Management & Operations

Transit Market Primed For Growth In Rail Services

Posted on February 15, 2007 by Steve Hirano, Editor

Rail operators are finding that third-party services can help to control costs, increase efficiency and provide technical expertise that might not be available in-house.

These services are available through a number of providers, but railcar manufacturers such as Bombardier Transportation and Alstom Transportation are strengthening their positions in the rail services sector.

The decision by Bombardier late last year to acquire certain assets of Transportation and Transit Associates LLC (TTA) signaled the company’s interest in expanding its railcar refurbishment and overhaul services. The move was favorably timed. According to Bombardier officials, growth in third-party rail services in North America — from car overhaul to maintenance and operations — is on the horizon.

“It’s not by happenstance that we timed this acquisition,” says Mike Hardt, Bombardier’s vice president of services, North America. “If you look at the aging rail fleets that are out there today in North America, you will find that the overhaul business has multibillion-dollar market potential.”

Further down the line, Hardt says, the large batch of new railcars that have been put into service over the past five years will be needing rehab in the next 10 to 12 years. “So if you roll the clock forward, those cars will be ready for our overhaul business,” he says.

Hardt adds that some railcars are being slotted for upgrades and retrofits, long before they’re ready for overhauls. The upgrades can include improvements in customer amenities, security systems and diagnostic and trouble-shooting capabilities.

The acquisition of the TTA assets significantly expands Bombardier’s overhaul presence in North America, which currently includes operational capabilities in Dansville, N.Y.; San Diego; Thunder Bay, Ontario; and Sahagun, Mexico. TTA, headquartered in Bath, N.Y., is a rebuilder and assembler of rail transit vehicles, systems and components for the North American market.

Hardt says the acquisition, which includes land, equipment, facilities, staff and a test track, puts the finishing touch on the company’s bid to become a full-portfolio rail service provider, by offering new cars, operations and maintenance, parts and support, and overhaul.

Meanwhile, Alstom Transportation has the largest presence in the railcar overhaul market in North America. According to its own data, it has a 73% share of the market for overhaul projects between 2000 and ’06.

Roelof van Ark, president of Alstom’s NAFTA region, views the refurbishment market as steady, but not necessarily growing. “Many of the larger fleet transit authorities have already refurbished their older model cars or are in the process of refurbishing them,” he says. “For example, Alstom is currently working on two large-scale rehab projects for the Washington (D.C.) Metropolitan Area Transit Authority [364 subway cars] and the Metropolitan Atlanta Rapid Transit Authority [238 rapid transit cars].”

Technology’s influence
The maintenance end of the business also presents opportunities for third-party service providers. In fact, Alstom sees this segment as more robust than the overhaul market.

“Alstom believes there should be an upturn in the demand for maintenance services to be provided by the private sector to some of transit agencies,” van Ark says. “As transit cars include more high technology, and as some transit agencies concentrate on their core business — namely operating their fleet — transit agencies should see the cost benefit of sub-contracting maintenance to third parties.”

Van Ark says the trend of outsourcing maintenance of rail services is strong all over the world and that North America should not be an exception. “In the meanwhile, we can also be helpful in managing the supply of parts and overhaul kits for agencies that do their own maintenance, which we are doing for Amtrak’s Acela passenger train line,” van Ark says.

Michael Shaman, vice president of operations and maintenance for Bombardier’s Total Transit Systems division, says the demand for greater punctuality is growing, along with improvements in security. “The bar for performance is rising all the time,” he says.

Bombardier, which has a dozen operations contracts in North America, mainly for airport applications using peoplemovers, says customers benefit from the technical expertise that contractors can provide, both in maintenance and operations. “We bring added value of our experiences worldwide,” Shaman says. His division employs more than 1,000 employees in eight countries.

“Our greatest challenge is continuous improvement,” Shaman adds. “Customers are demanding more for less these days, and performance requirements are going up.”

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