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Expert Report Prepared for: The Association of American Railroads Assessment of European Railways: Characteristics and Crew-Related Safety By: 1166 Avenue of the Americas New York, NY June 15, 2016
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Expert Report Prepared for: The Association of American Railroads Assessment of European Railways: Characteristics and Crew-Related Safety By: 1166 Avenue of the Americas New York, NY June 15, 2016 Oliver Wyman, Inc. Contents I. Overview and Key Findings... 3 A. Oliver Wyman Introduction... 3 B. Key Findings... 3 II. Comparison of US and European Railroads... 9 A. Network Overview B. Freight Characteristics C. Operating Complexity D. Country Profiles E. Summary III. European Rail Safety Analysis A. Safety Data Analyzed B. Overall Significant Accident Rates C. Investment and Accident Rates D. Recent Crew Transition and Accident Rates E. Eastern European Accident Rates F. Summary Appendix A. European Advanced Safety Technology Appendix B. Safety Analysis Definitions and Reporting Appendix C. Data Sources Oliver Wyman I. Overview and Key Findings A. Oliver Wyman Introduction With offices in 50+ cities across 27 countries, Oliver Wyman is a leading global management consulting firm that combines deep industry knowledge with specialized expertise in strategy, operations, risk management, organizational transformation, and leadership development. The firm s 3,000 professionals help clients optimize their businesses, improve their operations and risk profile, and accelerate their organizational performance to seize the most attractive opportunities. Oliver Wyman s Rail Practice employs the largest and most experienced staff in the world dedicated to the rail industry and is widely recognized as the premier management consultancy to state-owned and private freight and passenger railroads. It has carried out major strategic, operational, and financial planning and evaluation assignments for major rail operators and infrastructure providers in Europe, as well as railroads in North America, South America, Africa, and the Pacific Rim. Oliver Wyman s European rail experience includes work for public and private entities in Germany, France, Italy, UK, Poland, Finland, Hungary, and the Czech Republic, among others. Many of Oliver Wyman s assignments for its rail clients include evaluating infrastructure, equipment, and operations activities for both passenger and freight railways. Oliver Wyman staff members are leading experts in safety and train crew management and network planning and operations. B. Key Findings On March 14, 2016, the Federal Railroad Administration (FRA) issued a Notice of Proposed Rulemaking (NPRM) (Docket # FRA ), in which it proposes regulations establishing Oliver Wyman 3 minimum requirements for the size of train crews depending on the type of operation. A minimum requirement of two crew members is proposed for all freight railroad operations (with certain exceptions). Oliver Wyman was asked to analyze the FRA s approach with regard to data on European railroad operations in the February 18, 2016 Regulatory Impact Analysis (RIA) that the FRA prepared to support the NPRM. Specifically, Oliver Wyman 1) assessed the FRA s assertions that European rail operations are not comparable to US rail operations; and 2) analyzed European safety data to determine if one-person crews are as safe as two-person crews an analysis the FRA did not carry out. Oliver Wyman s key findings include the following: In the RIA, the FRA asserts that European railroads are neither relevant nor comparable to US railroads. 1 Oliver Wyman s analysis found however that the interconnected standard gauge European network serves an economy approximately as large as the United States in terms of GDP. The rail network is as large as or larger in terms of route-kilometers than that of the United States, and has a train density (daily trains operated per route-kilometer) approximately twice that of the United States. The European network also has a greater percentage of passenger trains, which are intermixed with and operate at higher speeds than freight trains, and multiple freight and passenger operators sharing infrastructure, making for a more operationally complex network. Freight traffic in Europe also has a level of diversity similar to that of freight traffic in the United States, including mix of commodities, mix of dangerous and non-dangerous goods, and mix of train types (unit train, mixed carload 1 Train Crew Staffing: Notice of Proposed Rulemaking, Regulatory Impact Analysis, Federal Railroad Administration, February 18, 2016, p. 19. Oliver Wyman 4 merchandise, and intermodal) including a significant number of retarder-equipped hump yards to handle carload traffic. The FRA asserts that: It is also apparent that railroads in these countries can be considered to be industrial type railroads servicing one origin and one destination only. 2 The FRA s conclusions, however, are based on a review of a small sample of European rail operators and thus these findings are skewed based on what is only a very small segment of European rail activity. Most of the legacy rail operators (i.e., national railroads prior to liberalization), as in the United States, operate a full range of unit train, intermodal trains, and carload manifest trains. Many of the smaller operators that have started service since liberalization do operate point-to-point unit trains, but have joined the legacy carriers and entered into the carload manifest and intermodal business as well. In Europe the ownership of the track is divorced from the operation of the trains and thus unlike the United States, one must look not at the individual operating companies, but at the full network to really grasp the operating environment. In Germany alone there are over 200 freight operators and over 100 passenger operators sharing a common network that accounts for nearly 25 percent of European trainkilometers. FRA also found that most of these foreign operations would meet the requirement in one of the exceptions of the proposed rule (due to their size). 3 This assertion is only true if the FRA dismisses its own proposed rule that such trains must not exceed a maximum speed of 25 mph (42 kmh). If these operators were restricted to such speeds, the European network would grind to a halt. These varied operating companies primarily operate on the high-density 2 Ibid., p Ibid., p. 21. Oliver Wyman 5 European mainline network, not, as implied by the FRA, only on the low-density branch line feeder network. Most European railroads operate with one-person crews. Countries with one-person crews account for 94.1 percent of European train activity (train-kilometers). Many railroads in Western Europe have operated with one-person crews since shortly after World War II. As the railroads were rebuilt and electrified, many countries implemented one-person crews to alleviate manpower shortages, take advantage of electric and diesel locomotive technology (no longer requiring a fireman), and to more economically compete in a shorter haul, truckcompetitive marketplace. Implementation of advanced train control technology has not been a prerequisite for the adoption of one-person crews in Europe. Indeed, despite the predominance of one-person crews, the EU has no plans to install advanced train control technology (ERTMS) on 75 percent of its network. (By comparison, the US will install positive train control on at least 60 percent of its network.) There is no argument that European freight trains are shorter than those operated in the United States, in large part because of the high density of trains operated and the desire to keep block sizes shorter to better accommodate close spacing of freight and passenger trains and provide greater network fluidity. However, shorter block sizes and a greater number of interlockings mean that there are far more signals per route-kilometer, and Europe s train density double that of the US means more traffic control transactions (signal indications and dispatcher communications) as well. Thus, in most European countries, a higher workload is handled safely and efficiently by a single person in an environment where the Oliver Wyman 6 tolerance for error is far less than in the United States (where larger slow-moving freight trains and limited passenger traffic are the norm). In the RIA, the FRA states that it is aware of international one-person crew operations, but asserts that There are no safety data available to account for the safety record of one-person crews. These data are not readily available. 4 We do not understand why the FRA was unable to secure this data, since it is publicly available, and we have included links to the data in this report (see Appendix C). Based on an analysis of this data, one-person crew operations typically experience lower levels of significant accidents than two-person crews in Europe. Additionally, Western European railways with one-person crews have lower accident rates than Eastern European railways (both one-person and two-person), which may reflect higher levels of investment in infrastructure. To adjust for the different accident rates observed between Eastern and Western Europe, and because five of the six remaining twoperson crew operations are in Eastern Europe, Oliver Wyman also conducted an analysis comparing one-person versus two-person crews in Eastern Europe. For most types of accidents and overall significant accidents, there is no statistically significant difference between one-person and two-person crews in these Eastern European countries. The FRA asserts that A second crew member could be instrumental in limiting the damages and injuries after an accident takes place. 5 Oliver Wyman examined the economic impact and the number of fatalities in Eastern Europe for one-person and two-person crews and 4 Ibid., p Ibid., p. 6. Oliver Wyman 7 concluded that there was no discernible difference in the magnitude of accidents based on crew size. Furthermore, the number of employee fatalities appears to be significantly higher for two-person crews than for one-person crews, although statistically we could not confirm this. The FRA asserts that In rare instances, having a second crew member aboard may result in an additional injury or fatality if a serious accident occurs, 6 but based on Oliver Wyman s analysis of Eastern European data, exposing two crew members to a field operating environment may actually lead to greater fatalities. In Oliver Wyman s experience, safe train operations have more to do with what is in front of a locomotive, rather than what it is pulling. Most European railroads have used single-person crews on freight trains for decades, predating advanced train control technology. They use single-person crews despite the fact that Europe has twice the train density, far more passengers sharing the network with freight, and far more control transactions per route-kilometer and yet suffers no reduction in crew-related safety. 6 Ibid., p. 5. Oliver Wyman 8 II. Comparison of US and European Railroads Trends in both the US and abroad are driving the increased use of single-person train crews. There is a long history of technological improvements in the rail industry that have led to productivity gains and set new standards for safety. The use of single-person crews is widespread internationally, for both freight and passenger trains, and on rail networks similar to the United States in size and complexity. The use of single-person crews on the majority of the European rail network is one such example. 7 In the FRA s Train Crew Staffing: Notice of Proposed Rulemaking, Regulatory Impact Analysis (RIA) of February 18, 2016, the FRA reviewed average train length and train weight for a small sample of European rail operators in Sweden, Norway, Denmark, and the UK. The review did not include large rail networks such as those of Germany and France, which account for a large share of total European rail traffic and which have one-person crews (Exhibit II-1). In fact, 94.1 percent of all European rail traffic (train-kilometers) is moved by one-person crews. 8 7 Throughout this document, a one-person crew means one person in the cab of the locomotive, without regard to whether, in the case of passenger service, there is an additional rail employee in the passenger section of the train (i.e., a conductor). 8 Information on crew size is based on Oliver Wyman s direct knowledge of rail operators, interviews, and public data, supplemented with a survey of 12 countries where crew size was unknown. Oliver Wyman 9 Exhibit II-1: European Rail Network Activity by Crew Size, Percent share of train-kilometers Based on this review of a small sampling of operators, the FRA concluded that It is clear that US rail industry operations are different from the railroads that have one-person operations in Europe.For the most part, foreign train operations are not comparable as train lengths, territory, and infrastructure are not as heavy or complex. It is also apparent that railroads in these countries can be considered to be industrial type railroads servicing one origin and one destination only Eurostat and Oliver Wyman analysis. 10 Train Crew Staffing: Notice of Proposed Rulemaking, Regulatory Impact Analysis, op. cit., p. 19. Oliver Wyman 10 Oliver Wyman undertook a much more extensive analysis of available and recent data on the overall European rail network and individual national networks, which provided a more detailed and accurate picture of both rail operations and rail safety performance. Because rail services in Europe freely operate across borders, a proper analysis will consider the European Economic Area (EEA) as a whole, and on this basis, the EEA is comparable to the US rail network in terms of network size and density. 11 European railroads on the networks of the 28 EEA countries (Exhibit II-2) operate a wide variety of services, both within their national territories and internationally (cross-border). The latter can involve changes in safety systems, electrification, and operating rules, and requires the use of complex interoperable equipment and multiple train control systems. Similar to US freight railroads, European railroads provide intermodal, unit train, and carload manifest services for an extensive array of commodities (including dangerous goods) and serve a wide range of origins and destinations over varying distances. And because operations in Europe are now decoupled from infrastructure ownership, dozens of small new entrant and large legacy freight operators (e.g., DB Schenker Rail, SNCF) run trains simultaneously on mixed passenger-freight corridors and offer high-frequency services, meaning that operations are higher density than is the case for much of the US rail network. On a per-kilometer basis, European rail networks also are more complex, with a greater number of junctions, interlockings, turnouts, and train movements. 11 The European Economic Area (EEA) includes all 28 European Union Member States (of which 26 have railroads) plus Norway. Switzerland, while not an EEA member, is accorded the same rights and is part of Europe s international rail system. The European Railway Agency and Eurostat compile rail statistics for the EU, Norway, and Switzerland. Thus, Europe and EEA as used in this report refer to all 28 countries for which data has been compiled and analyzed. Oliver Wyman 11 Exhibit II-2: Countries with Rail Networks in the European Economic Area The FRA also asserts that Most of these foreign operations would meet the requirements in one of the exceptions of the proposed rule, (due to their size). 12 The FRA appears to be referring to its specific exceptions for Class III freight railroads, i.e., short lines with less than 400,000 employee work hours per year. 13 The Surface Transportation Board also defines a Class III railroad as generating less than $38.06 million per year in revenues. 14 It is true that there are many small new entrant rail operators in Europe that would meet the definitions of a Class III railroad in terms of work hours and revenues (just as in the United States) but in terms of train-kilometers, the majority of traffic 12 Train Crew Staffing: Notice of Proposed Rulemaking, Regulatory Impact Analysis, op. cit., p Proposed Rules, Federal Register, Vol. 81, No. 50, March 15, 2016, p Railroad Facts, 2015 edition, Association of American Railroads, p. 3. Oliver Wyman 12 is still handled by rail operations that are equivalent to Class I and Class II US railroads just as in the United States (Exhibit II-3). Exhibit II-3: Incumbent versus New Entrant Rail Operators: Market Share in Freight Train-Kilometers, Furthermore, small rail operators in Europe are not like Class II short lines, which generally maintain their own low-speed Class 2 track (under 25 mph), and operate over short distances typically hauling traffic to/from specific customers for interchange with the Class I railroads. Small rail operators in Europe instead have access to and operate over the entire European rail network both domestically and cross-border. And where the FRA would exempt Class III US railroads from the two-person crew requirement where a rail operation would take place at speeds not exceeding 25 mph, 16 many small European rail operators run trains on mainline networks that exceed this speed limitation (and require operators to maintain strict schedules or 15 Independent Regulators Group, Fourth Annual Market Monitoring Report, March 2016, p Proposed Rules, Federal Register, op. cit. Note that heavy-grade operations (over steep mountains or hills) would not be exempted. Oliver Wyman 13 incur penalties). Maximum running speeds for freight no matter the size of the operator can reach 90 to 120 kmh, equivalent to 56 to 75 mph. 17 They also operate extensively on lines over which passenger trains run as well, which the FRA has identified as a factor (presumably negative) in considering future approvals of one-person crew operations. All of these factors combine to create an agenda of operating work events and decision points for European train crews regardless of rail operator size far greater than those facing train crews in the United States. In addition, safety issues routinely impact thousands of more lives than in the US, due to the close proximity of freight and high-density passenger services on the European rail network. A. Network Overview As shown in Exhibit II-4, the interlinked EEA-28 rail network serves a market that in total generates a slightly larger GDP than the United States. Operators on the standard gauge portion of the network have slightly shorter lengths of haul (freight train-km) and train sizes are shorter, but the overall network as a whole has three times the density (in train-kilometers), due to large numbers of passenger trains. 17 Troche, Gerhard, High-speed rail freight: Sub-report in efficient train systems for freight transport, Centre for Research and Education in Railway Engineering at the Royal Institute of Technology Stockholm (Railway Group KTH), 2005, p. 11. Oliver Wyman 14 Exhibit II-4: Overview of European and US Rail Networks, Total Europe (EEA-28) European Standard Gauge United States GDP, US$ billions 19,541 17,064 17,419 Route-kilometers 231, , ,399 Total train-km, millions 4,317 3,968 1,233 Total train density, trains per day In addition, total train density on the rail networks of the EEA-28 is much higher on a daily basis than in the United States (Exhibit II-5). Freight train density is comparable in a number of countries as well, including large economies such as Germany, Austria, and Poland. Train density is a far more important metric than train size in relation to safety considerations, since what is in front of the train (e.g., signals, objects on track, presence of other trains) dictates the train crew s safety decisions far more than what is behind the cab. It is important to recognize as well that in the US environment, in most cases the train crew cannot directly observe more that the first 30 or 40 cars, which is about the average length of Eu
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