Rivalry between two operators of modern, high-speed trains pits one firm against the other

Competition shakes up Italian rail

by Anthony Faiola

The Washington Post

In the land where train schedules were once rough estimates and riding a chugging “locale” could feel like traveling by mechanical bull, the hypermodern Italo locomotives aimed to shake up the state-controlled world of Italian rail.

Offering sumptuous leather seats, top-shelf Prosecco wine and a cinema car showing first-run movies, Italo high-speed trains — operated by a Rome-based company whose investors include the chairman of Ferrari — began running in the spring of last year. But even as they whisk passengers from the canals of Venice to the shadow of Mount Vesuvius at speeds around 320 kph, Italo trains have become less a symbol of the future than a cautionary tale of what can happen when the word “competition” comes up in crisis-ravaged Europe.

Italy’s rail wars have become a litmus test for efforts to inject dynamism into ailing European economies. For Nuovo Trasporto Viaggiatori (NTV), the company that operates Italo trains, the results so far have been tragicomic, a reminder of how hard it can be to wrest power from state-run companies — a process that economists say is essential to putting the continent on firmer ground.

“They were going to treat us like the enemy,” Paolo Ripa, NTV’s chief operating officer, said of Ferrovie Dello Stato Italiene, Italy’s national rail giant, which was founded in 1905.

In Rome’s Ostiense station, for example, a 1.8-meter-tall fence was erected without warning one night last year — in front of Italo’s new customer center and only two weeks before the high-speed service was to launch. A Ferrovie subsidiary admitted responsibility but said safety was its motive; only later did the company install a gate that restored direct access to the train platform.

“What, someone is going to run out of our ticket office and jump onto the track?” Ripa said. “I don’t think so.” Another company official likened the state-run company’s approach to “many small acts of sabotage.”

Ferrovie was divided more than a decade ago into subsidiaries that operate under the same parent company and whose shares are still held by the Italian state. One subsidiary, Trenitalia, operates trains, including its own high-speed rail service, that directly compete against Italo. Another subsidiary, Rete Ferroviaria Italiana (RFI), oversees rail infrastructure, including train stations.

In theory, RFI — the company responsible for what Italo officials decried as the “cage” in the Rome station — is supposed to treat competitors equally. But Italo says that in vital ways, RFI and Trenitalia are still unfairly acting as one.

Some of the tactics, Italo says, have been as silly as putting gloating announcements on state-run trains when Italo’s locomotives are delayed. Others, however, have allegedly been more serious.

Italo says Trenitalia unfairly slashed its prices in an attempt to “squeeze” Italo’s profit margins. Trenitalia, Ripa said, could afford the discounts in part because it enjoys lucrative state contracts that help support its bottom line. Italo also says RFI discriminated against it by strictly limiting its floor space for automated ticket machines in Bologna and Venice.

On a recent afternoon, the part of the Ostiense station where Trenitalia operates had working escalators and toilets, while the moving walkways and bathrooms on the side of the station where Italo maintains its passenger center were out of service. Italo also says RFI is dragging its feet on a massive expansion at what is set to be Italo’s main hub in Rome, the Tiburtina station. The slow pace of completion — now almost two years delayed — has effectively turned the facility into a ghost town where many Romans fear to tread at night.

Part of the problem, many there contend, is that Italy opened its train market well before establishing a fully independent transit regulator — something that only happened this past summer.

“Why did it happen that way? Because this is Italy,” Ripa said.

Yet even the introduction of an imperfect competition has already boosted quality and lowered prices. The entry of Italo has by default made Italy one of the most competitive train markets in the world, given that most domestic high-speed routes in Europe and North America are still only served by one carrier.

Although Italo only began operations last year, Trenitalia has also spent years preparing for the opening of the market, and underwent a massive restructuring that improved efficiency and operations. One survey from 1991, for instance, showed that almost half the trains running on the key Rome-to-Milan route were delayed by more than 15 minutes. Today, Trenitalia says its networkwide on-time performance has climbed to 90 percent.

Last year, antitrust authorities fined the state-run train company $272,000 for anti-competitive practices against Arenaways, a far smaller private startup that was operating a limited route from Turin to Milan. In March, antitrust officials announced they were also investigating the state-run company for charges leveled by Italo’s operator, NTV.

“This is a country where we had crony capitalism and where state-run incumbents were very strong,” said Giovanni Pitruzzella, head of Italy’s antitrust commission. “We now have a new fight for competition happening, but getting where we want to be won’t be easy.”

On Thursday, Italian antitrust authorities announced that the state-controlled rail group had offered concessions to Italo. Ferrovie pledged, among other things, to make it easier for NTV to negotiate time slots and to grant the private competitor more exposure at train stations.

Officials from Trenitalia and RFI, however, strongly deny any collusion or unfair competition. The companies share a headquarters and have a joint media relations manager but contend that their operations are independent.

In a lengthy interview, Trenitalia Chief Executive Vincenzo Soprano said Italo was crying foul because his state-owned company was beating the privately owned upstart at its own game. He said Trenitalia had only lowered prices by an average of 9 percent, calling the discount a fair response to a new entrant.

Meanwhile, Soprano said, Trenitalia’s vastly improved services — including a new frequent-traveler program and luxury cabins in first class — have been winning over the same lucrative business travelers that Italo had been targeting.