funding | passenger trains

How to fund the passenger railway finance  There are few places in the world where passenger services cover their full operating costs, let alone those of replacing equipment, and the cost of construction is almost never met. New approaches to funding are therefore required if the passenger sector is to see significant growth, argues David Burns.*

U

rban and inter-city, the two basic types of passenger service, have totally different travel patterns but face similar funding problems. In most cases competition from other modes and population density prevent rail from charging, at least, fullyallocated costs. There is a close correlation between

income and the desire or the need to travel, so as incomes increase so do passenger-km. Overlaying this is the desire for personal mobility which starts with a bicycle. As income improves, it graduates to a motorcycle, and eventually a car. With more cars there is increased demand for better roads. Since in a democracy each driver and his or her passengers are

usually also voters, roads receive the majority of public funding. Roads have become a necessity, but railways are not always essential, and so railway funding is often ignored. Modal shift in the USA and Western Europe has also reflected the development of transport technology. Inter-city rail suffered badly from the impact of jet aviation, particularly in the USA, while in the urban sector better roads and car-oriented suburbs encouraged the shift away from public transport. Today, a developing country’s pace of modal shift can be much faster since the transportation technology already exists. For these countries, the rate of change is governed only by the growth of per capita income, population and perhaps legislation. In countries like China and South Korea the transition from bicycle to high speed train has taken less than 20 years.

* David Burns is a United Statesbased railway engineering consultant with more than 40 years’ experience in 40+ countries.

The high cost of urban rail

As more and more people live in cities, so the need to travel to work increases, with the number of cars on the road growing alongside population and incomes. Urban rail can help to relieve road congestion, and a review of recent new-build projects shows that at around a population of 10 million and a per capita income of US$3 000, cities start to construct urban railways. Cities with a population of around 1 million are actually delaying construction until the per capita income is 10 times higher, but this unfortunately demonstrates that most cities are reactive rather than proactive in meeting the transport needs of their inhabitants. Building a railway in an urban environment can cost anywhere from Within the inner ring motorway, Paris is a very compact city with excellent public transport, leading to a high market share of 25%.

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passenger Trains | fUNDING

Demand is so high in Mumbai that passengers are prepared to endure loadings of 16 pass/m2.

$24m/km for a surface alignment in Delhi to $360m/km underground in London. In contrast, if construction is undertaken proactively prior to urban development, costs are usually in the range of $5m/km to $10m/km. Once the average person buys a car, he or she will usually use it for urban, regional and inter-city travel because of the door-to-door convenience and the ability to travel in an environment of their own choosing, with air-conditioning, personal choice of music and other comforts. In assessing the effectiveness of policies aiming to reduce car use, we should first note that public transport market share can vary dramatically by city, but is seldom more than 25%. Comparing different cities can give an indication as to what is required for urban transport systems to be successful in terms of ridership and the ability to be self-funding. In Dallas public transport market share is only 4·5%, reflecting low-density housing and the use of a car for almost all journeys, but an expanding light rail system is changing travel patterns and can be credited for the resurgence of the city centre. Public transport market share is 20% in New York, but nearer to 50% in the central area. This reflects highdensity housing, a good public transport network and the fact that owning a car and parking are very expensive. Paris has a market share of 24%, as high-rise construction is only

permitted in the suburbs and there is extensive commuting to and from the business districts. Paris itself within the inner ring motorway is a very compact city with excellent public transport and is ideal for walking or cycling. Also, petrol and parking are very expensive. Similarly, high-density housing, excellent networks and prohibitively expensive car ownership are reflected in the high market shares enjoyed by public transport in Tokyo (57%), Osaka (60%) and Singapore (65%). Thus it is possible to conclude that high-density housing and restrictions on the ownership and use of private cars are critical factors in encouraging the use of public transport. Unfortunately, introducing legislation to restrict car use is almost always political suicide, although the implementation of a congestion charge in London since 2003 might suggest otherwise. fares and funding

Public transport essentially caters to all income levels, which raises an interesting conflict in the pricing structure. For a poorly-paid worker, travelling to and from work can eat up a substantial part of their income and it is therefore important to keep fares affordable. On the other hand, those on better incomes would have no problem paying a much higher fare, especially for better quality of service. In the early years, urban railways tried to solve this problem by charging first and second class fares like their main line counterparts. Almost all have now settled on a single class to make fare collection simpler. Dubai’s new driverless metro has Gold and Silver classes, as well as separate cars for women and children. But an attendant is required for the half coach of Gold class to ensure that passengers have paid the correct fare. One of the few urban railway systems that actually makes a profit from farebox revenue alone is Mumbai, where demand is so high that

Japan’s private ‘railways’ MuLTipLiciTY: In Japan there are a number of very profitable private urban railway companies that are no longer simple transport businesses, but rather conglomerates with multiple investments tied together by the railway. One such company is Hanshin Electric Railway Co Ltd, which owns a bus company, retail businesses, a baseball team, residential

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property, hotels and a travel agency. Urban transport operations currently provide 26% of Hanshin revenue, with property accounting for 20%, retail 16%, the travel business 13%, entertainment and communications 12% and hotels 9%. Hanshin is a long-established company, demonstrating that property can indeed be relied upon to provide a continuous income stream. l

passengers are prepared to endure loadings of 16  pass/m2. But in the long term this is unsustainable, because as soon as passengers can afford better transport they will desert these overcrowded services. Low fares also mean that the suburban railway system is generating insufficient revenue to fund badly-needed capacity enhancements, with the result that new lines are being built with a separate fare structure that only the well-paid can afford. In contrast, fares on London Underground are amongst the highest in the world, particularly for travel in the city centre where demand is strong. This in part reflects factors such as a lack of parking, road congestion and a charging regime to tackle the latter which have effectively ‘forced’ commuters to use rail. Beyond the city

Compared to urban railways, regional and inter-city passenger trains serving different markets have very different fare structures, but the funding problems are similar. As the car became more affordable, people stopped using regional railway services, and as roads improved, intercity ridership dropped off as well. To make matters worse for inter-city operators, people in developed countries on average make surprisingly few long-distance trips a year. While many operators claim a market share in excess of 80% on some inter-city corridors, this does not include the private car or, in some cases, coach services. For rail systems as whole, the overall average is much lower, as a brief international comparison makes clear. Market share is currently running at around 7% in the UK, a small country with a relatively high population. In the last 15 years or so, partially as a result of privatisation, inter-city ridership has increased by about 40%. However, overall government subsidy for the railway has increased. Note

passenger Trains | fUNDING that true high speed has yet to arrive in the domestic market, with the fastest inter-city services operating at up to 200  km/h on conventional infrastructure. The 9% market share enjoyed by French national operator SNCF has been underpinned by high motorway tolls and a lack of domestic inter-city coach services. On the more popular high speed corridors, market share appears to be in the 40% to 50% range, and the overall market share has remained stable following deregulation of the airline industry. While Germany does not have expensive toll motorways, until recently inter-city road services and discount airlines were restricted. On certain corridors rail has a market share of perhaps between 30% and 40%, but overall market share is only 8%, reflecting a similar situation to France. For a European country, rail in Switzerland has a relatively high intercity market share of 12%. This is all the more interesting as it has virtually no routes where services operate at more than 200  km/h, and in some senses the Swiss railway network could be considered to be an urban railway as the distances are short and the density

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of usage resembles a city. In fact, the population uses the railway almost as an urban population would its public transport system. In the USA, the Northeast Corridor linking Washington DC with Boston is thought to have an overall market share of around 10%, but the national regional and inter-city market share is in the range of only 0·2% to 0·3%. In contrast, the figure for Japan is 30%. Before building the world’s first true high speed line in 1964, on a new alignment and to 1 435  mm gauge, stringent laws were passed limiting the ownership of private cars. This was at a time when the ownership of all types of motor vehicle was 19 per 1 000 inhabitants, compared to 411 in the USA. Japan also has the advantage of being a linear country ideal for generating high ridership in rail corridors. Today all major cities have excellent public transport providing easy access to inter-city rail. In asking why rail is so popular, we should note that the fare from Tokyo to Osaka is $130, the same as flying, and there are 10 trains an hour between the two cities. Motorway tolls would total $80, while to own a car private off-street parking is required,

in addition to paying an annual inspection fee of $1 000 and buying petrol at $1·80 per litre. Restrictions on car ownership, the high cost of driving and strong rail usage have given Japan the best passenger market share for a high-income country. However, several percentage points have been lost recently to the discount airlines. As further illustration of market share sensitivity, a 30% reduction in motorway tolls at weekends has resulted in a 10% loss of inter-city rail traffic. frequency is key

Regional and inter-city passenger services are very capital-intensive, requiring significant expenditure on railway infrastructure, signalling and rolling stock. Road coaches have virtually no direct infrastructure capital costs, and substantially lower vehicle costs due to the benefits of mass production. Aircraft may be expensive, but airlines incur no capital costs for the airspace they use. Air is much faster and its overall capital cost per seat-km can make it competitive with high speed rail. A typical inter-city coach carries

passenger Trains | fUNDING

The Tokaido Shinkansen is the world’s busiest high speed line, carrying 151 million passengers a year between Tokyo and Osaka. However, this is still only 1·4 round trips per person per year.

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around 60 passengers and can cost $400 000. Some double-deck vehicles have a capacity of 90 passengers and cost about one thirtieth of the cost of a typical eight-car inter-city train. In addition, the coach operates on the public highway and is just paying a user charge, which almost certainly does not fully cover the full usage cost. Having lost status as the cheapest mode of long-distance transport, coach travel has undergone a major resurgence in the USA and more recently in Europe, through the introduction of low-cost, high-quality services. Some companies now offer passengers all the amenities that might be found on an inter-city train, such as sleeping berths, entertainment, at-seat catering and power points for laptops and other devices. Coach travel is slower than rail, but for distances of up to 150 km the difference in overall journey time is often insignificant. This is especially true as the coach, with its smaller unit of capacity, can offer a high service frequency. In making the choice between modes, schedule and convenience are the primary factors. Overall journey time must be considered, but the actual travel time using the primary transport mode is often secondary. Overall journey time starts when departure is convenient. If train frequency is every hour, then it can be argued that the average waiting time at the station is 30 min and the speed necessary to make up for this waiting

Railway Gazette International | September 2012

Table i. environmental and economic benefits of rail Benefit

Railway

Government

Population

Increased passenger travel

x

x

x

New industries

x

x

x

Industrial expansion

x

x

x

Lower-cost freight transport

x

x

Increased community income

x

x

Reduced land-take for roads

x

x

Reduced road congestion

x

x

Reduced road maintenance

x

x

Value of time savings Energy savings

x x

x

Reduced pollution Noise

x

Water

x

Particulate emissions

x

Gas emissions

x

Improved transport safety

time is very expensive. To make the problem more pronounced, waiting is perceived by passengers as being three times longer than it actually is. The trade-off between train frequency and speed is generally not that important for urban networks because distances are short and commuters have a simple choice. They can use a car and deal with congestion and parking, or use public transport. Train frequency here is largely an issue of capacity and comfort. But frequency is key to the future of inter-city and, to a certain extent,

x

x

regional passenger services. To put it simply, to justify a high frequency you need passengers, and for passengers you need population. In a developed country the average person makes only three to five long-distance (100  km and over) trips a year, and geography and demographics will define what percentage of these trips will be in a given corridor. As we have already noted, Japan has a distinct advantage in that it is a linear country, while a similar situation applies in the US Northeast Corridor where the Atlantic reduces

funding | passenger trains

the direction of travel by 50%. If one assumes 25% of the population are going in the direction of a corridor and 10% select rail, to fill an eight-car train on an hourly service the population on the route needs to be between 16  million and 32  million. If rail attracts 30% of passengers, population centres of 5 million to 10 million are required. For a half-hourly service, the population requirements double. The Tokaido Shinkansen provides a case in point. It is the world’s busiest high speed line, carrying 151 million passengers a year between the two largest cities in Japan, Tokyo with 35 million inhabitants and Osaka with 18  million. They are 550  km apart, and 10 trains/h each with 16 cars (1 300 seats in total) run in each direction at frequencies as high as every 3 min. Total ridership in the corridor works out at around 1·4 round trips per person per year. Capturing the benefits

The environmental and economic benefits of rail, and specifically passenger trains, are many. As Table I (p74) shows, all these benefits accrue to the general population. How do these factors convert to a financial benefit for the railway? In the case of passenger trains, this is a very important question as it is very difficult to quantify the benefits, especially in monetary terms, that can then be transferred to the railway. The argument that trains are ‘environmentally friendly’ may be correct, but few passengers will consider this

when making a modal choice. The economic benefits of lower environmental impact accrue to the whole country or region, and should be considered by the government in determining the level of subsidy. Sometimes this is taken into consideration. One of the common economic arguments given in favour of travelling by rail is that it saves time, and that business travellers are therefore prepared to pay a premium ticket price. According to the UK Department of Transport, the value of the business traveller’s time is US$84 per hour saved, and this seems to be reflected in the price of a first class ticket. But even if business travellers are prepared to pay US$84 per hour more, they are typically only 30% of passengers, only a proportion of which would be prepared to pay the extra fare. Regional and inter-city operators face very strong competition in what they can charge for travel. Few people consider more than the immediate out of pocket costs, such as fuel and road tolls, when looking at going by car. If there are two or more people in the car, the cost per person becomes difficult for rail to compete against unless there are very high toll and parking costs. Coaches are usually the least expensive means of long-distance transport, often costing 25% of the rail or air fare. Yield management is a problem

Information technology is having an increasing impact on passenger travel, as online retailing and other

On each Megabus service in the USA there is at least one seat that is sold for just $1.

developments have broadened the range of available fares well beyond a simple choice between first and second class. Largely driven by competition between airlines, today there can be dozens of ticket prices between city pairs. Some inter-city rail operators have been willing to follow this trend, while others have been more or less forced to so (p88). On each Megabus service operated by Stagecoach in the USA, for example, there is at least one seat that is sold for just $1, available to the passenger who books early enough. As capacity is filled the ticket price increases, but the coach passenger booking at the last minute is still typically only paying about 60% of an equivalent rail fare. In reality, yield management is a major problem for inter-city rail when competing against airlines operating between major city hubs which for competitive reasons are able to offer heavily-discounted fares. A rail operator may be able to match this fare, but the train will probably stop at other stations en route. The discounted end-to-end fare could easily be lower than those for travel to or from intermediate stations, which will either result in the passenger buying an end-to-end ticket and getting off at an intermediate station, or making the unpleasant discovery that the end-to-end fare was cheaper than the ticket bought for the shorter journey. This has the effect of forcing the rail operator to lower its fares for the whole line, and one major operator ceased using yield management for this very reason. Overall, yield management or market pricing can certainly fill empty seats and increase ridership, but the amount of extra revenue it actually produces for the rail operator is open to question. People like to ride trains, but are only prepared to pay a limited amount over the cost of coach travel for relatively short distances. For longer distances, some people may prefer high speed rail to flying, but again they are only prepared to pay a little more to travel by train. This clearly indicates that the range of prices or fares that is available to a rail operator is limited. Road and air have insignificant infrastructure capital costs, so it will be very difficult, if not impossible, for rail to compete on a new route unless the construction cost is largely covered by an alternative funding or revenue source, usually the government. Most railways also require some form Railway Gazette International | September 2012  

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passenger trains | funding of additional income to operate and maintain an existing system. Alternative funding sources

Often a public-private partnership or concessioning is considered as an option for creating a new passenger route or taking over an existing service. In the short term, this may be a viable option since private companies tend to be more efficient. However, there is still usually a need for public subsidy. As a business opportunity, rolling stock manufacturers, engineering consultancies and infrastructure contractors are major promoters of new passenger railways, particularly expensive urban and high speed routes. With the award of a build-operatetransfer concession, these companies borrow money from which they pay themselves up front to build and equip a new route or service, and then proceed to operate it for a given period of time. Should the service prove to be a financial success, then these companies have the added benefit of a long-term stream of profitable revenue. On the other hand, should the service prove to be unsustainable,

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the lending banks, shareholders and bondholders must pay for the loss. This approach to concessioning is viable provided the government fully understands the financial implications and is prepared to contribute an appropriate subsidy, which will almost certainly be required. Contractors are less likely to invest heavily in an existing passenger railway because there is less opportunity to benefit from upfront revenue. Rolling stock manufacturers may be interested, provided there is an upfront payment. So, where does the government’s money come from to cover these capital and operating subsidies? Sometimes it comes from the general fund, at other times from specific forms of taxation. There are several methods commonly used, but all have their disadvantages. Logically, taxes to fund public transport should come from the beneficiaries of the system. Road users who benefit from reduced congestion form one obvious source, but a fuel tax imposes an unfair burden on those for whom public transport is not a viable alternative. Tax increment financing, or

applying a higher property tax in areas that will benefit from new stations, would seem to be a logical method of funding, but it is usually used to develop land around the station to encourage (benefit) the private property developer. The value of existing property near a new station will also increase, so property tax should increase. Generally this money goes to the local authority and usually not to the railway. The property owner who was there before the station was built may not derive any financial benefit until the property is sold, and will object to paying increased property tax for the foreseeable future. Sales tax or value added tax can be increased in the general area served by the railway, and this is a commonlyused approach in the USA and Canada as it is paid by all the beneficiaries of the convenience and reduced congestion provided by new public transport infrastructure. Unfortunately, wealthier residents end up contributing more and are usually the people with political clout who object to the imposition of a tax increase. Alternatively, they may evade the tax by purchasing high-value items outside the

passenger trains | funding

Fig 1. Comparison of short-term costs for driving between four cities at similar distances from each other.

area in which it applies. Congestion charging can also be an effective method of funding public transport. However, while these charges seem to be very effective in reducing congestion, by charging road users for driving in certain areas at certain times, the revenue generated is offset by the increased subsidy required to ensure that sufficient capacity is provided on public transport for motorists who have been priced off the road. Highway tolls could be used in a similar way to ‘encourage’ the use of inter-city rail. Fig 1 shows the immediate short-term cost of driving between

Road pricing Fuel cost

Paris – Lyon

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Tokyo – Osaka

Madrid – Barcelona

Railway Gazette International | September 2012

Chicago – St Louis

four pairs of cities that are all roughly the same distance apart. For Chicago – St Louis, where ‘higher speed’ rail services are planned for 2017 (RG 7.12 p62), the short-term driving cost is about the same as the current cheapest Amtrak ticket. While there is an obvious argument for a toll, aside from the political problem of imposing a charge of any significance it is more than likely the money would go to highway maintenance anyway. Budget transfer is another funding option. Occasionally, a government will recognise the logic that, especially for urban networks, increased public transport use will reduce expenditure on road construction and maintenance and will agree to transfer funding from road to rail. Some local governments recognise that they are dependent on public transport to bring workers to their place of employment. So they levy a tax on employers to support public transport. This may be an effective solution if there is some guarantee that the transport operator actually receives the funding. Whatever the mechanism for providing public support, rail is capitalintensive and of all the transport

modes it presents the highest degree of risk because a high percentage of its assets, namely the infrastructure, is non-recoverable. This results in higher interest rates on borrowed money. To minimise interest payments assurance of government funding is critical, and therefore subsidy should be based on legislation which is much more difficult to change and not on a budget allocation that can altered with the stroke of a pen. Leveraging rail assets

As investment and subsidy from government can be fraught with problems, it is appropriate to consider other approaches to providing funding for passenger rail. A traditional, vertically-integrated passenger railway usually has assets. It often has more land than is needed for operations, air rights above the track, the track itself and the ability to provide transport services that people need. In addition, it requires specialised technology and services that it may be able to sell to other operators. Around the world there are examples where a railway has leveraged its passenger services to such an extent that the overall company is

passenger trains | funding very profitable. Station development is one potential source of revenue. Stations should be transport hubs and businesses locating there can benefit from the ease of access the railway provides. There is also increased passenger revenue and increased revenue from businesses located at the station. Typically, these businesses are hotels and especially retail outlets. Many major Japanese stations are now important shopping centres, and in Europe DB, SBB and SNCF have programmes to develop shopping complexes at

Construction: The Hong Kong government recognised the need for a funding source when it decided to build the Mass Transit Railway. It created a company that had authority to fill in part of the harbour, and this land was then used for a railway station, workshops and rolling stock depot. Using the air rights, 20 high-rise apartment blocks were also built on the site, with income from this development funding most of the cost of building the first phase of the MTR network. Since then there have been several additional construction phases, a large proportion of which have been funded by property development. At present 31% of MTR revenue comes from the farebox, with property development providing 48%, property management 10% and station businesses 11%.  l

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Photo: Andrew Benton

Property development at Hong Kong MTR

Photo: Andrew Benton

funding | passenger trains

provide access to new areas for property development, with railway construction actually funded by this development. Japan, Hong Kong, New York, Los Angeles and London provide examples of this approach. The lesson here is that urban railways should be actively involved in urban planning, proactive and not reactive as regards the development of a city. The only way that Dhaka, the capital of Bangladesh, will have the passenger services its needs will be if the railway is proactive in urban property development (RG 5.08 p334). A new urban railway can also have a major impact on redevelopment schemes. In Dallas, the light rail system has sparked a resurgence of the

Above: Dhaka’s railway must be proactive in urban property development.

Below: St Pancras Hotel, today undoubtedly one of the finest hotels in London, was part of the station and owned by the railway. For short term cash flow and lack of expertise, it was sold as were all other British railway hotels.

Photo: Andrew Dunn

major stations. Some Japanese railways actually own department stores and, in the case of Hanshin Electric Railway, a premier league baseball team that provides useful off-peak revenue. There is no parking at the stadium which is a 2 min walk from the station. For smaller stations, a supermarket or a convenience store that also sells rail tickets may be the answer. People will go frequently to the store and will see the trains. When they need to select a transport mode, the train will be embedded in their minds. And parking is one of the most profitable aspects of airport operations, so why should this not be the case for railway stations? Construction and sale or management of residential or commercial property on or near the railway is a common method of revenue generation. A few governments have the tools to enable a railway to exploit property development, such as Hong Kong where permission was granted for part of the harbour to be filled in for railway use (p82). Florida East Coast Railway’s planned passenger service between Miami and Orlando (p42) illustrates that money can be made through property development to fund railway construction, given a minimum frequency of 1 train/h to offset the cost of running at higher speeds. Many urban railways were built to

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passenger trains | funding inner city with major new commercial, residential and entertainment development. A sales tax has been used to fund construction and operation of the Dallas network, but if additional land had been acquired for property development when it was built, the system could be self-supporting. Freight and other opportunities

Creating a rail mentality

Photo: Julian Wolinsky

Freight trains use San Diego’s light rail network between 02.00 and 05.30. Note the high-reach pantographs which provide clearance for the larger freight trains.

Additional income could also be generated by using the infrastructure of an urban passenger railway to carry freight. This can present problems, but examples where it is working well include San Diego where the Blue Line of the light rail network is used by freight trains between 02.00 and 05.30. On main line networks, the substantial difference between the operating speeds of passenger and freight trains raises technical issues such as the degree of superelevation applied to curves. Faster passenger services will also use more train paths than freight. While for most freight speed is not that important, there are products, such as fresh produce, that can benefit from passenger train speeds. A recent US study showed that a single 55-car transcontinental produce train, operating at up to 160  km/h, could

can be provided to the passenger, such as internet access, onboard entertainment and business centres at stations. High-quality tourist trains are another source of revenue, with a number of very successful operations in place around the world, and some older urban railways offer historic rolling stock for tours, parties and weddings. The website that the prospective passenger uses to buy a train ticket can offer a whole range of additional services ranging from car hire to hotel accommodation from preferred suppliers, sightseeing packages and even flights. The airlines themselves have been doing this for years.

generate revenue in excess of $1m. Passenger railways can own a continuous strip of land between important cities, often 30  m or more wide, which can easily be used by utilities as well as pipelines and telecommunications companies. If used for electricity transmission, there can be problems with interference with signalling equipment, but they are not insurmountable. In many cases, selling the surplus capacity of railway telecommunications systems is a major revenue generator, but unfortunately most of the benefit goes to the telecommunications companies. Sprint, the major US telecoms company, was originally developed by the Southern Pacific Railway, but was sold to help keep the core business solvent. Assuming a railway is of a reasonable size, it may have workshops and other specialised facilities which could be used to undertake work for other parties. Tokyu Car Corp is owned by JR East and manufactures rolling stock for this railway and other operators. On the retail side, onboard food service has historically been an acceptable loss-maker in that it attracted passengers to the railway. However, there are other evolving services that

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Unfortunately, exploiting almost all of these possible sources of revenue requires specialised expertise not usually found on a railway. More importantly, railway management often seems unable to recognise this fact. Another common problem is that the ownership structure of a railway often prevents it from diversifying, acquiring land other than for the railway itself, making use of air rights or meeting transparency requirements for property development if government investment is involved. Usually for rail to be considered in the modal choice, convenience of getting to and from the station is a major factor. Besides convenience, there is the intangible factor of rail needing to be a pleasant experience. For this to happen rail has to be a part of everyday life, not as a necessity, but as a choice. Stations must be conveniently located, have easy intermodal connections, and must be in themselves a destination. In other words, there must be reasons to go to the station other than to catch a train. A person might go to the station to shop, see a movie or go to a restaurant. In summary, urban railways are a necessity for cities over a certain size and per capita income, and the only question is how to pay for construction and provide the likely operating subsidy. Regional and inter-city passenger trains have a future if traffic warrants frequent service, if fares are competitive and if there are enough sources of other revenue to provide appropriate, consistent support to maintain competitive ticket prices. Above all, it is necessary to create a ‘rail mentality’. When people need to travel, rail must be seen as the mode which is preferable to road or air.  l