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Iarnród Éireann – A crisis to be overcome

With the Minister of Transport talking hard ball about the cost of running Iarnród Éireann, Tim Casterton asked David Franks, the company’s CEO, how he would seek to manage the situation and what positive steps could be taken to bring Ireland’s rail network through the current financial crisis.

In May Ireland’s Transport Minister, Leo Varadkar, said he would consider imposing financial cuts on Irish Rail as the company’s current drain on the public finance was unsustainable (this despite a 30% reduction in PSO funding since 2008). Talk abounded of a mass closure of rural routes and services being cut back on main lines.

Are these simply a means of focusing thoughts on future requirements for the railway and what Ireland is prepared to pay for? Or is there a deeper agenda? Is there a way through this that could bring a stronger company out the other side?

David started off by explaining the background. ‘Iarnród Éireann just has to cut costs as there are not the funds available to continue with operational costs at current level. Key to this has to be the pay deal.’ Staff and managers are currently being asked to accept pay cuts. ‘It’s a hard thing to ask of your loyal work force at any time. They are being asked to accept a reduction of 1.75% while the deal for management is up to 6.1%.’

It’s obviously a very difficult situation to sell. Franks is certain that staff are aware of the current financial disaster that has hit Ireland. ‘I see an overall positive approach within the country to get on and try and resolve the issues rather than going down similar routes to countries such as Greece or Portugal.

The Public Sector employees in Ireland have been forced to take cuts. However we are considered to be ‘semi-state’ and the government isn’t able to enforce cuts. We are fortunate that the 2008 levels of pay remain
in force as well and this has greatly  helped.’ As in other railway companies such as Network Rail, voluntary severance has been used to help reduce the Iarnród Éireann pay bill.

Consultation and negotiation with the Trade Unions has been a priority in recent months. David explains, ‘The proposals have been referred to the Labour Relations Commission for a recommendation to be made – that’s the Irish equivalent of ACAS.

6847265825_82140eca6b_o [online]
Photo: William Murphy.
Historically, with other industries once this process was done, the recommendation was put to the unions and accepted, but last year both Bus Éireann and Dublin Bus were given recommendations by the Labour Court and in both instances, the situation ended up with an industrial dispute and short strikes. I’m doing the utmost to avoid this with Iarnród Éireann as it would cause even further damage.’
Regrettably for Iarnród Éireann, a few days after my conversation with David around 1,700 members of the union SIPTU participated in a ballot and very narrowly voted to reject the Labour Court recommendation with a 51% to 49% split. SIPTU has now advised that their Iarnród Éireann members will be balloted on strike and industrial action which will be undertaken if any attempt to implement changes to workers’ terms and conditions of employment without agreement is made.

TSSA voted 72% in favour of accepting the Labour Court recommendations, whilst at the time of writing, members of two other unions have still to conduct ballots. Both Iarnród Éireann and Minister for Transport, Leo Varadkar, have expressed disappointment with the outcome of the SIPTU ballot and advised that failure to reach agreement is likely to result in redundancies within the company and possible line closures.

Says David Franks, ‘Although the pay deal within Iarnród Éireann was crucial, it alone wouldn’t resolve the financial situation as the gap is just simply too great. It’s a part of a package which includes constraint, other efficiencies, service levels and of course the level of subvention we get from the Government.”

Track Record

‘Last year we delivered on our budget. It was tough, but we did it. The targets we’ve been set for this year will be even more demanding. Several types of grant have now been removed and this makes setting the budget even more of a challenge. At present I’ve a huge headache to try and find funding to cover some of the operational and maintenance expenditure required this year.’

With all this talk of financial crisis abounding, it is worth looking at the Iarnród Éireann annual report for 2013 to see how the company performed and despite the doom and gloom, it’s actually quite impressive to see what has been achieved on the financial front.

Costs were reduced by €25 million on a ‘like for like’ basis (excluding ‘one off’ savings achieved in 2012).

Train kilometres operated increased by 0.5 million km despite a reduction of €8.7 million in Public Service Obligation (PSO) payments and a 6.1% reduction in staff (261 fewer) – this being the lowest ever staff numbers.

The train operating costs have been reduced by an impressive 16.6% per kilometre.

Passenger numbers remained about static, but freight tonnage increased by 4% and revenue across all operations increased by €8.3m (4.4%).

Both the safety and PSO targets were achieved on all routes.

The wholly owned port of Rosslare Europort increased its surplus to €2.1 million, with an increase in freight units of 4.5 per cent.

These achievements are certainly impressive, particularly bearing in mind that the economy has been in recession.

Taking up the challenge

David Franks was appointed as CEO at Iarnród Éireann in February 2013. ‘When I started here I soon appreciated that we were very good at cost controls, but not as good at growing revenue. Previously voluntary severance had in many instances hit the wrong areas of workforce – revenue protection being one with many ticket office staff and revenue protection staff having left. I saw that one ‘quick fix’ would be to reduce ticketless travel so I set about getting resources reallocated to re-build the Revenue Protection team and, on regular occasions, getting the office-based staff out supporting them. Ticket checks are now up by 25% and around 40% more Penalty Fares are being issued. An independent survey was recently undertaken and it shows a big decrease in ticketless travel. I can feel that the first green shoots of a recovery are happening – we can see slight increases in passenger numbers now with the last quarter of 2013 being up. The first quarter of 2014 showed a 2% revenue increase.’

‘The fortunes of the different sectors within the company vary with Commuting, which includes the DART, taking the lead with improving results. I’m not sure why we still refer to the DART separately! There are clear signs that people are starting to ‘get back to work’ with some revenue increases, but the income is still a bit up and down. One thing that we are particularly good at is getting people to and from events.’

David’s comment here is borne out by the recent popular ‘One Direction’ concerts held in Dublin which saw services being very well utilised and bringing in that vital boost to the fare box. Sporting events also generate additional revenue for the company with travel to the huge Dublin stadia.

Whilst most of this is Dublin-based, a side line that is paying well in Cork is the increased numbers of cruise liners calling into Cobh. With the port being adjacent to the station the use of rail to access Cork city centre is generating opportunities with additional services being provided on the commuter branch.

‘Inter-City hasn’t been performing so well and this is mainly down to competition from the new motorways constructed during the ‘Celtic Tiger’ years when money seemed to be no problem. Although we attracted investment in the rail network at the same time, it was mostly concentrated on new routes rather than improving the line speeds on the Inter-City routes to make them compete more effectively.

Another priority I had here was to get passengers back onto services and this has been achieved with special promotional fares. On the Cork to Dublin route recently a €9.99 offer resulted in a 40% passenger increase. However what we have to ensure now is that having tempted these customers back to retry the service, they keep an interest in travelling by rail. Our passenger fleet is now one of the most modern in Europe with Wi-Fi being available on all trains so that passengers on the journey can use the time for working, catching up on e-mails or simply just to browse the internet.’

Freight

Having been for many years the poor relation on IÉ, freight is now becoming the rising star. ‘During 2013 we recorded a 4% increase with freight tonnage. I see freight as an opportunity that we can use to claw in additional revenue, especially as much of the network is controlled centrally and there is rarely cost involved in opening up lines for an additional train path.

CNV00067 [online]On the (main) network I see passenger trains as covering all the network costs and freight should only be charged on a marginal basis; however on the few freight-only lines such as Drogheda to Navan, the costs must be covered. Freight must pay its way. To improve the viability of freight we are currently looking at how access to the network is charged, as at present all are charged the same rate. I don’t consider that the charges that we apply to passenger services are also right for freight and we may be able to reduce them.’

Another long time issue with freight customers has been the relatively short formations permitted on the network with 18 bogie container wagons being the current maximum. The problem with much of the network being single track is the length of passing loops. Even on double track routes, passing loops may not be of sufficient length.

Says David, ‘I’ve asked the team to look at where train lengths could be significantly extended. Freight train paths could be designed to give a through run so that the use of loops isn’t required.’ One possible solution here could be operating overnight when passenger trains are not running.

One key bulk freight flow is the zinc ore from Navan to Dublin Port. Franks had good news. ‘The Tara Mines have now had their licence extended so that traffic will continue.’ The traffic generates three weekday trains on the Northern Line.

Intermodal trains on the network are buoyant and currently centre on County Mayo with the Ballina freight yard handling nine arrivals and departures each week. International Warehousing and Transport (IWT) now operate seven weekly services in each direction to and from the Dublin Port private sidings now that agreement has been reached to operate an additional service on Saturdays. DFDS runs two trains to and from Waterford Port each week to connect with its Rotterdam-bound container ship. Ballina and Westport also handle timber trains that operate to Waterford.

‘In the future we are also keen that with biomass becoming important, freight can transport it.’ At present a new biomass electricity generation plant is under construction in Mayo a few miles from Ballina and this would require a regular source of fuel to operate.

‘We are also currently carrying out a study to look at opening up the long time mothballed Foynes branch for the Shannon Foynes Port Company on a ‘cheap and cheerful’ basis. At some future point it is also likely that the mining of zinc ore in the Limerick area could commence and that, similar to the ore from Navan, would be an ideal source of freight.’

David’s Message

David Franks’ message to staff and stakeholders is uncompromising but optimistic. ‘It’s going to be tough, but Iarnród Éireann can get through this.’

It is clear that there really is a financial squeeze greater than seen for a long time, but with the outlook for business in most key areas of the network looking quite positive at present, I think the CEO is right and Iarnród Éireann will get through and come out all the stronger.

1 COMMENT

  1. Bet they’re glad that they splurged on all that fancy rolling stock. Might have been cheaper to fit the wi-fi to the Mark 3s, eh?

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