Since the liberalization of railway transportation, 7 years have passed, and it has been 6 years since the first private operator started its services.

Let’s check how much presence the private companies have in the railway sector.

This post is translated by ChatGPT from the original text in Turkish published at Rail Turkey

Almost no progress in passenger trains

It was expected that the liberalization on the passenger side would progress faster compared to freight, at least that was our prediction. There are a few reasons for this:

• While the scarcity of rail-connected industrial facilities is a major drawback for the freight side, passenger stations in urban areas have a significant advantage over buses.
• Excessive cost sensitivity on the freight side makes competition against the state-owned company more challenging, while in the passenger sector, competition through different services is possible.
• In the passenger side, the private sector is free to take steps that will make a difference for individual passengers and tour companies, such as opening new routes, implementing different pricing policies, conducting advertising and promotion campaigns.
• It is possible for private companies to operate passenger trains with “guaranteed profitability,” which they favor.

Despite all advantages above, the only initiative in the passenger side so far has been the Cappadocia Express. However, there is no news yet about the train that was scheduled to start its services in February 2022.

The lack of significant progress in the liberalization of passenger trains can be attributed to the unfamiliarity of active companies in the passenger transportation with the railway industry and the unfamiliarity of these companies’ managers with trains.

It should be noted that another reason for this unfamiliarity is the scarcity of publicly shared information. Although statistics regarding the railway sector are regularly published, it is not possible to find information that would guide those considering entering the sector. For example, it is not possible to know how many passengers are transported on which routes, the occupancy rates, or the departure and arrival punctuality of the trains.

The entry of private companies into the market is not easy either. Procuring railway vehicles is challenging and expensive, and it is not easy to attract the trained workforce to private companies since the only source is state company. And when things don’t go well, exit options are also quite limited.

Private companies in freight, but no competition

At the end of 2017, with the entry of two companies, Körfez Ulaştırma and Omsan Lojistik, an important initial step was taken towards liberalization in the rail freight. While the market share of the two private operators remained at 13% in 2021, the state-owned company, TCDD Transportation, held an 87% market share. In Bulgaria, where the first private operator was established in 2005, the private operator’s share is 50%, and in Romania, where the first operator was established in 2002, it is 80%.

The indicator for the lack of competition in freight is not the low share. The main reason is, both operators only carried specific loads of their group companies. It is not easy for Omsan to start a fierce competition as it’s all loco fleet is leased from TCDD Transportation. It is more likely for Körfez Ulaştırma, which has made significant investments in locomotives and wagons recently, to deepen the market.

Another private operator candidate in the rail freight is Arkas Lojistik. The company announced at the beginning of this year that it has placed an order for 5 locomotives and currently holds the largest private freight wagon fleet in Turkey. Arkas is expected to start its operations with its own locomotives in 2025.

Another noteworthy development is Pasifik Eurasia. The company, announced as the official operator of TCDD Transportation in 2020, is going public. The company stated that 40% of the proceeds from the IPO will be used for railway train operation investments. Although further details have not been disclosed, we may expect to see a new operator in the rail freight.

An important reason that has delayed private investments in the freight sector is pricing. TCDD Transportation, with its 87% market share and a large fleet of wagons, still holds a dominant position in the market. However, its prices are not based on its costs, making loss which are covered by the government. Therefore, it remains uncertain whether the private companies, which must determine prices based on its costs, can compete with TCDD Transportation.

Intense competition in rolling stock industry

There has never been a legal barrier to the presence of the private companies in rolling stock. However, until recently, TCDD was the sole regular purchaser in the market and made almost all its purchases from its subsidiaries (Tülomsaş, Tüdemsaş, Tüvasaş). The private companies largely developed around these state-owned subsidiaries.

The first area where the private sector surpassed public companies was urban rail industry. Local manufacturers, led by Durmazlar and Bozankaya, have won almost all recent tramway tenders in Turkish cities. Now, their names are also heard in metro tenders. Türasaş, which won the suburban cars tender for Gaziray, will be the first state-owned manufacturer in this area.

The most intense competition is observed in freight wagons. Private sector manufacturers such as Gök Yapı, RC Mühendislik/Erciyas, and Vako have drawn attention with their successive capacity expansions and technology investments. In fact, TCDD Transportation still meets all its needs from Türasaş, and the new wagon investments by private operators and wagon owners are still limited, with a few exceptions. However, exports have become the locomotive of the industry in recent years. Significant contracts have been signed, especially with European companies. Another initiative that has revitalized the sector is the acquisition of Rayvag by Greenbrier, a leading US-based manufacturer.

Cover photo: Ministry of Transport ©