Saturday, Dec 16, 2017
Infrastructure | Transport | Europe | Italy

Italian Railways

Ferrovie dello Stato launches “iron therapy” with €6.5bn investment


1 year ago

Renato Mazzoncini, CEO of Ferrovie dello Stato
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Renato Mazzoncini

CEO of Ferrovie dello Stato

Being the country’s n°1 company in terms of investment, the development plan of state-owned Ferrovie dello Stato exemplifies Italy’s shift from austerity policies to investment. CEO Renato Mazzoncini explains the strategic importance of the TEN-T Corridors that will unleash Italy’s full potential to become a logistics platform connecting the Mediterranean and Middle East to the north of Europe, and how the flagship Freccia 1000 high-speed train shows Italy’s leadership in railway innovation and is the best transport option for millions of visitors to Italy.

 

Italy is at last emerging from its longest economic crisis since World War II. Its GDP started to grow again last year, with an increase of 0.8%. In your opinion, has there been a shift from austerity to investment with the 2016 Stability Law and Unlock Italy?

Definitely. 2016 is really the year of the shift. Ferrovie dello Stato is the number one company in Italy in terms of investment. To understand the importance of Ferrovie dello Stato, in 2016 our budget reached €6.5 billion for investment in the country. The second company was Enel with €2.5 billion.

This amount is even more important if you consider the multiplier effect of transport and infrastructure investment. Public transport is the emblem of the modernization of the country. To understand the magnitude of the policy change pushed forward by the government, it is essential to point out that in 2014 our investment budget was €3 billion. In two years, we more than doubled the amount of investment in Italy.

 

This is what you refer to as “the iron therapy” of Ferrovie dello Stato…

Exactly. Half of our investment goes towards the development of the TEN-T corridors. This is crucial for the country in order to be connected with the rest of Europe. If you want to build a strong Europe, it is absolutely necessary to have good connectivity, and the TEN-T corridors are the most important infrastructure for Europe right now.

The east-west corridor, for instance, is of strategic importance. In the north, we have the Alps and we won the tender with Europe to have these corridors south of the Alps and not north of the Alps. Had we not won the bid, the country would have been completely cut off from the rest of Europe. In the area of this corridor, there are Turin, Milan, and Venice, just to name the most important cities. At the moment we are working on the construction of the piece of the corridor connecting Turin to Lyon. This is a very big tunnel – 54 kilometers (33.5 miles) long, going from Italy to France.

Another key tunnel is the Brennero that connects Italy to Austria and Germany, which is 64 kilometers long – the longest railway tunnel in the world. Also the Gottardo tunnel is 50 kilometers long and goes from Italy to Switzerland towards the north. It connects to Germany, but also to The Netherlands and other countries.

The other corridor is the north-south one. Currently, we have high-speed rail links between Milan and Bologna, Florence, Rome, and Naples. It is possible to travel in only one hour and seven minutes from Rome to Naples. With the high-speed train Freccia 1000 it’s possible to travel between Rome and Milan in 2 hours and 20 minutes. By the end of 2016, Freccia 1000 will be able to reach the speed of 350 kilometers per hour. It is not the Hyperloop of Elon Musk, but we are getting closer! Our advantage is that we can transport 500 people at the time, while the Hyperloop only 20.

 

How will the corridors impact cargo transportation in Italy?

This is a significant aspect for the economy, as about 90% of the freight is transported by road. Italy has a strategic position in the Mediterranean because a great amount of cargo arrives from the south. Therefore, the strategy of the Ministry of Transport and Infrastructure is to further develop ports – such as at Taranto and Gioia Tauro – and create interconnectivity with the rail system, which will have a remarkable economic spillover for our regions in the south of Italy.

There is a real problem of infrastructure for freight in Italy. Currently, ships go around Spain to go up to Rotterdam, from whose port cargo gets transported to Italy. This is the paradox. We have to work continuously to connect ports of the south of Italy with the north – similar to the ports of Trieste and Genova that provide an easy access to the north of Europe.

Our investment is allocated 50% on the TEN-T and 30% for the regional system, because 80% of Italians don’t use the high-speed system, but the regional train or bus system. We have to improve the quality of this segment because I think it is possible to have over 30% of Italy’s residents traveling and commuting by public transport instead of private car.

With regards to cargo, we have to invest in the rail track, but also in the connection between ports and the logistic platforms. In this way, trains will transport a considerable amount of cargo.

The difference with recent years is that in the past all the investment went to the TEN-T, while now we are focusing significantly on the regional system as well.

 

What kind of improvement does the regional network require? Is it newer trains?

We have two main targets. First of all, part of the regional network is still single track. We have to double the track. And then we have to work on stations to make them more comfortable. It is not necessary that all the stations become like Milano Centrale, but we understand that in Italy we have 2,200 stations, which is a high number for a little country like Italy, and many need improvement.

We have a fleet for the high-speed system that is fantastic; I think that it is really the best in the world at the moment. In contrast, for the regional system we have 20-year-old trains. We have to modernize the system. Currently, there is a tender for Trenitalia to buy €4.5 billion worth of new trains dedicated only to the regional system.

An idea we are developing is to create a ROSCO (rolling stock operating company). It’s a system used frequently in other countries. In Italy we don’t have it yet. It is an interesting investment option because basically the ROSCO owns and maintains trains, which are leased to train operating companies that operate them. In this way, we minimize the risk of buying new trains and letting them remain idle. We are seeking investment for this idea, not from the transport system, but rather from financial institutions interested in making it a reality.

Are there other opportunities for American investors to tap into Italy’s railway market?

The Italian market in public transport, and in the railway system in particular, is financially very strong. If someone wants to put money in this business, there will definitely be interesting returns. In the next five years, we’ll have to spend approximately €10 billion on new trains.

 

It seems like you have to sort out the “impossible trinity” in the infrastructure sector, namely trying to combine competitiveness, efficiency, and high quality. What are the key factors you are focusing on?

The real challenge is not in the railway system but the mobility market. For instance, if you want to go from Rome to Milan, you can choose many different ways. You can take your own car or get a ride with BlaBlaCar; you can catch a train with Trenitalia or Italo; you can take a low-cost flight; or even travel by bus with Italian, British, or German companies.

In order to go from home to work, you’ll probably have to take more than one means of transportation. Probably there is a piece on foot, by bus, or car; some people take a bike at the beginning or end of their daily commute. We need to make people’s lives easier. Some start-ups have disruptive power in this sense and may be our biggest competitors in the future. Take for example Airbnb and how they revolutionized the hospitality market.

If a company wants to defend its little business in this new world, I think that it is not possible to win. In Italy, Ferrovie dello Stato is the biggest company for public transport and is the only company that can try to become the ‘mobility company’ of the State. We give our clients the solution, with our simple app to travel all day paperless; you don’t need any ticket.

We have the technology that we export all around the world from Iran to Sweden to North America. I think that we can arrive with our high-speed trains everywhere, because there are only seven companies in the world with the high-speed systems. I really think that Italy’s and Japan’s systems are the two models of reference in the world. But, it’s not enough. Continuous improvement of the customer service is absolutely necessary.

 

What about the possible acquisition of Anas, the state-owned company deputed to the construction and maintenance of roads?

We need Anas to evolve into a fully-fledged mobility company, as well as of course to make gains in terms of infrastructure. In the near future roads are set to experience significant technological change. But Anas doesn’t currently have the technology to transform Italian roads, whilst Rfi, the subsidiary of FS Italiane, which owns the railway network, could provide what is necessary. The synergy is quite evident also from a planning perspective.

 

Can you give us more details about the characteristics of the Freccia 1000 high-speed train?

The Freccia 1000 reaches 350 kilometers per hour on a normal track, so you don’t need to upgrade it and invest more money. And it’s also not too expensive. Furthermore, Freccia 1000 has been conceptualized in order to not only provide safety but also comfort for the passengers thanks to a particular design of the suspension system.

Italy is not easy geography. We have a lot of mountains and tunnels. Freccia 1000 is a train that can really run in all conditions.

It is also possible to export Freccia 1000 to many other countries. We are already working in 30 countries around the world with our subsidiary, Italferr. Our technology and know-how in the railway system are globally recognized as avant-garde.

 

You’ve just mentioned how Ferrovie dello Stato can take Italian trains all over the world. Let’s look at the opposite trend. Let’s see how tourists can take advantage of Ferrovie dello Stato to discover the Belpaese…

The train is by far the best way to travel and discover Italy. The Minister of Tourism, Dario Franceschini, is indeed one of our biggest fans. Our stations are located in the center of all the most important touristic towns in Italy. You can arrive in Venice, Florence, Rome, and Milan and just take a trolley with you. Train stations in Italy have been indeed very important in terms of social development. Entire towns developed around stations that were built 100 years ago in the middle of nowhere.

Having a tour with our high-speed trains is also cheap if you compare it with other countries such as the UK, Japan, or France. And our network is widespread, so tourists can visit all the most important towns with the high-speed trains.

There are also a many small yet historically unique places, especially in the south such as Pompeii and Ercolano, or Agrigento in Sicily, that are reachable by train. We are working closely with Minister Franceschini to realize particular stations for tourists in these small places because the possibility to reach Italy’s most picturesque places by train is a peculiarity of the country. Tourism and train is the perfect joint venture. 



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