Expansion abroad, one of FS Italiane’s objectives over the coming years

By the Il Foglio newspaper

Rome, 23 November 2016

For the FS Italiane Group, one of the main objectives for the coming years is expansion abroad. All over the world. The Industrial Plan 2017-2026 aims to increase its cross-border share of revenue from 13 to 26%. However, in absolute terms, given the business’s concomitant growth, achieving that percentage means quadrupling the company’s international turnover, increasing it to 4.2 billion in 2026, to the level of other major players.

In fact, there are 200 railway companies around the world, but only seven countries have an efficient high-speed service worthy of being a benchmark, and with it comes desirable technologies, products and services that can be exported to: Italy, Spain, France, Germany, Great Britain, Japan and Korea.

To understand what is happening in a sector where Italy can boast of being one of the few true “national champions”, it would be useful to start from a study published in November 2015 by Credit Suisse with the slightly provocative title “The high-speed train market remains on track”. However, the report focuses on China. Ten years ago, writes CS, China resorted to the use of well-established train manufacturers to support its own development, such as Siemens, Alstom, Bombardier and Kawasaki.

China now wishes to break free definitively. Rather than mutually complicating matters, the two state companies, CSR and CNR, the largest Chinese train manufacturers, decided to combine forces at the end of last year. According to a press release from the Shanghai stock exchange, the aim of the merger was to “create a new cross-border bidder and global leader in the field of high-quality railway equipment”.

The primary target of the Chinese companies, the report continues, “is not, however, the European market, but rather Asian countries like Cambodia, Vietnam and Thailand, the Middle East with Saudi Arabia, Africa with Nigeria, South America with Brazil, Argentina and Mexico, as well as Russia”. Their analysis shows that emerging countries have the biggest potential for growth. “But rail services could also expand in the USA, while the western European market is widely saturated. There, they are talking more about modernisation and improvement than infrastructure expansion”.

The FS Industrial Plan will therefore develop along three main lines. The first one involves working as a general contractor, with the capability to work, in particular, in countries with large infrastructure gaps. The company will largely find itself competing on the markets indicated by the Credit Suisse report, i.e. primarily with the Chinese. But with very strong high speed know-how.

As will happen in Iran, where the Italian group has put itself forward for the construction of two new high-speed lines. Its priority areas for international expansion are the Middle East (Iran, Saudi Arabia and Oman), India and South-East Asia (Malaysia, Thailand, Singapore and Vietnam), the Americas (Brazil, Argentina, Colombia, Peru, the USA and Canada) and Africa (Ivory Coast, Congo and South Africa).

The second point targets growth abroad for market railway services, i.e. with high added value. Trenitalia can export the very high quality of travel that it offers today on the Frecce system to other countries. In addition to strengthening existing cross-border relations (for example, Thello services with France, Venice-Ljubljana-Belgrade connections or the new traffic with Switzerland thanks to the opening of the Gotthard and Ceneri tunnels), it will focus on more attractive European routes: Paris-Brussels, Paris-Bordeaux, Hamburg-Cologne, Milan-Zurich-Frankfurt (this connection will begin in late 2017 and will cross three countries), Athens-Thessaloniki (thanks to the acquisition of TrainOSE, which was privatised by the Athenian government in 2016 and runs services on all the Greek network but has no rolling stock and has so far used the old stock from the other OSE public company) and London-Edinburgh. All this is partly thanks to the liberalisation of the European railway area provided by the Fourth Railway Package, starting from 2020.

The last part of the plan involves the international development of LPT, local public transport. The goal is also rail/road modal integration for passenger transport in cities served by the Group’s infrastructures. A quote comes to mind at this point from 2009, not by a manager or by a marketing expert, but by a former governor of Campania, Antonio Bassolino, at the opening of the Gricignano-Naples HS track, completing the Naples-Rome route which can be done in just over an hour: “The Milan-Naples high-speed line is a real metro system of Italy”, said Mr Bassolino, considering that Naples used the high-speed infrastructure as junctions for its own underground system.

The fact that the entire Po Plain in the north, from Turin to Venice, can be done in 4 hours with the Turin-Milan section in 55 minutes and Milan-Verona in an hour and 20, also confirms that the FS HS infrastructure is a metro system of Italy. These two cases cover the time that it takes Romans to cross Rome using the two single running lines of their metro system. FS Italiane had focused on the Roman metro system and, more generally speaking, on the services run by Atac; it’s just a shame that Virginia Raggi’s council did not follow suit.

The wait therefore goes on until 2019, when these services will go to tender and FS will be ready to bid for them. In the meantime, it has reacquired 100% of Centostazioni, a company which runs Italy’s main stations, 40% of which had been sold to private owners.

The CEO of FS Italiane, Renato Mazzoncini, outlined a smart station project, a meeting point between high-speed lines and interregional and underground transport, with spaces for shops, entertainment and relaxation. At the same time, he also expressed his interest in the M5, the fifth line of the Milan metro system. Expansion abroad yes, but also for the local underground.