THE appalling terrorist attacks in Paris on November 13 and the thwarted attack on an Amsterdam - Brussels - Paris Thalys train on August 21 will inevitably lead to calls for greater security and the reintroduction of border controls.

THE announcement last month that the 26 transport ministers of the European Union (EU) have finally decided to open up the domestic passenger rail market in each member state to competition from 2020, and to reform the way loss-making passenger services are funded and procured, could herald a passenger rail revival in many countries provided private operators are given the chance to compete fairly.

WHETHER we like it or not, we have to face up to the accelerating development of technology which is both a huge challenge as well as a real opportunity for rail to reduce costs and become more competitive. This was one of the messages to come out of the Institution of Railway Signalling Engineers' (IRSE) Aspect 2015 conference held in London last month, and the challenge faces both signalling and telecommunications.

THE news that Dr Vladimir Yakunin is to step down as president of Russian Railways (RZD) after 10 years will come as a shock to many both within Russia and abroad, especially as he has been so active in the International Union of Railways (UIC), where he has served as chairman since 2012.

THREE of Europe's major railways face some serious challenges in the coming months as they try to grapple with problems ranging from a failure to react to rapid changes in the market, as in the case of French National Railways (SNCF) and German Rail (DB), or a failure to keep costs under control and manage projects effectively as with Britain's infrastructure manager Network Rail (NR).

SNCF's president Mr Guillaume Pepy outlined the threats facing SNCF's high-speed services at the UIC's high-speed rail congress in Tokyo last month. These include car sharing, the advent of long-distance bus competition, and the future introduction of autonomous-driving cars. Such developments are changing travel habits, while at the same time people are becoming more price conscious. These threats are not unique to SNCF, as DB for example is only too well aware.

SNCF is trying to respond to the new business environment in several ways. Its low-fare Ouigo high-speed operation launched in April 2013 has been successful in attracting new business and is now being expanded. SNCF is also increasing the proportion of discounted fares, and has introduced TGV Pop where passengers can vote online for a train service 14 days before they want to travel. At the same time SNCF is adding more seats to its TGV fleet and improving train utilisation to increase profitability.

While this sounds like a sound strategy to revitalise TGV, SNCF has failed to tackle the continuing decline of its conventional long-distance services, many of which are in grave danger of withering away completely. A good example of the poor service on offer is the Nantes - La Rochelle - Bordeaux line where only three trains a day are provided with the first northbound departure not until 10.55, while onerous speed restriction will be introduced soon due to the poor state of the track, which will make the service even less attractive.

The latest plan calls for services to be recast to meet the needs of passengers with higher frequencies on many routes, coupled with investment in new trains and infrastructure in order to improve punctuality, and reduce journey times and operating costs.

Opening up some routes to competition to break SNCF's monopoly is also suggested, although this will face stiff opposition from the unions, and is unlikely to start before the end of 2016. A leadership council is proposed to administer the network, which does not sound very inspiring.

While there is huge potential to develop these services, time is of the essence. A small dynamic team of people with vision and energy needs to be formed, along the lines of the Ouigo management, which can breathe new life into the services and try out new ideas to establish what works best. A visit to Britain and Sweden, for example, would also provide ideas of how to revitalise regional and overnight services.

Across the border in Germany, DB also needs new ideas to combat its disappointing financial performance, and to recover from a series of damaging strikes this year. DB's CEO Dr Rüdiger Grube is planning a drastic restructuring to improve efficiency. One measure under consideration is the part-privatisation of DB, even though this has always faced considerable political opposition in the past.

A substantial reduction in the size of the management board was expected to be announced last month. DB's executive board member for technology and environment, Dr Heike Hanagarth, has already resigned, and according to reports in the German media, DB's head of passenger transport Mr Ulrich Homburg, head of compliance Mr Gerd Becht and head of railfreight Mr Alexander Hedderich, will all leave the board, while head of logistics Mr Karl-Friedrich Rausch, who retires at the end of the year, will not be replaced.

To lose so many key people at once points to serious conflicts within the DB hierarchy over future strategy. It would appear foolhardy for Grube to exclude people from the management board with responsibility for passenger or freight, its two main revenue earners. DB actually needs two passenger board members, one focused on the concessioning of urban and regional services - where DB has lost considerable ground to new private operators - and the other responsible for developing its purely-commercial Inter-City and ICE high-speed services. These two roles need very different skill sets.

In Britain, NR's huge investment plan, and in particular its electrification programme, has come unstuck with costs spiralling and projects running behind schedule. The government has since postponed some of the electrification schemes and appointed new senior managers to tackle the problems.

Behind this unfolding crisis is the sheer volume of work which NR has taken on in an effort to modernise the network and increase capacity to cope with soaring traffic. Good project management and implementation is being hampered by an acute shortage of signalling and electrification engineers. This is a worldwide phenomenon, which has been exacerbated in Britain by the government's opposition, until recently, to electrify main lines in the mistaken belief that some new method of powering trains was just around the corner. This led to an exodus of engineers and loss of expertise, which NR is now having to rebuild.

The potential for rail transport is great, as its market share is still very small, but railways do not have a God-given right to survive. They need skilled people with flair and imagination in the right jobs to prosper.

WHILE still opposing the European Union's (EU) Fourth Railway Package in the EU council and parliament, Germany and France are already making sure it will have no effect in bringing competition to public service obligation (PSO) passenger contracts in their two countries.

TRUE success lies in the ability to predict future trends accurately and embrace them successfully rather than letting them adversely affect your business. The difficulty lies in making accurate predictions and knowing how to react, especially as the speed of change is so swift today that the future has arrived before most people have even realised it.

THIS issue of IRJ contains a number of stories which highlight some of the challenges associated with investing in the construction of new lines or increasing
the capacity of existing ones.

THE 61st UITP World Congress and Exhibition being staged in Milan on June 8-10 comes at a time when the public transport industry is facing an unprecedented number of challenges. Though the theme of the event, Smile in the city, is light-hearted, the message behind it is a tough one: the sector must embrace the opportunity for change and position itself at the forefront of the urban mobility system. The acronym Smile represents the guiding theme for the congress as well as the objective for the sector: positioning public transport as a key ingredient in building sustainable and competitive cities.

THIS year is shaping up to be a watershed for the global rolling stock supply industry. A series of mergers, acquisitions and disposals, coupled with the growing importance of small and medium-sized enterprises are likely to have far-reaching consequences for the railway industry.

The massive merger between China's two train building giants, CNR and CSR, received final approval last month from China's Securities Regulatory Commission and the Ministry of Commerce, as well as anti-trust authorities outside China, and the first appointments have been made to the board of the new CRRC Corporation. This means the merger could be completed as early as next month.

CNR and CSR generated combined revenues of
$US 30.5bn between January and October last year, and achieved total profits of
$US 1.45bn. To put this in context the world's next largest train builder, Bombardier Transportation, had a turnover of $US 9.6bn for the full year and an Ebit of $US 429m.

CNR and CSR have so far focused their export efforts on Asia, South America, Africa and the Middle East. But with the Chinese government keen for the new company to boost exports there will be considerable pressure to enter new markets.

Speaking at the recent Railway Forum in Berlin, CSR chairman Mr Zheng Changhong, who has been nominated to the CRRC board along with his CNR counterpart, explained how China wants to become a manufacturing power focused on innovation achieved both independently and through the continued transfer and absorption of technology. He referred to the huge resources at the disposal of Chinese companies, noting that 10,000 R&D engineers participated in the development of the 380A high-speed train supported by the ministries of railways, science and technology. This could give CRRC a huge competitive advantage in the future.

Completion of the e12bn GE-Alstom deal, which involves GE acquiring most of Alstom's power business in exchange for GE strengthening Alstom's rail division, is awaiting approval from the European Commission's (EC) competition directorate, which is due to give its verdict on July 8. If the deal does clear this final hurdle then Alstom will be purely focused on rail transport and should become a much stronger competitor particularly in signalling and locomotives.

Hitachi's purchase of Italian train builder AnsaldoBreda and a 40% stake in signalling specialist Ansaldo STS is expected to be completed later this year subject to regulatory and antitrust approval. Hitachi Rail Europe already has a strong foothold in Britain having won several substantial orders for passenger trains, and chose Britain as the location for its rail business global headquarters. Despite having innovative and highly reliable products, Japanese companies have often found it difficult to compete because of the strength of the yen, so Hitachi's Italian acquisitions should prove an astute move by consolidating the company's presence in Europe and improving its chances of achieving its goal of becoming a strong global player.

Vossloh is in the midst of restructuring its railway business and plans to sell off its locomotive and LRV manufacturing divisions in order to concentrate on infrastructure, where it is one of the main players. While Vossloh's vehicle building businesses are relatively small, they could prove attractive to a manufacturer looking to strengthen its position in the market, although the European locomotive market is highly competitive and has excess capacity.

If recent reports in the financial press are accurate, then another major change in the supply industry could be afoot. Bloomberg claims that Bombardier has hired UBS and Citigroup to advise it on a possible initial public offering or sale of Bombardier Transportation. The parent company is keen to shore up its loss-making aerospace division and one way to achieve this would be to sell its profitable rail business. This would have a profound effect on the market depending on who bought it, especially as it hard to see how a European or North American railway equipment company would be able to buy it, which would leave the door open to Asian companies looking to penetrate new markets.

Some of the smaller and medium-sized train builders have been steadily increasing their market share, most notably Stadler and CAF, and more recently some of the eastern European players such as Pesa and Škoda. These companies have proved adept at winning orders due to their agility, low overheads, and their ability to produce good products at competitive prices.

This has been aided by changes in the European market. The advent of open-access passenger operators and concessioning of local and regional passenger services has reduced the dominance of national railways and led to more smaller contracts, while traditional railways, most notably German Rail (DB), are becoming more receptive to bids from a wider range of suppliers.

While some companies are becoming increasingly focused on their core product, others are expanding their product range quite aggressively through acquisitions of niche players. Two notable examples of this are Knorr-Bremse and Wabtec, which are both developing a wide portfolio
of products.

By the end of this year the landscape of the railway supply industry could look quite different and these changes will shape the future of the railway industry for the next few years.