Tuesday 6 April 2010
Rail freight

Rail Freight Portal: Member of the month : Slovenian Railways (SZ)

Interview with Robert Vuga, Director of Freight Transport, SŽ

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How the Slovenian railways will change the future

This year Slovenske železnice (SŽ) is embarking on a fascinating and exciting new journey, a journey that will last 14 years and see many improvements put on track - a radical transformation with a strong government commitment. “If we want to modernise our national railways we’ll first have to invest in modernisation”, says Robert Vuga, Director of the freight division. Since October 2009 he has had 100% support for this from the recently appointed General Manager of SŽ, Goran Brankovič. Right away, in his maiden speech, Brankovič announced that he wanted to turn around the negative business trends, without wanting to compromise employees’ social situation.

“Unfortunately we are still facing the consequences of a monopoly situation and the resulting context in which everything is felt to be a matter of course”, continues Robert Vuga. “Since the liberalisation of the markets, competition is a new and menacing fact for us. But let’s be clear about this, I would not describe our present position as tragic since we have drawn up a strategy and are putting it in place right now. First of all I am planning to rectify the situation we inherited from the past. Secondly, I plan to restructure and, finally, I’m thinking of a strategic partnership. But take note, we aren’t looking for someone to take over the company in its present state, that’s only for when we are doing better, so that we can offer real added value.”

Emulating DB’s success

Robert Vuga: “The mainstays we’re aiming for now are, on the one hand, financial consolidation, streamlining the operations and renewing the infrastructure and, on the other, better penetration of foreign markets and increasing our marketing efforts. I admit, we still have a long way to go, but it’s certainly not wrong to try and emulate Deutsche Bahn’s success. Twenty years ago DB was one of the German government’s biggest budgetary problems, nowadays it’s one of the most successful companies. I am sure that, with the involvement of the Slovenian government and the European Union, we can turn this into a success story.”

Robert Vuga: “What has not helped us, or any other European railway company, is the enormous impact of the economic slump. In the first nine months of 2009 Slovenske železnice recorded a loss of 30.9 million euros – by far the largest part of that in our freight division. In the end the number of tons transported dropped from 19.0 million in 2008 to 14.6 million tons in 2009. Expressed in tonne-kilometres production fell to around 3 billion tkm. Conventional freight transport, in particular, received some heavy blows, mainly due to the recession in the steel and automobile industries, as well as the sharp downturn in Slovenia’s most important economic markets. Intermodal traffic underwent a drop of ‘only’ 15 per cent.”

Continued investment in the future

Robert Vuga: “Of course freight transport is an international business in our society – some 90 per cent of the total number of tons transported is linked to bilateral trade with Slovenia or transit traffic. The immediate measures we took were in fact not so different from other European operators: cost-cutting, adjusting production capacity, slowing down planned investments, the introduction of a part-time employment programme for over 10 per cent of our staff, and an agreement with the trade unions to reduce salaries by 5 to 10 per cent.”

Robert Vuga: “Parallel to these measures sales and marketing activities for new service offerings were boosted. In any case we were careful not to shoot ourselves in the foot. After all, cutting production capacity too much, without a clear objective, might soon have caused problems once the industry picks up again. Despite the unfavorable circumstances we continue to invest in new lines and foreign markets with a view to the future.”

Modernising the pan-European transport corridors

Robert Vuga: “The history of Slovenske železnice goes back to the mid-nineteenth century, though the present company, originating from the former Jugoslovenske železnice, dates from 1991. Although Slovenia was part of communist Yugoslavia before 1991 it has actually been oriented towards Western Europe since way back. We have always been aware of our important strategic location at the southern edge of the Alps, bordered by Austria to the north, by Italy and the Adriatic Sea to the west, by Croatia to the south and east, and by Hungary to the northeast. Accession to the EU in 2004 - and to the eurozone in 2007 - has only increased our importance as a logistics hub for Central Europe. As a supplier of integral and intermodal transport for Slovenia and abroad we have also expanded container terminals in Ljubljana, Maribor and Celje, so that we can provide optimal service for the goods flows on the pan-European V and X transport corridors. The 5th corridor is the east-west link from Portugal via Ljubljana-Moste to Budapest, Kiev and Moscow. The north-south link from Munich and Salzburg via Ljubljana-Moste to Zagreb, Belgrade, Istanbul and the Middle East forms the 10th corridor. The two routes cross in Ljubljana.”

Robert Vuga: “Without doubt the biggest problem is our inefficient infrastructure. I will just mention that a significant part of our cargo transport still runs on a single track. So the largest share of the 8.89 billion euros investment will be devoted to transport infrastructure on the 5th corridor and laying a double track from the port of Koper to Ljubljana. The port is part of the 5th corridor and serves as an important entry point for Austria, Italy, Hungary, Slovakia, the Czech Republic, Croatia, Bosnia and Serbia. Many Asian countries use Koper for forwarding their products inland, too. Unfortunately the single track between Koper and Divaca causes serious delays in the arrival and departure of goods in Koper – a completely new double track is planned for 2015.”

‘Connecting Europe’: from Ljubljana to Istanbul in 46 hours

Robert Vuga: “The increasing importance of Koper as a port of entry to Central Europe is an extra reason to ensure good connections with the hinterland. Because don’t forget that about 60 per cent of the goods that are brought into or out of the port are transported by rail, as compared to only 20 per cent in Rotterdam. Let me sum it up like this, if we want to prove ourselves as a logistics platform for Central and Southern Europe we must think not only of our geographic position but just as much of our operational position.”

Robert Vuga: “Now, it is also true that we don’t get any business from our geographical position. That has to come first and foremost from the services and products that we offer the various operators, which is exactly why we are concentrating right now on developing a network of direct freight trains to Germany, the Czech Republic and even into Turkey with the Europe Bosporus Express. Indeed the freight train to Istanbul is a nice example of a regular intermodal service that we have set up with our partner, Adria Kombi. This is the sort of service with which we are building a reputation for reliability and good quality for international rail freight transport. We have also reduced the transit time from Ljubljana to Halkaki (the rail terminal in Istanbul) from 64 to 46 hours.”

Robert Vuga: “International growth is only possible for SŽ via partnerships and through the expansion of our operational range and the opening up of new markets where we can offer independent traction and logistic services. Nationally it will come down to continuing to develop SŽ as a good quality supplier of integrated logistic services for the Slovenian economy. That is already very obvious to our clients, not only through the implementation of ISO standards (ISO 9001 and ISO 14001), but also via new initiatives such as, for example, a completely integrated service for the collection and distribution of containers.”

Robert Vuga: “It is not unimportant either that our international presence has become increasingly apparent, with regional centres in Vienna, Budapest, Belgrade, Sarajevo and Udine. In April 2010 a new SŽ office will open in the Czech Republic and right after that we will set up shop in Bulgaria too. In short, then, we are already sufficiently well organised internationally to ensure fast and correct management of our customers’ commercial and operational requests. So I am also convinced that SŽ is heading at full speed towards international recognition!”

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