Intermodal Russia

Innovative business model for new railfreight operator

SBB Cargo and the intermodal operator Hupac are jointly founding an independent, neutral company to handle transalpine transit freight between Germany and Italy. It is hoped that a clockface production system and lean structures will make the new company the cost leader on the north-south corridor.

As of the beginning of 2011, SBB Cargo and Hupac will be founding a new train operating company that will focus on block and intermodal trains on the European north-south corridor between Germany and Italy. In taking this step, the Board of Directors of SBB has affirmed the decision it took in February on the strategic realignment of SBB Cargo.

The shareholders in the new company will be SBB Cargo (75%) and Hupac (25%), the leading intermodal freight operator on the north-south corridor. It is possible that further partners will also join. The new company will intensify the existing decades-long partnership between the two companies. The aim is to jointly establish and develop a strong, neutral traction company that is close to its market. This move also seeks too achieve cost leadership in the intermodal segment by optimising resources on selected routes and halving structural costs. Since the company will be Swiss, quality will be a major priority.

The new company's customers will primarily comprise intermodal operators, who will account for about 80% of the planned total sales of CHF 300 million. Although Hupac will itself be the company's largest single customer, the range of services is clearly geared to other large customers. Apart from operators, these include railfreight and other railway companies and individual large-volume shippers. "The crucial thing is to be able to offer the market traction services between Germany and Italy as an independent, neutral train operating company. This is in the interest of both shareholders", explains Nicolas Perrin, Head of SBB Cargo.

Several railfreight operators dominate the north-south rail corridor, and a number of other railway companies now operate their own freight trains on the corridor in addition to SBB Cargo. The intense competition is creating heavy price pressure and slender margins for traction operators. "The step forward that has now been adopted will make it possible for us to continue to operate on the central European freight axis as a Swiss company. Looking ahead to the opening of the Gotthard base tunnel, Switzerland's two strongest players in the sector need to pool their strengths. Only by doing so will we have a chance of actively counteracting the pressure being exerted by foreign operators with a solution of our own", says Hans-Jörg Bertschi, Chairman of the Board of Directors of Hupac.

Neutral traction services on the same terms for all customers
The new carrier's business model is a first in the railfreight industry. Hupac's stake in the company means that intermodal customers will for the first time bear some of the responsibility for the strategy and development of a railway company. "We have gone against the European trend by developing a model in which the railway company does not effectively take away the intermodal operator's freedom of action by integrating it", says Hans-Jörg Bertschi. The new railfreight company will benefit from the strengths of two independent partners: SBB Cargo will provide the traction resources and rail-related technical skills, while Hupac, thanks to its pan-European market presence, will supply an important part of the transport volume. Hupac will play an active role in helping to shape the market-oriented development of the new company at the strategic level, something which will ultimately benefit all the new carrier's customers. This form of cooperation has shippers' wholehearted support since it promotes market proximity and efficiency as well as contributing to rail deregulation. SBB Cargo International will operate independently, maintaining neutrality towards all customers. The shared goal of both partners is to provide dependable service, reliably fill capacities and continually optimise capacity usage.

Base on the north-south corridor
The new company will employ around 480 people, including 237 drivers and 76 operating staff. A further 170 employees will work in planning, scheduling and administration. SBB Cargo International will have its own locomotive crews in Germany and Italy right from the outset. In Switzerland crews will initially be leased from SBB Cargo.

The spin-off of international operations into the new company will result in 157 redundancies at SBB Cargo over the next two years. These will be implemented in a socially responsible manner. SBB will offer alternatives for retraining within the rest of the company and can provide new employment opportunities thanks to growth in other areas. The best possible use will be made of all available solutions throughout the Group employment market, including offers to work in other SBB divisions, exploiting staff turnover, early retirement opportunities and, where necessary, outplacement. No staff who are employed under the collective employment contract will be made redundant.

The new company will probably be based in the Basel-Olten-Lucerne area. A search for suitable office premises is in progress. The existing depots on the north-south corridor in Switzerland will be retained, but – in a departure from current practice – drivers will be deployed to a greater extent within the same country. Basel will become the central hub of the Gotthard and Lötschberg corridor production concept. The number of drivers at SBB Cargo's depots in Ticino and central Switzerland will remain at around its present level. In Germany, the staff currently based in Offenburg will be transferred to Mannheim in the medium term. The other sites in Germany and Italy will be retained for the time being. The subsidiaries currently responsible for production in Germany and Italy will be integrated into the new company. Chemoil, the subsidiary specialising in the transport of petroleum and chemical products, will remain an affiliate of SBB Cargo AG.

Sustainable business success with new production system
The new company will commence operations at the beginning of 2011. It will initially lease 109 main-line locomotives from SBB Cargo's existing fleet, 59 of which will be modern multi-voltage locos for cross-border operations. The linchpin of the new company's corporate strategy is increased locomotive and driver productivity. This will be achieved by implementing a clockface production system in which locomotives will operate a large number of round trips, with reduced downtimes and a focus on high-volume routes. The aim is for the company to break even by 2013 and become self-financing in the medium term. "By setting up SBB Cargo International we are creating a strong player on the north-south corridor, helping to transfer traffic from the roads to rail and contributing to Switzerland's growth as a centre of economic activity", emphasises Nicolas Perrin, Head of SBB Cargo.