Leo Express in public service obligation (PSO)

Leo Express began its operation as a private commercial carrier without any subsidies on its operation at the end of 2012. But we have also long-term interest in regional and long-distance transport in the private service obligation, which is ordered by the Ministry of Transport of the Czech Republic and by individual regions (authorities). 

The common goal of carrier and authorities is the long-term satisfaction of the passengers and authorities. The key to success is high-quality rolling stock and customer service. Both is currently being appreciated by our passengers in 7 European countries, especially on rails in the Czech Republic, Slovakia, Poland and Germany.

I. Commercial risk versus public service obligation

To operate a service at commercial risk means that the operation needs to earn on its own operation, otherwise it will generate loss. The income comes only from the passengers and the carrier isn’t supported by any subsidies from the public budget.

Passenger transport in the public service obligation is ordered by the Ministry of Transport of the Czech Republic in the case of long-distance transport and by the individual regions in case of regional transport. If the operation under such obligation is not profitable, the authority (i.e. Ministry of Transport or the individual region) will pay the difference. The carrier is therefore capable of operating a line with limited number of passengers without risking any loss.

Commercial risk

  • Carrier is operating at its own risk and is not supported by the state
  • Carrier decides on the number of connections
  • Carrier’s main motivation is the highest possible profit

Public service obligation

  • Carriers doesn’t risk anything, because any losses are covered by the authorities
  • Long-distance transport is ordered by the Ministry of Transport of the Czech Republic
  • Regional transport is ordered by individual regions
  • Authorities’ main motivation is the best possible service for the passengers

II. The current goals of transport in the public service obligation

The main goal of the authorities and the carriers is to increase the occupation of each individual connection. The more passengers each connection transports, the more income it will generate and the less money from public budget is needed.

GOAL: TO INCREASE THE OCCUPANCY RATE

  • THE AUTHORITIES HAVE THE HIGHEST NUMBER OF CARRIERS IN THE HISTORY
    • that means possibility to compare their offers in a public tender or in the case of direct award with market consultations
  • IMMEDIATE INCREASE OF RAILWAY’S ATTRACTIVITY AND BETTER USE AND CONTROL OF PUBLIC SPENDING
    • money from public budget into regional transport as long-term investment into services
  • ATTRACTIVITY OF PUBLIC TRANSPORT IS DETERMINED BY THE COMPLETENESS OF SERVICES
    • not only new vehicles, but also on-board services, Wi-Fi, follow-up connections, door2door transport…
  • LIBERALISATION OF THE MARKET MEANS MORE JOB OPPORTUNITIES
    • on the railway and in connected services, support of the employment market and businesses in the whole region
  • THERE IS NO SUCH THING AS A LUCRATIVE AND A NON-LUCRATIVE TRACK IN TRANSPORT IN PUBLIC SERVICE OBLIGATION

III. Regional transport as a complex service

Regional transport cannot be only a train, but it should always be accompanied by other connected services, such as follow-up connections, possibility of light personal transport in the city, additional services on-board and good basic equipment of the vehicles. That is how complex regional transport for the best possible use of railway for passengers should look like.

VEHICLES

  • Low-floor
  • Barrier-free
  • Air-conditioned
  • Wi-Fi
  • Vending machines
  • Audio-visual information system
  • Bike and ski transportation

ADDITIONAL SERVICES

  • Bike stands and shelters at the stations
  • Bike/scooter rental
  • Car-sharing
  • Parking
  • Door2door transport

FOLLOW-UP TRANSPORT

  • Substitute transport must be adequate and exceptional
  • The transport from/to the railway station must be considered

INVESTMENTS INTO INFRASTRUCTURE

  • Active lobbying for investments
  • Railway stations, electrification, safety

PROMOTION OF THE REGION

  • Collaboration with cultural events
  • Support of tourism

IV. Advantages of liberalisation of the market

The liberalisation of the railway market brings significant advantages to the passengers as well as to the authorities. Thanks to the competition the carriers have to increase the quality of their services, which brings more passengers to the railways and that results in less individual car transport, which significantly contributes to less traffic on the roads and better environment.

  • Better services
  • New services for passengers
  • Lower prices for passengers and the authorities
  • Increase in number of passengers using rail transport
  • Lower impact on the environment
  • Development of multimodal transport

V. Method of carrier selection

According to the current legislative, the authorities can choose the carrier for PSOs in a public tender, or they can award the contract directly on the bases of comparation of offers from different carriers in so called market consultations. 

PUBLIC TENDER

  • More offers from carriers
  • Will be made mandatory from 2023, until then it is possible to award contracts directly with the use of market consultations

ADVANTAGES

  • Maximal rate of transparency
  • Lower prices are probable
  • Contract can be as long as 15 years (therefore amortization can be divided into longer period and that can lead to lower prices for the service)

DISADVANTAGES

  • The requirements have to set out very precisely and the process can last longer

DIRECT AWARD (WITH MARKET CONSULTATION)

  • Possible to close direct contracts up to 2023 (with the maximal length to 2033)
  • Possible only after comparing more offers in so called market consultation

ADVANTAGES

  • More freedom in setting out the requirements of the service
  • Better option to influence the characteristics of the service during the validity of the contract

DISADVANTAGES

  • Less transparency, can lead to discrimination of some carriers
  • Risk of higher price than in public tender
  • The contract can only last up to 10 years (therefore the fixed costs can be divided into shorter periods)

VI. The process of selecting a carrier for PSOs

Closing a PSO contract is a very time demanding process. The general consensus is that it is necessary to start the process at least 36 months before the operation of the service is scheduled to start. The causes for this are the legislative requirements and the time it takes for the carrier to prepare the service (especially to secure the needed rolling stock and to set out the procedures necessary for the operation – ticket sales, refunds, customer care, selling places…).

The terms for contracts on the provision of public services are set out in the Regulation (EC) No 1370/2007 of the European Parliament and of the Council of 23 October 2007 on public passenger transport services by rail and by road. This regulation is complemented by the Act No 194/2010 Coll. on Public Service in Passenger Transport. This is a simplified illustration of the process:

1.  PrenotificationNotification of the intent to award a contract for PSO-  At least 1 year before the start of the tender/direct award process
2.  NotificationNotification of the intent to award a contract for PSO directly-  At least 2 months before the closure of the contract
3.  ComplaintsFiling a complaint by anyone, who has any interest in given performance-  In 15 days from notification publication
4.  Closed contractNotification of closed contract-  In a year from closing of the contract
5.  Annual reportsAnnual report about public service obligations-  Every year

VII. Contact

Are you interested in more information? Contact us at [email protected]