We The Italians | IT and US: A new high-speed train business model for the US, Italian style

IT and US: A new high-speed train business model for the US, Italian style

IT and US: A new high-speed train business model for the US, Italian style

  • WTI Magazine #146 Dec 18, 2021
  • 1023

Italy began building its high-speed rail system in 1977, when an initial piece of the Rome-Florence line was completed. Over the decades it has developed its network until it has almost 1000 kilometers of high-speed lines. Our country is not the first in terms of extension of the network, for example France or Spain have about 3 times as many kilometers compared to Italy, but it is the first to have innovated the business model.

It was 2012 when Italo entered into direct competition with Trenitalia and Italy established itself as the first country in the world to have introduced open access competition. Subsequently, competition in the high-speed sector was introduced in South Korea and from 2021 also in Spain and France.

Slowly the Italian model is establishing itself as the winning one all over the world and the European Union has identified the Italian model as the one to be implemented by all member states in the coming years. This means that the same infrastructure, which in Italy is managed by Rete Ferroviaria Italiana (part of the Ferrovie dello Stato Italiane group), is not only used by Le Frecce trains, but also by Italo trains.

Italo is a private operator that was born at the end of 2006, but it is only since April 28, 2012 that it started operating on the Italian network. The arrival of competition has brought great benefits to the Italian consumer who, thanks to liberalization, has seen not only an increase and improvement in the travel offer, but has also been able to benefit from a strong reduction in prices.

Between 2011, the year preceding liberalization, and 2019, the last pre-covid19 year, demand grew by more than 120% against an average fall in ticket prices of around 35/40%.

Competition has improved the quality of service with strong innovation in industrial processes and in the services offered to passengers. Today it is possible to find a train every 5/10 minutes on the Milan-Rome line and in fact a real Italian subway has been created. Liberalization has also done a lot of good to the historical operator Trenitalia, which, thanks to the push of competition, has greatly improved the quality of its service and its efficiency, and has begun to invest in other countries.

But what can Italy teach to the United States on this matter?

In the United States there is no real High Speed line, but President Biden has decided to invest heavily in rail transport in his infrastructure bill approved in November 2021. The only corridor that has some sections that exceed 200 kilometers per hour is the one between Boston - New York - Philadelphia - Washington DC, which is called the North East Corridor (NEC). In technical jargon, NEC is a second level high speed, since the first level, existing in Italy, sees speeds above 250 kilometers per hour.

Trains on this corridor have average ticket prices about five times higher than in Italy, and the frequency of trains is not very high and there is only one passenger operator, Amtrak, which is a state owned enterprise. Just to bring up some numbers, in 2019 Acela's express service had just over 3.5 million passengers, when Italo alone, smaller than Le Frecce, carried 20 million in the same year. Demand could be much higher if NEC switched to having an Italian-like business model, and the benefits would come to American consumers who could efficiently move over the East Coast.

There are several projects to develop new high-speed lines in other areas of the U.S. They will not be easy to complete in the next few years, but there is certainly an effort toward creating new infrastructure. In the Texas high-speed project, for example, the Italian company WeBuild is one of the relevant players. However, it is good to distinguish these new projects from the one corridor that already has some high-speed infrastructure.

So what is possible to imagine for the NEC corridor, which needs to be improved, but in fact already exists in part?

We could think that on the same infrastructure, which will be improved thanks to the investments of the infrastructure bill, several passenger rail companies could run. A real Italian-style competition could therefore be introduced over the years also between New York and Washington with a strong fall in prices and a strong increase in supply.

To date, the train is little used due to the fact that it cannot compete with other means of transport, and in particular with air transport. Moreover, the airport slots (i.e. the possibility to use an airport) that are currently used in the New York area to fly to Washington or Boston are very scarce. These could be used more efficiently for intercontinental flights rather than short haul flights.

The change in mobility, which has arrived in Italy thanks to the introduction of high-speed rail and competition, could also arrive in the United States in the coming years. In recent years, the concept of liberalization has become really important and is revolutionizing the entire sector, and Italy has undoubtedly been a protagonist in this process.

High-speed rail Italian style, therefore, may lead to an improvement in mobility within the United States.