallorca, or operate flights between Rome and Athens. As economic theory suggests, the increased competition arising from market liberalisation has greatly reduced prices. For example, the average air fare between Milan and Paris has dropped by a factor of 16 since 1992!
Inevitably, cheaper fares lead to rising passenger numbers: since 1993, they have more than tripled in the EU. Yet such growth is accompanied by considerable pains. While the number of passengers and flights continue to increase, so too do the emissions from the aviation sector. Measured per passenger-kilometre, flying is among the most emissions-intensive forms of travel. Alternately, long-distance train trips can essentially be emissions-free, provided the trains run on electricity generated entirely by non-fossil fuel sources. Even when they aren’t emissions-free, trains perform much better than planes: UK trains on average emit six times less than domestic flights per passenger-kilometre, while Eurostar claims passengers on its services between London and Paris or Brussels are responsible for 90 per cent less emissions than on an equivalent flight.
With emissions-free airplanes still a long way from being commercially viable, a large-scale modal shift from air to rail seems imperative for the EU to reach its goal of net-zero emissions by 2050. Brussels has proclaimed 2021 the “European Year of Rail” to promote trains as an alternative to shorthaul flights (journeys less than 1000km). This is a distance where trains, especially the high-speed variant like France’s TGV, can compete with flights on city centre to city centre travel time. Before the Eurotunnel enabled rail links between the UK and the continent, London-Paris was the busiest air route in Europe. Since then, the number of daily flights has halved, with Eurostar commanding around three-quarters of the travel market between the two capitals. In fact, many of the EU’s busiest air routes are between cities less than 1000km apart. At least theoretically, a large-scale shift to rail seems feasible.
Competition is Key
However, beyond competing on time, trains must also compete on prices. Madrid – Barcelona is the busiest air route in Europe, despite high-speed trains connecting the two cities in 2:30 hours. Three competing airlines keep airfares low, while the Spanish rail operator Renfe faces no competition on its high-speed line. This pattern can be found throughout Europe. The medium-to-long distance rail market is reminiscent of the aviation market pre-liberalisation: national operators face little to no competition from private operators. However, if aviation successfully liberalised, so too can rail. The EU should complete the creation of a single rail market analogous to the existing one for aviation, where a railway company based in one member state can operate trains within and between any other.
How can that be achieved in practice? The monopolist’s best friend is high barriers to entry. Enhancing competition will involve lowering these barriers. Naturally, the railway sector contains some barriers to entry, like up-front investment into locomotives and waggons. Yet so does aviation, where private companies have managed to flourish. Beyond administrative obstacles, private rail companies face unnecessarily high charges on using rail track, which in several countries is managed by the same state-owned company as the railway service itself. Reducing these access charges to reflect the marginal cost of usage would be a first step to encourage private companies competing with national incumbents. To facilitate crossborder travel, countries should implement uniform standards in terms of signalling and voltage – so that any train can travel across the EU without technical obstacles.
The railway sector would be well-advised to adopt some of the mechanisms which have made flying so prevalent. This starts with booking a trip. Websites like Skyscanner and Google Flights allow travellers to easily compare all possible options for flying from A to B within seconds. Similar comparison websites for train travel are few and often don’t have access to all timetables, let alone fares. And while a flight involving more than one airline and layover can often be booked as a single ticket, international train travel usually means booking separate tickets for each leg – significantly increasing costs. This also means less protection when something goes wrong: If a delayed train means a connection booked on a different ticket is missed, the traveller faces little chances of receiving compensation. To make trains more attractive, booking them must be as easy as booking a flight on the same route.
Next Stop: A Level Playing Field
The EU praises rail as a sustainable transport mode, claiming an increase in rail’s mode share is a vital element of the European Green Deal. But beyond encouraging words, policy is needed to bring about this shift. Planes cause far more greenhouse gas emissions – i.e., negative externalities – than trains. Air fares should reflect these social costs. Currently, almost the opposite is true. At the beginning of the Covid-19 pandemic, European governments were quick to spend billions on bailing out their airlines, even though a survey of 231 economic experts found this to be the least desirable of 25 recovery policies. There is little regulation on the aviation sector: Kerosene, unlike most other fuels, isn’t subject to any excise tax; tickets for international flights aren’t subject to VAT. Although the aviation sector is part of the EU’s emissions trading scheme, most of the emission permits are ‘grandfathered’, i.e. given to the airlines for free.
Compare this to the rail industry: Operators pay excise taxes for the electricity and diesel fuel they use. They indirectly pay for the emissions permits required for electricity generation, none of which are grandfathered. In several member states, international train tickets are subject to full or reduced VAT rates. Without a level playing field, it will remain difficult for trains to compete with planes on prices. Given the clear environmental benefits of the former over the latter, the EU’s ambitions for emissions neutrality should be reflected in a kerosene tax and the end of grandfathered emissions permits.
The EU’s designation of 2021 as the European Year of Rail should stimulate the mode shift needed to reach net-zero emissions by 2050. Prescribing ‘more trains’ alone isn’t a silver bullet to all environmental problems, especially since constructing new rail track also involves emissions. But more people taking the train instead of flying embodies another shift – from a constant desire for more (whether more speed or consumer goods), to slowing down and appreciating the world around us. Looking down from a plane, the phenomenal task of saving our planet may seem distant and intangible. Sitting in a train, watching the landscape whizzing past, may offer an appropriate change of perspective.