The railway market in Bulgaria has known a progress in the liberalisation process of railway transport, mostly due to private companies. Private operators still hold a low market share of 10-15%, but the rhythm is rising and investments in new rolling stock make the reform advocates hope. However, their number is still reduced as compared to those who want BDZ’s state monopole to endure. The national company has serious economic difficulties and faces bankruptcy. Although the state company has been reorganized, progress is still slow while budget distribution and rolling stock management are subjects of controversy between BDZ’s different divisions. Non-discriminatory access and the release of operation licenses generate polemics fed by accusations, according to which the state limits fair competition by supporting contracts signed exclusively between state companies and there is no independent referee to change the current situation on the market.
The railway market in Bulgaria has known a serious drop after the fall of the communism, the main problems which affect Romania’s southern neighbour being a poor infrastructure and the lack of investments in rolling stock renewal. Nothing new in this, the only difference compared to the other countries being that railway transport enjoys a good image and can get votes to the politicians who promote this type of transport.
The bus crisis, such as some Bulgarian analysts call the collapse of coach transport during 2005-2008, was also due to railway transport revival, a process which began after Bulgaria’s accession to the EU. However, the reduction by half in the number of passengers compared to the figures in 1990 and the reduction by three thirds in the freight volume are hindrances difficult to overcome and the liberalisation brought the fear that a divided national market will completely fall apart.
Bulgaria also has problems in implementing an independent regulatory body, whose creation announced a while ago but has not yet implemented. Operators face problems when it comes to operation licenses, a pertinent example being the case of Global Rail Trans, part of Kremikovtzy steel plant which suspended its activity and was rejected several times by the railway authority in Bulgaria, the operator complaining about discriminatory treatment and suing the responsible authority. A first step towards the liberalisation of railway transport was taken in 2002 when the government divided Bulgarian Railways into BDZ, the national operator, and Nacionalna Kompania Železopatna Infrastruktura (NKZI), the infrastructure manager.
The strictly social image of the Bulgarian railway transport is a minus to be eliminated in the future. This image characterises not only passenger transport, but also freight transport, most of the customers of the national operator being major state-owned companies which benefit from preferential tariffs unlike private companies, which were forced to redirect their activities to private operators or even establish their own operators. Thus can be explained the success, although moderate, of private operators, most of the time developed by foreign groups, such as Bulgarian Railway Company (BRC) or Unitranscom operators established by Romanian holdings.
Large western operators don’t show interest in accessing the Bulgarian market
Many foreign investors complain about BDZ’s tariffs and call on private operators just to save money, although services are not better, nor prompter and not even cheaper since private carriers’ strategy is based on attracting a smaller segment of customers and keeping them through customized offers. However, this strategy enabled cost savings, as operators invest exclusively in buying rolling stock according to the type of load. Therefore, private operators such as BRC, Bulmarket or Gastrade have not only bought specialized cars and locomotives with reduced hauling power capable to haul, for example, oil tanks from Pirdop refinery or steel from Kremikovtzy. The evolution of private operators’ share is precisely the outcome of these budget savings which have recently enabled service diversification and also attracted customers outside traditional borders. The national operator BDZ has not answered to this flexibility and capacity of adapting according to the customer’s needs and it is still considered a giant driven by communist beliefs.
Nevertheless, this limitation to niche markets has had a negative impact on the Bulgarian market’s attractiveness, the large western operators showing little interest in Bulgaria. In fact, this situation has also been fed by the problems of main cargo transport customers (plants and coal mines) which have reduced their orders and persuaded large operators such as DB and SNCF to stay away. The cooperation between the operators in Bulgaria and those in the neighbouring countries in cross-border services has, however, improved, but the situation could be explained by the fact that Bulgarian operators are part of groups from adjacent countries. The fact explains most of the successful outcome of private operators who are a real threat to the national operator’s supremacy.
BDZ has been facing bankruptcy for over a year
BDZ is still one of the largest companies in Bulgaria and a major employer, so the reorganisation problem which also implied many layoffs is a national interest concern. The 2009 economic downturn has seriously hit the national operator, the intense rumours on BDZ’s shutdown being denied by Minister Alexander Tsvetkov, who, in the fall of 2009, said the company was the synonym of railway transport in Bulgaria which, in turn, is the fundament of transport in the country and an irreplaceable social service. However, his declaration has stirred private operators. The national operator is completely inactive and launches no new services, indulging itself in customers coming from state companies and operators. A relevant example is BDZ’s withdrawal from Bulkombi joint-venture which provided RO-LA transport services. Its Italian partner, Cemat, was forced to sue the Bulgarian company. The company has 17,000 employees and has initiated a serious reorganisation
process which also implies major layoffs. In 2009, BDZ lost around BGN 40 Million (EUR 20 Million) and accumulated debts of BGN 150 Million (EUR 76 Million), according to the company’s CEO, Pencho Popov. Passenger transport services are exclusively provided by BDZ, which, according to UIC, had 8% losses during the first nine months of 2009. The national operator carried 23.7 million passengers, 7.5% less than in the similar period of 2008. The reorganisation is more for declarations, the promises of dividing the company in several independent undertakings with own budget and which could elaborate development projects for accessing European funding being denied by the decision-makers who reaffirm the compact statute of the company. Let’s take for example the government decision of August 2002, according to which BDZ will remain a single company for the next 15 years and which came only two months after the announcement made by BDZ’s CEO at the time, Hristo Monov. He declared that three new companies will be established: BDZ Passengers, BDZ Cargo and BDZ Haulage that would manage the rolling stock. The project resulted in the establishment of two new subsidiaries: BDZ Cargo and BDZ Passengers. Currently, these subsidiaries still don’t have a budget, exclusive rolling stock fleet or facilities of their own (depots, switchyards) and were established for the operational cost efficiency of the mother-company, BDZ. Experts say that the actual division of BDZ will improve the currently poor financial situation on long term and that the new formula focuses more on stimulating services than when BDZ’s management was ensured by one team. This has made them assume that the reorganisation is just a tool to make things official for the national operator, which has been operating as several distinct, yet financially dependent, entities with the same investment budget since 2003.
The largest private operators
Bulgarian Railway Company is the first and yet the most important private freight operator in Bulgaria. The full private capital company was established in 2004 and is 50% property of Grampet group, the other half of shares being managed by a Belgian partner. The company was certified as railway operator on April 15, 2005. In 2008, BRC held a market share of nearly 15%, being, in fact, the only important operator after the state-owned company, BDZ. According to UIC data, during the first nine months of 2010, BRC carried 687.000 tonnes of freight, 11% more than during the previous year. The company’s main customers activate in the chemical industry, BRC providing services for the petrochemical plant in Burgas and Pirdop oil refinery, as well as the Bulgarian subsidiaries of LukOil or Holcim. According to UIC 2007 data, the company has a fleet of 10 locomotives and bought 26 British small and medium capacity locomotives in 2008. BRC has bought haulage vehicles to cope with the increasing volume of freight. Bulmarket DM is a 100% private capital company. Since 1996, the company has been one of the most important propane-butane forwarders in the country and is also the largest biodiesel supplier and developer of environmentally friendly technologies for fuel processing in Bulgaria. In 2008, Bulmarket controlled 25% of the Bulgarian market in propane-butane transport and managed 14 kilometres of rail. The operator also has a hub for cereal loading processes, as well as different port facilities. Bulmarket’s future plans include an active implication in fuel transport from the Caspian Sea to Bulgaria.
At the end of 2008, Unicom Group set up a cargo transport consortium in Bulgaria. On October 10, 2009, Unitranscom, developed in collaboration with TransWagon Works Burgas car facility, was certified as railway operator on the Bulgarian network. Unicom Group owns 50% of Unitranscom’s shares. In 2009, Unitranscom had one electric locomotive and, according to the activity developed, the company plans to lease locomotives and wagons for transport services and shunting activities with Unifertrans’ support. In 2009, Unitranscom adapted its transport offer to the market requirements and expanded its activity on chemicals and coal transport segments. Reportedly, the company received orders from the chemical fertilizer manufacturer Neochim, as well as from Cherno More mines which contracted Unitranscom for coal transport to the thermal power station in Sliven, Eastern Bulgaria.
by Alin lupulescu
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