Wednesday 3 February 2010
Rail Freight

Rail Freight Portal – Interview of the “Member of the month” (Rail Cargo Austria)

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“Strong together” might be the ideal slogan for Rail Cargo Austria AG (RCA). After all, the takeover of the Hungarian company, MÁV Cargo, has produced one of the largest rail cargo operators in Europe – a unique combination for going full speed straight through to the Balkans, the Black Sea and Ukraine. ‘Strong together’ is the motto of the Macher-Schmidt duo, too. The CEO has a logistical background going back more than 30 years and the CEO has a good 25 years experience in the airline industry. The two men know exactly where they want to go with RCA.

They can’t really be happy with last year’s results, but CEO Friedrich Macher still can’t suppress a certain optimism. As a guest professor at the Donau-Universität Krems and a lecturer in logistics at the Wirtschaftsuniversität Wien he explains why to us: “it was an ‘annus horribilis’ for the whole sector, but whereas rail cargo operators in other countries experienced a 30 to 50 per cent drop, we were able to limit the damage to a decrease of 13.5 per cent - the top benchmark in Europe.

Ferdinand Schmidt adds eagerly: “despite our heavy structure, with more than 17,500 employees (including ÖBB-Produktion GmbH and MÁV Cargo), we have still dealt very alertly and, in a certain sense, proactively with the current crisis situation. Though initially we were looking at a loss of 480 million euros, we have been able to limit it to 60 million euros thanks to our business model, drastic cost-cutting and, of course, the synergetic effect of MÁV Cargo. In terms of tonnage and turnover we ended up number two in Europe last year.

Manageable impact

Ferdinand Schmidt: “One of the profound lessons I have remembered from my period at Austrian Airlines and Lauda Air is that there is no money in leaving a plane on the ground. It won’t surprise you then if I tell you that it’s no different with freight cars. Due to the downward trend in the first half of 2009, we had 30 per cent of our 33,000 goods carriages parked at a certain moment. Thanks partly to the economic recovery in the second half of the year we have been able to drastically reduce that percentage. To put it in figures: we moved a transport volume of 118.8 million tons in 2009. Expressed in ton-kilometres, RCA and MÁV Cargo together add up to 28.2 billion tkm.

Friedrich Macher: “So the impact of the crisis has remained manageable for RCA. I can say that with good reason because we are still following the same investment programme, in an updated form of course. That doesn’t mean that we have made a ‘light’ version of it – that would be pointless – but you might say we have played with the time frame. The economic reality is what it is but, mark my words, that is exactly where the danger lies. Once the markets pick up again you have to have made your investments or they must at least be underway. The customers expect that too.”

Ferdinand Schmidt: “You have to see the positive impact of this economic malaise. I’m thinking particularly of a couple of efficiency programmes we have set up to optimize our resource usage. I want to link that straightaway to the impact of the merger with MÁV Cargo, because the first positive results of it have become very visible in the past year. Take for example the fact that more than half our trains run with no delays because we only need to change the driver at the Hungarian-Austrian border. Pooling freight cars has made our operations a whole lot more market-friendly, too. The merger of RCA with MÁV Cargo will save the group up to 50 million euros in four years. And don’t forget, the synergy between our companies will undoubtedly result in our winning back tonnage.”

Gateway to Central Europe and the Balkans

Friedrich Macher: “It is perhaps good to know that our company is part of the Austrian railways (Österreichische Bundesbahnen, ÖBB). As an independent freight subsidiary, with a market share of 90 percent of the domestic market, we are specialised in national and international freight transport, mainly via the railways. With our Contract Logistics division we offer not only total solutions for European transport, but also a specialised network of logistical services and partnerships for freight forwarding in Central and Eastern Europe.

It is equally important to know that because of its geographic position Austria is THE gateway to Central Europe and the Balkans. Economic growth in the region has led to an increase in transport. Although I would be quick to say that the increasing flow of goods is expected to go through Austria mainly via the road network.”

Ferdinand Schmidt: “Allow me to add that if road transport claims to be flexible then we, as a rail company, must be too - something that depends partly on us, but which the Austrian government has taken on board as well. With the launch of the ‘Generalverkehrsplan’ in 2002 a good 45 billion euros was made available for investments in the Austrian road, rail and waterway networks up to 2030. Nearly 30 billion of that is earmarked for the expansion and improvement of the railway network, the main priorities being the connections between the domestic railway network and the (future) EU countries, the further development of the Danube corridor and the link to the south.”

Friedrich Macher: “As the biggest distribution company in Austria – with a market share of a good 55 percent – RCA is obviously an important player in road transport. But even more important, I think, is the contribution we have made to relieving congestion on the roads. With our subsidiary, Ökombi, we are aiming to transport some 500,000 trucks within Austria and from Austria to Germany, Italy, Slovakia and Hungary via the ROLAs (Rollende Landstrasse) in 2010. There is an extra advantage here for the environment, too. By putting trucks onto trains a good 74,000 tons less of CO2 were emitted in 2008.”
Thinking like a European rail freight operator

Friedrich Macher: “For the last decade we have also been very focussed on internationalising RCA – we’re a small country after all. If you are in a competitive environment then your entrepreneur’s DNA tells you that you have to be enterprising. We’ve done that by, for example, strengthening our forwarding activities through development and acquisitions, particularly in Central and Eastern Europe. It also includes starting our own production platforms in Italy, Slovakia, Rumania and Bulgaria – and right now we are getting ready to do the same in the Czech Republic, Poland and Slovenia. We have set our sights on Turkey and Greece, too, in the meantime. Those – with Ukraine – are obviously connections that we want to optimize in order to be able to compete with road transport. That is why it is absolutely essential to be able to develop with solid partners.”

Ferdinand Schmidt: “It is correct that 75% of our transport activities are internationally oriented now. So you might wonder why become even more international? Well, in the first instance because the market itself has become much more international. And equally obviously our clients and their requirements have assumed ever larger international dimensions. Indeed more and more companies have production sites all over Europe. To be very precise, big players from the Austrian timber industry and food industry are opening new sites in Rumania right now. In other words, you mustn’t miss the boat, you have to follow market developments and the customers.”

Friedrich Macher: “And just as importantly, we want to take a stronger position in terms of production. We are now active in one big liberalised market in which transit routes, corridors and crossing borders count for more, which is why we are putting all our weight behind developing RCA in the direction of Rumania, Slovenia and Italy. Our intention is to be active in more or less all the neighbouring countries eventually. The great advantage of this internationalisation for our clients is that they can count on the same quality and reliability all the time, but with much more precision in our production cycle and a much more interesting overall cost frame.”

MÁV Cargo, the right strategy

Ferdinand Schmidt: “It is not too difficult to understand from our acquisition of the Hungarian MÁV Cargo that internationalisation is an important spearhead of our policy. By merging with the biggest rail freight operator in Hungary – with an 83% share of the home market – we have firmly consolidated our position in Southeast Europe. Strategically this is excellent for RCA from a long term perspective, because we have improved our position in the Danube corridor with MÁV Cargo and at the same time we have the perfect connection between Austria, the Balkans, the Black Sea and Ukraine.”

Friedrich Macher: “With ÖBB we are the biggest provider of mobility in Austria – with a workforce of 43,500 people and worth a turnover of 5.7 billion euro. With this background it is only natural, then, that we want to be amongst the biggest integrated logistics service providers in Europe in a few years time. The bottom line is that I see only three or four big European railway companies ‘surviving’ and I definitely want RCA to be one of them!”.

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