Many trains in a railway station

Trends influencing the railway sector

Several trends have severely affected public transport and freight, which are reshaping the rail sector

December 01 2021Sandip Dalvi

Rail: the challenges and opportunities

Public transport has been hugely affected by global efforts to contain the spread of COVID-19. The most notable consequence has been reduced movement, slashing revenues. And as remote work becomes the norm, those revenues are unlikely to return to pre-pandemic levels soon. But the rail sector continues to play a vital part in keeping society connected and moving. And as we witness disruptions to supply chains, rail can help address them.      

COVID-19 – only part of the picture

Man sitting in the train with a mask on on the phone looking out of the window

Alongside the economic toll of the pandemic on the rail industry, other factors play a significant role.    

In a traditionally underfunded sector, the need for more investment in modern infrastructure is complicated by a mix of public subsidies, private funding, and multiple stakeholders – often with different priorities.  

In 2020, the rail freight transport market was valued at $247.39 billion and is expected to register a CAGR of about 2% in 2021-2026. The trend for 3D printing could reduce the need to transport materials from multiple sources as more products are manufactured in finished form.

Potential disruptors to the future of rail include new modes of passenger transport, like autonomous vehicles.

Amid this, the role of efficient, accessible rail networks is more important than ever – especially when we consider transport’s need to be part of the solution to climate change. So, how can the rail industry adapt in response to global trends? 

Increased urbanization   

Urbanized areas will increasingly converge into larger metropolitan networks and become megaregions. In 2020, Europe’s urbanization sat at 75%, behind only Northern America (82%) and Latin America and the Caribbean (at 79%).

And rapidly rising populations in major cities and megaregions will only add to the pressures on rail systems and other public transport operators. 

As more passenger and freight traffic moves into these regions, congestion will become a growing challenge.

The rail sector can adapt to the sprawl of urbanization through increased digitization. By integrating systems, applying advanced analytics, and adding efficiencies, operators can create more capacity with the same infrastructure in land-locked megaregions. 

The Brexit effect on rail  

In 2019-2020, the UK rail industry received £20.1bn of income, with over half from passenger fares. But with restrictions on immigration and the free movement of European tourists, future fare revenue generation will take a hit.  

And with worker shortages manifesting through reduced mobility and transfer of skills between the EU and the UK, the completion of massive infrastructure projects like HS2 are being hampered. 

As the value of the pound fluctuates, products supplied by manufacturers who accept payments in Euros may become more expensive for UK rail companies.

Now that the practical considerations of the UK’s trading relationship are becoming clearer, businesses working in and with the rail sector will continue to navigate a host of legal implications.

In Germany, we saw state-owned railway operator Deutsche Bahn delay plans to float international railway group Arriva. Sources cited Brexit uncertainty as a factor in the decision, which had scared off potential investors.

Autonomous trains

Very fast train in a futuristic design

In October 2021, Deutsche Bahn and Siemens launched the world’s first autonomous train. For rail operators, automation allows an improved passenger offering without building new kilometers of railway.

Other countries are set to follow Germany’s lead. France’s national railway company SNCF is set to launch a prototype autonomous train in 2023.

And Japan’s rail operators announced plans to test driverless bullet trains as they grapple with a shrinking labor market.   

The advantages of autonomous trains include:

  • Ecological gains – driverless trains are more energy efficient, with better regeneration of energy during braking.
  • More reliability – autonomous and connected trains are more resilient and responsive to hazards.
  • Economic gains – reduced energy consumption saves costs, and automatic train operation allows operators to increase capacity, allowing train frequencies to be better matched to demand at peak times. 

Doubtless, other countries will embrace this trend.  

The specter of cybercrime

Because of the industry’s growing reliance on technology, the threat of cyber-attacks on rail systems is increasing. In 2020, a Swiss rail manufacturer was struck by a malware-based cyber-attack, where hackers attempted to blackmail the company.

And a ransomware gang claimed Spanish state-owned railway infrastructure manager Adif as a new victim in the same year.  

The potential implications of cyber-attacks on vital railway infrastructure could cause not only travel chaos but be a danger to life. There could also be severe financial and regulatory repercussions, as railway operators may be subject to regulatory fines or lose future contract renewals.

As railway legacy systems are bridged or replaced with modern ecosystems, the threat surface increases exponentially. Consequently, cyber security is a growing focus for the sector and will remain at the forefront. 

Green railways for healthier cities

Public transport plays a vital part in averting future crises resulting from global warming. Research by C40 cities indicates that if green recovery efforts overlook the value of public transport, we could fall short of the Paris Agreement’s climate ambitions.  

Investment in public transport can be a source of jobs and economic prosperity, helping build strong and thriving economies in cities. And increasing the mode share of public transport improves people’s health.

What examples can we see in the sector of the trend towards greener railways? There is growing investment in the electrification of railways which will reduce the consumption of petrochemicals in the future. And the United Kingdom’s Transport Scotland is committed to decarbonizing passenger rail services by 2035.

Germany invests 3 billion euros annually to make its entire network greener, and Italian railway construction is becoming more environmentally friendly.

Customer experience in the spotlight

Passenger experience is increasingly important, with Mobility as a Service (Maas) just one thing revolutionizing transport services.  MaaS platforms help make the most of available transport options – for travelers and operators alike – through smart solutions for ticketing, routing, data management, and real-time travel information.

And while 5G connectivity won’t guarantee that trains run on time, fast and reliable Wi-Fi connectivity is increasingly seen as a crucial part of delivering satisfying customer experiences. 

Going digital to transform railways 

Mobile ticketing and other smartphone-operated technologies smooth the daily commute, combined with big data to optimize routes and schedules.  
Smart traffic regulation ensures the safe and efficient flow of vehicles, further making public transport a better choice than cars.

Technology trends in the rail sector include:

  • Big Data and advanced analytics for route and cargo mix optimization and assisting operational planning
  • Asset tracking & condition monitoring using sophisticated sensors and dashboards
  • Predictive and prescriptive train and track maintenance using AI-powered analytics
  • Site inspections aided by mobility and cloud infrastructure
  • Drones and UAVs (uncrewed aerial vehicles) for track and rail infrastructure inspections
  • Blockchain and IoT sensor-based technologies for revolutionary applications in rail freight services, insurance, billing, document and identification management, and supply chain management across multiple intermediaries.  

Wrapping up

The pandemic has proved how much the global economy relies on smooth public transport and smart logistics. And other trends influencing the sector – such as increased urbanization and the rising demand for freight movement – present significant opportunities. The rail sector can also make a massive contribution to combating climate change.

Technology can help the railway sector increase capacity, enhance operating efficiencies, and transform passenger experiences. T-Systems offers a variety of solutions, from technology consultation and connectivity solutions to fully managed technology services. Explore our offers and get in touch.   

About the author
Sandip Dalvi – Industry Marketing Experte für Travel, Transport & Logistics

Sandip Dalvi

Industry Marketing Expert for Travel, Transportation & Logistics vertical, T-Systems International GmbH

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