Rail Baltica: the view from Brussels

LTV’s Brussels correspondent Ilze Nagla interviewed Estonian Henrik Hololei , the European Commission’s   Director-General for Mobility and Transport about the current progress of the giant Rail Baltica project and other matters of regional importance.

If we talk about Rail Baltica (RB) – the recent study by the Court of Auditors showed that the delay on the RB project is not the biggest if we compare it with other big infrastructure projects. So, what is the main challenge for RB now?

I think that the delay is normal because there is not a single cross-border major infrastructure project in Europe, which has not suffered from delays. But for Rail Baltica, I think the most important thing is not to have any further delays and  really start using the money which has been allocated for the project and to put it very simply – you need to put a spade in the soil and you have to start the construction. Of course, there is already something which is going on but it’s clearly not enough. I think that most important is to use the money which has been allocated and not to be a situation that when the final date of the use of the money comes there is still unused money.  This is simply not acceptable.

Whose fault is it that there are still delays?

Well,  first of all it is the complexity of the project – there is no doubt about it. Also the Baltic states do not have the experience of such a large cross-border infrastructure projects.  Secondly, I think it’s also because there have been issues in relation to the joint venture which is supposed to run the project and the three member states. It took years to get to the situation where the joint venture has also been accepted and should play a much bigger role in managing the project as such.

And of course, one very big thing is that it has also taken quite some time for the three Baltic countries to realize that this is one project which goes through the three countries! It is not three separate projects and it has to be treated as one project. I think that the realization of all this also helps to accelerate now the construction of the project.

Some Baltic states don’t agree with you because they would like to have three independent infrastructure managers. Not a single one as suggested in the report by Atkins.

The Commission has always advocated for one single infrastructure manager at the time when this railway has to be operated. It is very difficult to see how you can add value when you have three different infrastructure managers for a project which is one.  And for a railway, which is one.  But these discussions are still ongoing and it’s my understanding that most of the Baltic countries are in the opinion that one infrastructure manager is the best solution but unfortunately, not yet all three.

Are you happy with the governance of Rail Baltica? There were also calls for an independent supervisory board.

Governance is, in my mind, today far too complex and will definitely benefit from the simplification and the discussions have also been ongoing. The Commission has also been advocating that we need to link the national bodies much better to the to the joint venture and try to simplify it as well as to make sure that the supervisory board is doing what it is supposed to do – namely, to supervise and not deal with the project management and the nitty-gritty coordination, which is not the role of the supervisory board, but to rather be there to represent the interests of the owners which are three Baltic states.

If you would need to name one thing which would make the project move faster – what would it be?

I think that it is just now the main thing to start the construction and to finish all the discussions about fine-tuning some last-minute things. But rather to show that we are able to use the money and go ahead with the project and try to deliver it in time.

Will there be enough financing for Rail Baltica in the new MFF [Multi-annual Financial Framework]?

First I would like to say that it is absolutely essential to concentrate on using the existing financing. We are talking a lot about the future financing, but the problem is that we haven’t been able to use the money which is already allocated. Rail Baltica will also get more money from the existing CEF [The Connecting Europe Facility] fund and really has to make sure that this all money is used. So, I think that there are sufficient funds available to allow the project to continue its construction and also to to be delivered in time.

If we talk about the passenger transport in general, it has been really hard hit by the Coronavirus crisis. What do you think which of the sectors – shipping,  aviation, railroad, coaches have been hit harder and which will have more difficulties to recover.

First I would say that all the transport sectors, including in particular passenger transport, were hit equally hard. Basically passenger transport stopped and we are talking about more than 95% of the decline in passenger numbers. So, now it is slowly and steadily moving upwards, but it is also taking time until we get there.  Urban transport, for example, is recovering faster because it is also clear that people need the urban transport for their daily commutes and there the numbers are getting back much faster.

But there are some specific areas like cruise industry – it will take quite some time to recover.  The distrust is still there and people do not come back so easily.  Aviation is slowly recovering. Rail is also recovering. It is a slow recovery, but it will definitely be a recovery for transport in general – it’s so important for people. Obviously there is now the decline but it will get back to its numbers in the future.

But do you see that the aviation business will recover to the same level as it was in previous years or it will take years for it to reach the previous level?

I not only think that it will recover to the numbers that were at the peak of it, but it will go far beyond that because the demand for aviation has been projected very high and the continuous demand in the decades to come.  Of course, now the question is also when do we get the aviation back to these figures that were before Covid? I believe that we are talking somewhere between – if you are an optimistic, maybe then you would say 2022. If you are a pessimist you would say 2025, but this depends so much on other factors.

It is also depends if we are going to have the second wave then we would have another setback to the transport sectors. If there will be the vaccine available, then it will definitely increase also the people’s trust. The bottom line is that people need to get back to using transport and have to feel entirely safe when they take whatever transport mode. This is an issue of confidence and this kind of consumer confidence is coming back over time and when we can also see that nothing happens when you are taking the transport mode.

But do people really need to go back to the same intensity of traveling as before?  Is such high level of air travel intensity as before actually welcome, especially in the context of the new Green Deal and climate change?

There are those who are advocating that air travel should be somehow contained and the people should be less using the aircraft. I don’t belong into that category. I believe that connectivity is one of the greatest goods that you can have – the air travel has revolutionized Europe, it has also being affordable. It has made it possible for any person from any income group to travel, to see other places, to meet other people. I think this is absolutely great what it has given us – the memories, the friendships. It plays a very important role in people’s lives and I think the people also in the future will want to experience that and want to see the places they have never seen but have heard about.

I believe that the connectivity is a good thing. But, of course, having said that it is clear that air transport has to become much more sustainable, planes have to become cleaner.  This is a process, of course, which is ongoing. But aircrafts are also very complex machines as we know and it will take time to have this change. It’s not going to happen overnight, but I’m also very happy to see that a lot of new things are being done in terms of innovation, in terms of new types of aircraft but also at the same time – new engines – they all are actually reducing the environmental footprint. So yes, aviation has to become cleaner and greener, and at the same time, I believe that connectivity has to continue to be affordable and available for all people.

Have the EU financial and also other forms of support for the transport sector to help to recover after the Covid crisis been enough?

Well, I think that financial support is important. It is also important that the sector itself is ready to modernize and change and also cut the costs as you always do when you have such kind of crisis situations.  Also from the regulatory perspective we have given a number of extensions, number of enforcement have been also postponed which have meant some additional costs. So, we have also taken steps in oder to try to cut the costs at this moment or at least not to create new costs for the transport sector. I think these are the kinds of measures which are available and, of course, in the end of the day it’s all about people’s trust.

In situations like this, for instance, Alitalia got state aid, even though the company is not really competitive and would not have survived if not for Covid. Is that fair that they get now some extra allowance that they would not get otherwise?

For Alitalia the Covid crisis has been a lifeline because this company was in trouble before the Covid.  Now, of course, Covid has legitimize the support that they have been given. But now the companies have to demonstrate themselves that they are viable. The states have the right to support their companies and also within the temporary framework of the state aid which has been agreed for the Covid crisis.

This is all done according to the EU rules and there are also strings attached. So, the companies have to also deliver certain things that have been asked of them as a part of the deal for the support. So, we’ll have to see! Of course, European aviation market is the best functioning internal market that we have in the EU. It has always been based on three pillars which are – competition, connectivity and affordability. It is essential that these principles are also maintained in the future.

How does AirBaltic look in the overall picture of aviation after the Covid?

AirBaltic is the most important connector for the for the Baltic region and it is the main airline in Riga, Vilnius and Tallinn today.  It has also been given the state support and that’s also fair in these conditions. It’s been cleared by DG Competition – so it is in line with the temporary framework. Otherwise, I have always believed in the way how AirBaltic is doing its business because I very much believe in their CEO Martin Gauss who I think is not only a great CEO but also a very good Ambassador for the aviation sector more generally and very visible and well-known also in Europe and beyond.

I think AirBaltic has done some very important decisions. Now the crisis also accelerated the change of the fleet to the new Airbus A220 aircraft, which is the most modern aircraft that you can today have in the market. I think that has been a very good choice and on that basis as well as with the cost cutting programs and being able to re-establish itself as they have – I think that they will be well back and continue to provide the connectivity for the people in the in the Baltics.

So would you say that in 2-4 years – depending on one’s level of optimism – we will see the transport sector back to the previous level? No changes, Covid-19 wouldn’t have left any marks?

Every crisis leaves a mark. I don’t think that today we are yet able to assess what kind of marks there are. For example, after the September 11 the security component became embedded in air travel and transport more generally. I somehow believe that this health safety component will be something which will be embedded in the future also in transport, but perhaps more widely in the transportation sector. How that would influence things – that’s difficult to say.

Also I do believe that people need to travel, people want to travel and there are always the companies who are  providing this. I do believe that it is going to bounce back. But again, nothing has changed  from the point of view that our whole transport sector must become more sustainable, must become more digitalized and must become more modern. These processes are anyway ongoing. I believe in 2-4 years we will have a greener, cleaner, smarter and more modern transport sector. And yes, I’d also do believe that people are back and the numbers will be comparable at least in the middle of this decade.

But because of that the prices for passengers might go up?

That is something that, of course, would be unfortunate. But at the same time what is keeping the prices down? Competition! As long as we have competition the price also continues to be affordable. So, I do believe in competition. I do hope that we will have enough companies in the EU transport market to provide that competition and that is also the best guarantee for the people to be able to travel affordably.

LSM.LV

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