This interview formally began in October, PJSC “Ukrzaliznytsia” will be divided passenger services into categories. Immediately, a number of questions: what category, how to change the cost of tickets, how they will change the conditions in the trains, and what is actually happening. For clarification Delo.ua addressed to the acting Chairman of the Board of PJSC “Ukrzaliznytsia” Evgeny Kravtsov.
In this part of the interview, we will focus only on passenger transport. Moreover, we were able to talk not only about the planned splitting of passenger trains, but also about how the BONDS were able to reduce the cost of tickets on international flights, why stop the increase of tariffs for passenger transportation on high-speed trains and much more.
Ukrzaliznytsia wants to share in the passenger transportation segment: comfort, Standart, economy. What does it mean?
First tell why you need the separation. In 2017 the BONDS purchased 50 passenger carriages have been repaired almost 40 cars. The purchase of new cars was in 2016. In 2018 we plan to purchase 60 carriages and overhauled several hundred cars. This is a rather large amount of updates.
In “Ukrzaliznytsya” is the formal categorization of cars. It cars, of which up to 10 years, they are in good condition. There are cars older than 10 years and cars older than 15 to 30 years. In simple words, all these cars of night trains in a different technical condition and they, for objective reasons, different level of comfort. Still there are compositions which consist of cars-transformers — three of them — one runs from Kiev to Zaporozhye and two in Ivano-Frankivsk. In 2018 we are planning the purchase of approximately 30 cars-transformers, this three part. The use of railroad transformers can significantly increase the utilization of the Park and carry more passengers fewer cars.
Standards need to divide the level of service we can provide to passengers.
At us often happens that even a part one the cost of there cars totally different quality. We want the passenger, buying a ticket, knew about the level of service that will be provided in a particular train.
We honestly want to show the passengers that we have, for objective reasons, different trains. The first is a relatively new (10 years), which is the entire set of services we plan to provide and/or already provided — air-conditioning, vacuum toilets, in the future, on-Board catering, media services, kits for travelling. The second train (over 10 years) — quite a comfortable level trains, but with a limited scope of services. For example, there may not be vacuum toilets.
Third (15-30 years) — this train will provide the minimum of services. Let me remind you that we have less than half of trains are equipped with air conditioning and vacuum toilets. This category economy.
Thus, the “Ukrzaliznytsia” will go from loss-making passenger transportation?
We understand that the loss of the passenger traffic is not quite correct to talk about the magnitude of the investment. And not quite right to invest in losses.
Despite the fact that it is our social function, we believe the issue of cost effectiveness and return on our investments.
Therefore, without government financial support, which at present, it is difficult to talk about long-term stable development of the company, the dialogue with business.
Today we have many cases when we are at 400-600 km carry passengers on UAH 100 per ticket, and 1589 km between Mariupol and Lviv can be overcome by UAH 172. At the same time for our best trains, best quality cars passengers willing to pay more.
The main idea is to allocate the premium segment, which is social and which is not connected with our social function of the carrier, and ask the right the state is free to set the fares for premium trains comfort category. Let me remind you that the tariffs for passenger transportation have not been increased for several years.
We, in turn, take the obligation that a certain proportion of the trains in the next 5 years will translate into the category of “comfort”, however, we will reduce the number of trains of category “economy”. However, private Park BONDS will be able to fulfill their social function of transportation. Category “economy” — this will be the entire train or within the compositions of the wagons, which we will be able to carry all preferential categories of the population, without increasing the cost of the ticket.
Tariffs for trains of category “standard”, we agree with the government for indexation.
So we will be able to maintain a balance between economic efficiency in the segment of comfort-controlled profitability or profitability in the segment “standard” and the implementation of the most important social functions of transportation in the segment of “economy”. It’s an honest approach to the market.
We ask the government to give the right BONDS be repaid in the premium category. Two other categories we cover the expenses or at the expense of regulation of tariff at a level that will provide the state or at the expense of direct subsidies. In European countries it’s called the social contract of carriage. The European model, to which we must come in the framework of the Association agreement with the EU, government regulated tariffs, only those transport which are subsidized.
You say that the BONDS will be obligations for the 5 years to minimize the share of the trains category “economy”?
This strategy is necessary to determine indicative strategy — as BONDS should change in the passenger transport sector. Today we are in the category of “comfort” 10% of trains within 5 years we plan to translate this category is about 35%. In the category “standard” 50-60% of trains within 5 years we need to maintain this level by reducing trains of class “economy”.
The trains will remain the division for reserved seats, sleeping and luxury?
Yes. Just happen assessment of passenger trains. We are talking about that we will give a categorical train, not the car.
Renewal of the rolling stock is separately running process. However, all new cars in most will go in the category of “comfort”.
How will you determine the price for the train class “comfort?
In the category of “comfort” we want free pricing, we want to determine the price of a ticket to market conditions. We see that today “SV-cars” on the directions Kiev—Lvov and Kiev—Ivano-Frankivsk compete with planes. Some people are comfortable in an hour to fly and a place to stay, and someone prefer to use our “SV-cars”, to come to Ivano-Frankivsk and then to go somewhere else. We are aware that there is competition with other modes of transport and we should be able to raise the price. This is not a social segment, is our business. Moreover, it should be noted that to date, the most popular are tickets for travel in cars category SV.
We ask for a certain maneuver, in the categories where we are investing money, we could pay back and for that was responsible.
Your competitor aircraft?
Depends where. In different areas we have different competitors. “Ukrzaliznytsya” can compete with aviation on the basis of the fact that we have a comfortable environment for a number of trains and a lot of people believe that the sleep on the train than to fly. Although we don’t compete for time, we are competing as a way of transportation.
In certain cases, we are competing with trucks. For example, the direction Kiev-Odessa. There can be price competition, may be the question of quality. If you go to Odessa by bus about 6 hours, by train a little longer, but in the train you can sleep.
We always have the advantage — we have to sleep comfortably. Rates
Can now name the cost of tickets for the “new” trains?
We will proceed from the level of return our investments in rolling stock — the return on the car, conditions of operation, our costs, and we have to have a minimum level of return.
We should see who our competitors are, look at the occupancy rate of the train, the goal is to keep our trains were filled to 100%, depending on day of week, time of year, time of booking etc. We want to have greater flexibility in determining a higher value on Friday night, lower on Tuesday.
In the figure we have to determine for themselves. We need to move away from the question of accuracy. Now I will say that the SV ticket from Kiev to Lviv will cost 1 thousand UAH. But it should be possible to determine on Tuesday the price of 800 UAH, Fri — 1, 5 thousand UAH, and to vary and compete with other modes of transport. If the air carrier will raise the cost or lower the bus — we should be able to find a compromise in our cost of the ticket.
Can be factors for days?
There is a threshold — up to 30% depending on the day of the week. But the important thing is that the ability to respond to changes of tariff in the market quickly, not in a year when we are in the year set tariff conditions and coordinate international transportation for another six months with other agencies, and is sufficiently flexible and fast. This is especially important when entering new markets, opening new international routes and destinations.
Rates in “standard” and “economy” will not change?
It is likely that they will not change, and if they do, then only slightly. As I said, the tariffs for “standard” will be governed by the state and will depend on the level of service that we provide there.
Why have several years of “Ukrzaliznytsya” may not raise tariffs for passenger transportation?
It is a question of the economic condition of the state: can people afford more expensive tickets.
Next year we plan to raise the issue of indexation of passenger tariffs. How much — not yet.
Is it correct to say that the administration does not want the excitement of the people and therefore do not agree on increase of tariffs for passenger transportation?
The suburbs — the right question. As for long-distance transport, the Ministry of Infrastructure is also afraid of the agitation of the people, and, probably, will not increase the tariffs.
What is the procedure of approval of tariff increase?
“Ukrzaliznytsya” initiates a change in tariffs, feed calculations. In the Ministry of Infrastructure to conduct their research, give their position on this issue, carried out tariff Commission, where the claim or reject the offer of the BONDS to change.
In case of approval, the proposal is sent for approval to the Ministry of Finance and Coregulators. The Ministry of economy should give a position in relation to the impact on the economy. The Ministry of Finance assesses the impact of the increase on the budget. In Gasregulating assess a regulatory nature. Process even with a very strong desire and energy takes several months. In less than two months the procedure impossible to perform. Usually about three months, sometimes more.
Than it stopped?
Have to make a decision whether the transport system, the population, if to speak about passenger tariffs to be indexed. At the state level take the position that it is not ready because of the level and growth of income, because the average wage in the country.
Why there is a disadvantage of the current system? Because it is not considered segmentation. You can’t do that, because there is a social part of the transportation, and is the most expensive that have a very high price elasticity. We have a large stock to increase the value to 50%, and this increase will not affect demand.
In simple words. People who pay for the ticket in SV 1, 2 ths, willing to pay 1, 5 thousand UAH.
Passengers pay for quality, comfort, conditions. Often these trains very comfortable. But for people who pay for a ticket for 100-150 UAH, the cost of the ticket 200 UAH can be a serious improvement. Realizing this, we propose another approach which will give us flexibility and keep the interests of the state.
And what about trains “intercity” and “intercity+”?
Fares for tickets in first class “intercity+” is not regulated by the state. Is free price, which is set to “Ukrzaliznytsya”. In practice, the first class of such trains sold out in the first place. But we don’t abuse it, adequately assessing the situation on the market and adequately setting the value of the transportation.
What is the occupancy of these trains?
The occupancy rate of trains “intercity+” — more than 90%. We have the highest rate in the CIS. Ukraine is one of the most efficient users of high-speed rolling stock. We are now actively experimenting with category “intercity” is a day-cars-transformers. We update sitting car there below the price, the speed, but the trains are transformers good at shorter distances over time, the movement to seven hours from Kiev to Ternopil, Zaporizhia, Ivano-Frankivsk. The occupancy of these trains is now over 80%.
The truth is that Hyundai has signed a maintenance agreement for another 5 years?
No. We are now in the process of negotiations, discussing pricing. While on the discussion of the question of price. All standard, we are in a tough pricing policy with all our suppliers, we want the best prices, we are a large customer.
How did you manage to make a discount on tickets to international destinations?
To start is to explain why the international destinations so much more expensive compared to domestic routes. Tariffs for international transportation shall be established by relevant international agreements. This is due to the fact that we are not the only carrier on the route, there are colleagues from other countries, which we use traction, and infrastructure. There are other fees that they charge for transportation. The cost of the ticket for international destinations there is our part, from the Ukraine, and part of colleagues abroad.
If you compare the second class “intercity+” Kiev—Przemysl, the price of the ticket will cost passengers in 489 UAH for a distance of 700 km. On the route Kyiv—Warsaw or Lvov—Warsaw cost will be 1,3-1,7 thousand UAH.
Why such a price? The fact that the route Kiev—Przemysl for the most part runs through our territory, and, for example, the Lviv—Warsaw in the most part is on the territory of Poland.
The question of cost is not only in how much we could give the discounts, how many of our colleagues abroad were ready to sacrifice their part of the fare. Moreover, the question of discounts to be agreed for each direction individually, based on many factors: costs, demand, technical capability to increase the volume of traffic to respond to the demand.
They are willing to sacrifice?
In the case of certain areas that interest them such as Kyiv—Warsaw, for them it is interesting. Here discounts on a parity basis. Actually because the ticket is now worth 1.4 thousand UAH.
These are business negotiations. Prior to that, the price was about 2,5 thousand UAH, and the occupancy of the train was 30%. After the reduction, we have become a competitor to air transport, the occupancy rate exceeded 90%. The economic effect on the face. Decrease 2 times increase in traffic in the direction of 3 times.
Have you had any problems at the border?
No. There is a procedure (depends on the border, the train and other things), the average time of the border ranges from 30 minutes to an hour. As standard there is a problem with the transportation of cigarettes over the border. Regularly identify such phenomenon. If confirmed by the involvement of our employees to such abuse — we immediately say goodbye to them.
In the second part of the interview is available on commuter transport, the protection of trains and how the BONDS will be “killing rabbits.”
Interviewed By Inna Roslik