Railways in Greece: poor service, no competition

Passenger train services are heavily subsidised in Greece, taking advantage of loopholes and delays allowed by EU law. A new memorandum signed by the government keeps state aid and TrainOSE’s monopoly in place, despite the fact that many routes are not operated and citizens are not happy with the service they receive. 

Published On: December 27th, 2019
Railways in Greece: poor service, no competition_62ccab23e7165.jpeg
Railways in Greece: poor service, no competition_62ccab23e7165.jpeg

Stavropouli train station (photo: Giannis Houvardas/Flickr CC BY-SA 2.0 )

Railways in Greece: poor service, no competition

Passenger train services are heavily subsidised in Greece, taking advantage of loopholes and delays allowed by EU law. A new memorandum signed by the government keeps state aid and TrainOSE’s monopoly in place, despite the fact that many routes are not operated and citizens are not happy with the service they receive. 

Stavropouli train station (photo: Giannis Houvardas/Flickr CC BY-SA 2.0 )

In the first wagon of the Athens-Thessaloniki train passengers are drinking coffee and eating in the dining area. The train will arrive to its final destination exactly in 4 hours. The employees of the private company responsible for the train’s canteen are discussing about the arrival of a new train that will soon make the same trip in 3 hours. After more than 30 years of endless projects on the country’s main railroad, finally Greece has its first fast train. But why did it take Greece so long to have one? The answer is complex, and contains stories of corruption and mismanagement – in combination with some lack of vision.

OBC Transeuropa here presents a data-driven investigation on passenger trains in Greece. We collected and analyzed data about the routes, the stations and passengers’ complaints, and we interviewed the key players in this game.

TrainOSE: the only operator for all passenger trains

The only operator for passenger trains in Greece is TrainOSE SA. It used to be a subsidiary of the Hellenic Railways Organization (OSE); in 2008 it became an independent state-owned company, until its privatization in September 2017, when it was acquired by the Italian national railway company, Ferrovie dello Stato, for €45 million.

We asked TrainOSE for data on passenger traffic, but they replied that there are no statistics or numbers. However, according to Eurostat, Greece is one of the few EU member states where the number of passengers has been decreasing in the last decade, along with Bulgaria, Croatia and Slovenia.

In accordance with the law 3891/2010 and its amendment (L. 4070/2012), TrainOSE’s responsibilities include the provision of rail traction services for the transport of passengers and goods, and the development, organization and operation of rail-freight and rail-passenger services, as well as other transport services by track-based modes. TrainOSE also has the right to conduct bus transport services. However, the law states that the development of bus transport projects must be approved by the Ministry of Infrastructure and Transport.

The passenger train market in Greece is a monopoly, since TrainOSE has the exclusive right to operate rail services for passengers. This is supposed to change on December 2020, when the EU’s 4th Railway Package is to be incorporated into the Greek legislation, according to the Hellenic Competition Commission . The EU Commission sent a reasoned opinion to Greece in July 2019, urging it to communicate the national measures taken to transpose EU rules on the opening of the market for domestic rail passenger transport services and the governance of the railway infrastructure (EU directive 2016/2370), which are part of the 4th Railway Package. A new Greek law of October 2019 has adopted some measures to transpose the directive. We asked the European Commission to comment about the case, but they stated that “we cannot say anything else as this is an ongoing case”.

The memorandum between TrainOSE and the Greek state

In November 2019, TrainOSE has signed a memorandum of understanding with the new center-right government of Greece. A memorandum is an agreement outlined in a formal document, which is not legally binding but signals the willingness of the parties to move forward with a proper contract. In the case of Greece, the current agreement between the state and TrainOSE is expiring in December 2020; its renewal is expected for the spring.

The new memorandum assigns the company public rail passenger transport services for a period of 10+5 years. Indeed, in accordance with the new law and the EU directive, Greek authorities have the right to award public service contracts directly to an enterprise . The memorandum stipulates that the Greek state will continue to provide €50 million plus VAT (€750 million total) per year to the company for its public service obligations . In return, TrainOSE has to operate certain routes without commercial interest (the so-called ‘non-profit lines’). However, Panagiotis Theocharis, former CEO of the Hellenic Railways Organisation (2018-2019), informed us that 95 per cent of the Greek railways’ routes is subsidized. Interestingly, subsides also go to the routes that TrainOSE operates by bus and not by train.

The memorandum of understanding cannot be found in the Transparency Portal where all Greek government institutions must upload their acts. We asked the Ministry and TrainOSE to send us the memorandum as well as the current contract between the government and the company, which was signed in 2015. However, a spokesperson for Ioannis Kefalogiannis, the Deputy Minister responsible for transport, told us that specific provisions of both the national (L. 4412/2016) and EU law (directive 24/2014) exempt public contracts for train passenger transport services from the scope of other obligations, such as of the obligation to publish them in the central electronic registry for public contracts.

One can easily criticize the government for having envisaged an agreement with TrainOSE for 15 years without an open call of expression of interest, and despite the fact that TrainOSE had not fulfilled its promise of €500 million in investments by 2020 in Greece. TrainOSE claims that the previous government had published a call for interest in October 2018, but no one had expressed an interest. OBC Transeuropa asked the European Commission about that call and to comment on the government’s decision to sign the memorandum. “In application of Regulation 1370/2007, and until December 2023, it is indeed possible for authorities to directly award a public service contract for transport by rail to an operator. In such circumstances, the maximum duration of the contract is 10 years but, for contracts awarded before December 2019, it can be extended by up to another 5 years on condition that the operator makes significant investment in assets, such as rolling stock”, said a person from the Commission familiar with the matter.

“State aid is given without any control”

We communicated with the Greek Regulatory Authority for Railways (RAS), whose main mission is to ensure fair access to the national railway infrastructure and services. For instance, RAS audits the agreements on public service obligations, in order to make sure that they really are implemented for passenger transportation. “The Authority is not responsible to oversee the fulfilment of the agreement”, said Ioanna Tsiaparikou, President of RAS, informing us that the first audit of TrainOSE’s agreement with the government will take place this year.

A spokesperson for the Deputy Minister responsible for transport stated that the relevant government departments are monitoring the contract. Actually, they told us that the Ministry has asked the Hellenic Railways Organization – the state-owned company which owns, maintains and operates all railway infrastructure in Greece – to establish an electronic monitoring system of contracts for public service obligations in order to properly monitor their execution. So far, as we understand, no competent authority has supervised the agreement with TrainOSE. This is also confirmed by Mr. Thanasis Ziliaskopoulos, former President and CEO of the company (2010-2015). “The control mechanism was internal. The Ministry didn’t check whether TrainOSE was providing the service or not. There was not any control then, and there is no one now. State aid is given without any control”, points out Mr. Ziliaskopoulos.

In other European countries such as the United Kingdom and Austria, the owners and infrastructure managers of the railway network use specific performance indicators to evaluate how train passenger operators do and regularly invite independent companies to report on their performance.

The European paradox

As for the Ministry’s decision to directly award a contract to TrainOSE, RAS’s President Tsiaparikou commented that “the action is legal. Nevertheless, we checked its legitimacy as well. Currently, there is no other stakeholder operating rail passenger transport services. However, this decision excludes a company that might in the future want to become a stakeholder. There is a European paradox here. On one hand EU legislation promotes healthy competition, on the other hand EU legislation allows directly awarded contracts.” One could easily argue that the government’s decision might affect fair competition in the passenger rail transport market in Greece. According to the former CEO of TrainOSE Thanasis Ziliaskopoulos, “If the market was open, the future would be bright for the Greek passenger lines”. OBC Transeuropa tried to speak with the Ministry at this regard, but no one replied back to our request.

In fact, back in January 2019 Rail Cargo Austria – a rail freight transportation company controlled by the ÖBB Group – had sent a letter to the Hellenic Committee for Competition, opposing TrainOSE’s acquisition of EESSTY SA, the Greek Rolling Stock Maintenance Industry. In the same letter the Austrian company had expressed its interest in investing into the passenger rail transport services in Greece, as soon as an invitation to tender would be opened by the Greek government.

OBC Transeuropa communicated with Rail Cargo Austria. “Currently, RCA has to go to its competitor for train maintenance – and EESSTY charges RCA 200 per cent more that it charges TrainOSE. The market is monopolized, that’s why we have filed a complaint to RAS. This issue needs to be solved, otherwise how can we invest in the passenger train services?”, said Mr. Zak Kiseoglou, Sales Managing Director of Rail Cargo Logistics-Goldair SA in Greece. However, the Hellenic Competition Committee considered that there was no reason for EESSTY not to be acquired by TrainOSE. Mr. Kiseoglou explained us that his company is ready to address the Directorate-General for Competition of the European Commission on this.

“The new memorandum of understanding gives TrainOSE a monopoly on the public passenger rail transport services for 15 years, excluding other companies from the right to invest in this market. Another issue that needs to be investigated, is the fact that, despite the modernization of part of the Greek railway network, state aid for public service obligations remains at €50 million”, added Mr. Kiseoglou.

Paying for routes that are not operated

OBC Transeuropa downloaded the trips offered by TrainOSE in the General Transit Feed Specification (GTFS) form, a common format for public transportation schedules and associated geographic information. Data indicates that 60 routes in Greece are currently operated by train and 8 by bus. After the outbreak of the Greek crisis, TrainOSE had to close a number of routes in order to avoid financial collapse – especially in the Peloponnese, Western Macedonia, and in Eastern Macedonia-Thrace.

We also found in GitHub all the stations of the TrainOSE network. Out of the 216 train stations in Greece, 156 are active and 60 are inactive. On the map you can see the active (blue) and inactive (purple) stations.

Note: On December 30, 2019 TrainOSE announced the re-opening of the Alexandroupoli-Ormenio route. 

Operation of bus services by TrainOSE can be controversial. Back in 2012, the company used buses to operate the Thessalloniki-Kozani route. Tickets cost only €3.5, while Kozani’s local bus operator provided the same service for €11.40. The latter went to court, and judges ruled that TrainOSE cannot operate bus services on bus routes, although these were in principle allowed by the law. Similarly, in the same period the bus operator of Achaia filed a lawsuit against TrainOSE for operating bus services to Kiato in the Peloponnese. However, operating some routes by bus instead of by train is in the interest of TrainOSE because of low passenger traffic.

OBC Transeuropa interviewed Mr. Panagiotis Paraskevopoulos, President of the Greek National Federation of Railroad Workers, about the complaint that the Federation has lodged a few months ago, against TrainOSE and the Greek state for noncompliance with the contract that they had signed. According to Mr. Paraskevopoulos, the Greek state subsidizes TrainOSE for routes that are actually not operated. For example, as he told us the state gave TrainOSE €17 million for the route Thessaloniki-Alexandroupoli, but this was given even when the Drama-Alexandroupoli stretch of the route was not served. “There is a preferential treatment for TrainOSE”, says the President, adding that “as a Federation we want to make sure that the public interest is respected”. Moreover, according to Paraskevopoulos’s sources, the new memorandum would state that the definition of ‘non-profit lines’ could be changeable and characterize different kinds of routes – but state aid would still remain €50 million euro anyway.

According to TrainOSE’s former CEO Thanasis Ziliaskopoulos, contracts for public service obligations impose heavy fines if train operators fail to comply with them. For instance, they could be excluded from participation in the following tenders. The real question is whether the breach of contract obligations bears specific consequences in terms of EU law. “In case a public service contract does not comply with the conditions, the Commission does not impose a fine on the member state concerned, but may order it to recover the compensation from the rail operator”, explained the European Commission to us.

Poor quality service

The EU Regulation on rail passengers’ rights and obligations (n. 1371/2007) gives member states the right to grant exemptions to train passenger companies from certain of its provisions for periods of up to five years. According to RAS, Greece exercised its right for the first time in 2009 and then in 2014. The Ministry further extended TrainOSE’s exemptions in 2019. These exemptions are related to travel information and booking systems, advance payments, responsibility for delays, missing of connections and cancellations, reimbursements and re-routing, assistance. Additional three years-exemptions are related to the service’s quality standards. According to the Ministry, such exemptions were necessary because of the special nature of the train market in Greece and of the operational conditions of the railway network.

OBC Transeuropa has derived and analyzed data from the 2018 RAS’s report on passengers’ rights. According to the Regulatory Authority for Railways, TrainOSE received 2,537 complaints in 2017. Considering that each complaint can refer to more than one category, RAS split them according to the different categories, in order to detect the most critical problems: in this way, the organization obtained 4,368 complaint items. Most of them concern reimbursements and delays.

RAS has the right to impose fines to train companies that do not comply with the rules. Different kind of measures are envisaged, including train immobilization. However, as the President of the Authority Ms. Tsiaparikou told us, RAS prefers to do everything possible within its scope before imposing a fine. According to its statute, RAS is an independent administrative authority, even if it is financed by the national budget.

We asked the president to give us more details about the fines that had already been imposed, but she claimed that this information is confidential. “Changes in the administrations throughout all these years have created delays. It takes a while to make up your mind and to develop your strategy. Furthermore, it is a fact that Greece has given emphasis to road transport instead of railways. Mistakes were multiple and continuous, there was no strategic planning. Infrastructures take a lot of time and a lot of money, so it’s not easy to get things done by tomorrow. Long-term plans need to be designed, funded and implemented”, underlined RAS’s president.

Giuseppe Lauricella contributed to the data analysis.

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