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What is needed to win the battle for the customer in a deregulated market? Hear about the creative business models needed to succeed. Presentation by Sven Gossel, CEO Transmetropolitan at the Amadeus Rail Innovation Forum 2017.

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  1. 1. Compete to Win Sven Gossel – CEO Trans Metropolitan Amadeus Rail Innovation Forum 2017 13th June, Prague
  2. 2. 1. This is our about passenger traffic only 2. I may step on a couple of toes here…
  3. 3. My gosh – are you serious?
  4. 4. Plane? Train? Car? Bus? • when do I depart? • when do I arrive? • when do I have to leave home or office? • how long is the trip vs. how long I stay? • what is my preference? • am I able to fly? • do I need to work while traveling? • may I miss a football match? • when am I finished with my meetings? • can I still see my kids? • can I use my preferred loyalty cards? • what is the total, total price? • how to get to my final destination? • can I get enough rest during the trip? • do I have internet access? • will I arrive on time? • can I get food and of decent quality? • I hate airport security! • do I have access to a rental car? • or: I need my own car! • can I combine train and plane travel? • does it support a multi-stop-trip?
  5. 5. European Market De-Regulation • Good. • Bad: ownership structure of incumbents represents conflict of interest • often private operators need to go to court to claim for their granted rights • but: the smaller the better • Railway industry appears to be where the airline industry was in 1995 • EU still needs to do a lot of homework • Market power of incumbents remains too large to really compete against • Private companies mainly in freight and niche markets as of today • or they are active in government controlled markets
  6. 6. Licencing • Oh my God. • Granularity of sand? Life fire extinguishing tests? • NSAs in bigger EU member states need to improve • by dimensions. • customer focus – except for their experience of no help to newcomers • capacity – application schedule too long and too complex for smaller players • bandwidth – their (or ERA’s?) rule shouldn't be to just passively OK the material • ERA’s executional power too weak to help private competition to rise • The goal: standardized production rather than building custom equipment
  7. 7. Cost of material • Airlines pay EUR ~300.000 for wet leasing an A320 per month • 180 legs @ 180 people @ 150+ bucks: around EUR 5M+ revenue • The A320 can fly practically fly to everywhere (up to 6 hours ‘airtime’) • One new ICE train set costs around EUR 30.000.000 for ~650 people • 2000 people per day yielding EUR 32/leg: around EUR 2M revenue per month • Hardly any leasing or financing option for new-comers • Although train revenue is less than airline revenue, the material is more expensive and way less fungible • Tons of new airlines but hardly new px rail operators • Private operators usually enter the market with used material • Only a European product standardization will open-up markets in full • Also: taxpayer’s check book isn’t too far off at many times
  8. 8. Cost of material
  9. 9. Network Access, Schedules and Tolls • Big players yet to locking-up most of the attractive slots • airport-like situation with limited regulatory power • often only court decisions will path your way as a newcomer • Still used to protecting markets from outside competition • Brennero, Eurotunnel, network access exceptions in general • Fee over-charge, long distance tolls influenced by PSO markets • European Patchwork Rail • Engines being licensed to more than 2 countries practically don’t exist • ECTS doesn't really play (yet?) • Network access should be organized vertically, not regionally • Even smaller network extensions take sometimes a decade to build • A change in schedule may still take ages to be published to customers
  10. 10. Shunting is really cost intensive
  11. 11. Sales Channels • As a newcomer your are just not taken seriously • “if I knew it was about that, I wouldn't have picked up the phone” • sometimes months in response time or no response at all • exceptions: rail co-operation partners, public transportation • Bigger travel agencies are simply not answering your inquiries • GDS is nice, but is a strong limitation for product differentiators • ICAO legacy turns out to be a barrier for inter-modality products • AccessRail makes this a business case • Cost. • You’ll end up in building your own website – not good
  12. 12. Last: Working Capital • Financial entry barriers are unreasonably high • EUR 50-100M are difficult to find • non-standard carriages and build-to-order engines push-up costs • delivery time and licensing requirements are killing business models • The Venture Capital and Private Equity market is small • A general issue across all industries in Europe • A specific issue for transportation as to the market structures • Main issues: • Government ownership in key market players • Unhealthy market shares of >90%
  13. 13. Identified mistakes of private operators • too little working capital • bad yield management • too little market research • missing customer focus, addressed markets to small, weak preparation • product needs to provide real customer value • irregular train schedules • no integrated product offer • hardly acceptable co-operation concepts • emotional start-up concepts aren't necessarily successful
  14. 14. What did WE learn from that experience? • Doing our homework. And this takes time. • Rail operation is much more than running some trains • Sales, sales, sales • Transportation is a commodity - A difference in painting doesn't make a difference. • We understand our business as an IT service with outsourced production • It is not: a train service with a connected website • We imagine ourselves using our product from a first customer contact to reaching a destination fully satisfying his expectation • Product image – Reliability – Experience • The big guys are super tankers. We are designing a speed boat.
  15. 15. Questions?