Spain ready to become the testing ground for international high-speed rail competition in Europe

As the end of the year approaches, Iryo is preparing to make a strong entry into the Spanish high-speed rail market. November 25 will mark a historic day since for the first time in Europe three national and foreign railway companies will compete at high speed. Will this follow the Italian liberalization experience or are we entering uncharted territory?

Iryo recently announced the start of its operations, scheduled for the end of November. The company, as explained in previous articles, is a consortium between Trenitalia, Air Nostrum and Globavia. For a year, it has been testing its brand new “Frecciarossa 1000” trains on Spanish lines, and after some disagreements with ADIF on capacity allocation, is ready to launch the first services. Along with Renfe and Ouigo, a subsidiary of SNCF operating successfully in Spain since 2021, Iryo will be the third company to enter the market.

Competitive high-speed rail transformation in Spain.

Following the liberalization process that culminated in the full opening of the network in 2020, ADIF has identified three main high-speed corridors on which to promote the open market for operators: Madrid-Barcelona, ​​Madrid-Levante (Valencia and Alicante ) and Madrid-Toledo-Seville-Malaga.

In these corridors, the optimized (perfectly clocked) network capacity was calculated and split into 30% for annual allocation and 70% split across three framework agreements. The latter was divided into several lots: A covering 60% of the capacity of the framework agreement, B covering 30% and C covering the remaining 10%. The decision to directly award 70% of the optimal network capacity while leaving the remaining 30% open to annual bids can be seen as an attempt to allow flexibility in service provision and to meet peak demand at the ‘coming.

For each of these packages, an international bidding process awarded the service to the operator who could ensure the most intensive use of the capacity within the package. Other selection factors include, for example, the availability of rolling stock or the desire to offer services on less busy routes and not only on the most profitable Madrid-Barcelona route. Subsequently, a 10-year framework agreement was signed to provide legal certainty and guarantee a long-term commitment from the railway undertakings.

The most consistent package A was awarded to Renfe, package B to Iryo and package C to Ouigo. Operators must comply with their path requests or penalties are imposed. He is valued that capacity could increase by 65% ​​on the three corridors identified, Renfe alone increasing for example by 13 percentage of its service delivery compared to the current traffic of the HS network.

Competition taken to a new level

For the first time in Europe, a national high-speed network will have three operators, including two from abroad. Until now, the only existing example of high-speed rail competition was Italy, where Trenitalia and NTV have been competing fiercely since 2012 with very good results. Although it may seem like a similar development, there are some key differences that make the Spanish approach a completely different liberalization process.

First, the Spanish network differs from the Italian network both geographically and politically. The former has a less dense and more distributed structure, and only the aforementioned corridors have been put out to tender instead of the entire high-speed network as in Italy.

Secondly, in Italy companies have more direct access to the market and are not bound by a 10-year framework agreement like in Spain, having more flexibility to design their service.

Third, and probably the most significant difference, the Spanish incumbent Renfe will be competing with two foreign companies that have a long track record in high-speed services. Ouigo has nearly ten years of low-cost high-speed rail operation, while Iryo can capitalize on the experience acquired by Trenitalia, which has been in direct competition with NTV for almost ten years.

New form of liberalization

These differences will probably lead to a new concept of liberalization of high-speed rail, with the combination of very experienced players and a more regulated capacity allocation, bringing both advantages and disadvantages. Having fixed capacities ensures that unprofitable rail routes will also be served and that small businesses can better survive without fear of being left out.

But not having this fear could also result in lower service performance because already having the paths lessens the need to be better than competitors. In general, competition should reduce prices, increase quality of service and frequencies.

The concrete dynamics of this liberalization process are still difficult to predict, and it is only in a few years, when the market will be fully operational, that lessons can be learned. For now, seeing the second largest high-speed network partially liberalized is a positive sign for Europe and an example for other countries. Opening up to competition does not mean harming incumbent national operators or reducing the quality of service. On the contrary, it can improve the transport performance of a network and the satisfaction of its customers. Italy have already shown that it is possible, Spain will soon follow.

The international vision behind Iryo

The new company formed in 2015 by Air Nostrum and Trenitalia, and more recently Globavia, is a long-term investment vision of the various transport players. Air Nostrum, part of the Iberia Group, represents an airline’s desire to diversify its portfolio. Following the legislation on short-haul flights recently adopted by France, more and more airlines are looking to supplement planes with trains for inbound and outbound journeys to and from airports over medium/short distances.

Trenitalia, on the other hand, is expansion very quickly on the European rail markets. It acquired Greek Railways in 2017, is the second regional operator in Germany via Netinera, will operate UK high-speed trains from 2026 with FirstGroup and has now entered the Spanish high-speed rail market as a second actor after the titular.

The opportunity for Trenitalia to expand internationally would not have been possible without competition improving its service and economic performance. It further proves that competitive environments, if properly regulated and managed, can make businesses stronger and improve the quality of service they provide to customers.

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Jose P. Rogers