Departing Operail chair: Expectations of company a matter for the state
Juggling both freight rail transit volumes and business sustainability are not possible without change, the outgoing board chair of the state-owned Operail says, while it is up to the state to decide on expectations from the company.
There is no doubt that halting the transit of goods of Russian origin has been economically harmful to Operail, Leon Jankelevitsh, who leaves his post as management board chair next month, says.
"The state certainly was aware of this when it made the decision. Operail certainly does not benefit economically from this, quite the reverse," Jankelevitsh said.
The state, as owner of the company, should however, be responsible for decisions on Operail's future, Jankelevitsh said.
The state's expectation as regards Operail at present is that it be profitable.
"In the current situation and in terms of what Operail is permitted to do nowadays, it is not viable to achieve both goals – of maintaining the transport capacity and do so in a sustainable way – simultaneously. In this respect, the state must decide what its expectations of Operail are in future."
"If the state as owner continues to see it as strategically important that Operail and Eesti Raudtee retain their ability to provide freight services, a system should be developed in which the state could order the required service from Operail and finance it, to the extent needed. Should the state's expectations be different, other solutions may also be considered - for example selling the company to a private investor," Jankelevitsh went on.
Merging Operail with rail track state concern Eesti Raudtee would not be a solution to the company's ills either, he said.
Apart from anything else this would need to be done in line with EU regulations.
The state's order to halt the transit of Russian and Belarusian goods last summer came as no surprise, as it had in principle been set last May, Jankelevitsh went on.
"In the last few days, however, there has been a greater understanding of the details of what is permitted, and what is not," he added.
The decision was understandable given the current security situation, he went on, but said that a state decision on its own does not constitute a sanction against Russia and Belarus.
For instance, while Operail setting an example for others might be the right thing to do, Eesti Raudtee, also state-owned, has not put in the same ruling, meaning other market participants, such as The Latvian Railways (LDz) have moved into the space formerly occupied by Operail.
Better coordination between friendly countries in the region was needed, in other words, Jankelevitsh added.
As for his own situation, Jankelevitsh said that board work at Operail over the past year has required quick decision making at a rate hard to prolong alongside the other core tasks, themselves also intensive, and, while he had three to four months left to run in his term, he is resigning now "with a relatively calm spirit" and at a time when the transfer of Operail's non-strategic business lines, as worked on by the Operail board and it supervisory board, were now coming to an end.
As for the future, freight rail transport depends a lot on the financing model and how much the state is willing to invest in it and whether it can be organized together with other market participants, Jankelevitsh went on.
Ultimately, freight rail transit in Estonia is not dead, Jankelevitsh said, noting its safety and environmental advantages over, for instance, road transit, but rather changes to finance models including infrastructure fees and their calculations, concluded involving Operail, Eesti Raudtee and Consumer Protection and Technical Regulatory Authority (TTJA), require change.
Operail's sale of its Finnish subsidiary's assets, for approximately €28 million was the best decision in the circumstances, he added, and the price obtained was a fair one.
Jankelevitsh is to take up a new post as a member of the board of the Phoenix Group, from February.
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Editor: Andrew Whyte, Barbara Oja