Andriy Ryazantsev told what changes expected to be made in Ukrzaliznytsia (VIDEO)

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Director of Business Development of JSC Ukrzaliznytsia Andriy Ryazantsev visited the Journalist agency studio. He spoke about Ukrzaliznytsia passenger transportation segment work, explained why and how the cost of passenger transportation is changing. He also told what changes are planned to be made at Ukrzaliznytsia.

“The cost of passenger transportation changes much more slowly than the cost of material and technical means used in passenger transportation. In addition, the cost of passenger transportation is increasing much slower than the wages of people involved in the process. Every year, the cost of passenger transportation increases by an average equal to the consumer price index. We are trying to index the cost of passenger transportation gradually and slowly. For example, for suburban transportation, prices are rising even more slowly, as regional councils need to approve it. Accordingly, the indexation process for these services is even slower. That is why such a transportation is probably the most unprofitable nowadays. If we talk about passenger transportation in general, they are subsidized from two sources: the first one is freight transportation, and the second one is the expense of fixed assets i.e. the same passenger transportation,” Andriy Ryazantsev explained.

He also noted that the passenger transport market remains unprofitable for the company.

“The total amount of losses for passenger transportation service in 2018 is more than UAH 12 billion a year, which was confirmed by Ernst & Young audit company. This amount is equaly divided between suburban and long-distance transportations – about UAH 6 billion each.

If we talk about the cost of tickets, the long-distance transportations give us UAH 1 of revenue per UAH 3 invested; suburban transportations gives us UAH 1 for every UAH 10 invested. Accordingly, UAH 6 billion (losses, – ed.) of suburban transportations are covered only with UAH 600 million of revenue for twelve months.

This is connected with many factors. For example, there are a large number of privileged passengers. In addition, the rate of increase in the cost of passenger transportation has always been lower than the indicators I mentioned above. In general, the philosophy of passenger transportation laid in the law of Ukraine “On Rail Transport” stipulates that suburban transportation would be offset by local budgets. And long distance transportation will be compensated from the state budget. Accordingly, these articles should regulate balance of transportations cost, which the state also regulates through orders of the Ministry of Infrastructure, but, unfortunately, since the law was adopted in 1996, the railway has never received the compensation, either from local budgets or from the state budget.

Thus, Ukrzaliznytsia constantly tries to cope with this social burden put on its shoulders by the state.

That is why until recently the rolling stock was folded. This applies to both traction resources used in passenger transportation and wagons. In the last 3 years, we have paid attention to change this situation at the expense of other sources, in particular, the funds coming from the depreciation of other main assets. They were aimed at improving the fleet of passenger cars. We also managed to purchase new passenger cars, as well as to upgrade a significant number of cars at Ukrainian enterprises.

Passengers can already experience improvements in the quality of cars. We are trying to continue this program. The reconstruction and restoration of cars is twice cheaper than the purchase of new ones. Thanks to this, we manage to restore more rolling stock.

In addition, we have completely updated our bed-clothes service. The list of goods that a person can buy while traveling in a long distance train has increased. We have improved the quality and range of these products,” Ukrzaliznytsia Business Development Director said.

According to Andriy Ryazantsev, it is also planned to modernize Ukrainian stations, first of all in the cities with more than a million citizens.

“A few words about the changes at the stations – more extra ones were made there. We plan to transfer some of the train complexes to the concession so that they operate as a European structures type, where the train stations and annexes are used as shopping centers or office centers with so-called hubs for passengers. The first five such train structures in Ukraine have already been identified. They are located in biggest Ukrainian cities. Competitive requirements for such concession structures are currently being developed. Passengers will be able soon to experience new, European-type comfort. We are also trying to increase the number of trains at Ukrzaliznytsia, as well as to make the train schedule more convenient so that residents of even the most remote settlements can travel by rail comfortably,” he said.

Andriy Ryazantsev specified when Ukrainians should expect passenger transport indexation.

“The upcoming passenger transportation cost indexation will be made no earlier than 2020. It will depend on changes in the consumer and industrial producer price indexes. We can expect changes in the cost of passenger transportation starting in the Q2 of the next year. This indexation will be negligible and we will report about it in the media. Our passengers will be informed in advance so that they can pay for the trip. We will be loyal in this matter, as we understand the financial situation in the country, as well as the situation with the incomes of our citizens,” added the director of business development of JSC Ukrzaliznytsya.

Recently, Ukrzaliznytsia has become a joint-stock company and was removed from the list of companies prohibited for privatization. Andriy Ryazantsev explained what changes will be made to the enterprise.

“For the company, this means a change of its ideology, as well as a paradigm of development. We are talking about the company to become a full-fledged business corporation, whose activity is aimed at transportation of goods and passengers, but at the same time with maximum profit. First and foremost thanks to the adequate corporate governance that is forming currently. These include the introduction of a supervisory board and a new board, which activity, due to its professional skills, will be related to rail transport and will include high-level specialists. In the future, this corporate structure will expand into the company. We are talking about the distribution and paradigm shift from regional railways to vertically integrated structures, and each of it will be a separate business line. There is a Presidential order to present a plan for the implementation of private traction. The exclusion from the list of companies that are not subject to privatization make it possible to enter the borrowing capital market not only in the form of credit resources, but also in the share capital. It is one of the sources that can be used to improve financing and infrastructure and passenger transportation. In our view, attracting international investors to work on a particular railway vertical goes in line with the main tasks that the company is facing. In addition, it is not only about attracting money but also about experience. This is important for our country, since the Ukrainian railways are probably the most extensive network among the European countries, and performs important functions both in passenger and cargo transportation,” Mr. Ryazantsev explained.

He believes it is important for Ukraine to adopt the law on railway transport.

“This law is currently under consideration in the parliament, and, if passed, we will get a changed market structure, a changed approach to the private traction segment, a new paradigm for the rail freight market. If this law to be adopted quickly, it is possible to make a brand new market in 3-5 years and attract enough investors to make the improvements in all spheres of railway activity noticeable,” Andriy Ryazantsev added.

He also explained the changes to be done on the private traction market and told about the implications of innovation.

“Private traction market issues have been debated for a long time.  We have Presidential instruction regarding this issues. Moreover, there is a decision of the Cabinet of Ministers of Ukraine to launch a pilot project, which should start soon. This is world-class experience when several operators are entering the market to provide services that were previously provided by the company monopolist. According to experts, from 3 to 6 operators can provide services Ukraine which will create competition. The one who will provide the highest quality and cheapest services will survive. That is, this mechanism will improve the level of services, their quality and accessibility for anyone who wants to use the rail transportation. From my point of view, this will lead to the fact that a large part of the goods transported by motorways today will return back to be transported via railway. And this will have a positive effect for a country because its roads will be in better condition and will not require such frequent repairs. Accordingly, the money earmarked for road repairs today can be used for numerous of other areas that also need investment.

I emphasize that the key positions is to adopt an appropriate regulations and legislation that will clearly and qualitatively build the entire structure responsible for traffic safety, and for pricing as well. Because the railway is not an ordinary highway, where you can get in the car and get off the highway. You can not just sit on a locomotive and go where you want. There are appropriate dispatching, security rules, compliance with those rules. Therefore, in order for passenger and freight transportation to function effectively, it is necessary to build the legislative and regulatory framework to distribute functions and responsibilities among all participants of the transport process.

The Director of Business Development of JSC Ukrzaliznytsia congratulated everyone on the coming New Year, Christmas holidays, and named the achievements of the company for 2019.

“I would call results related to development of freight transportation the biggest achievement, as this is one of the key areas of work of a joint-stock company. We were able to change the transportation model of one of our major export products, namely cereals and oilseeds. We have been introducing the so-called shuttle services for the last two years. That is, when the elevator forms from 40 or more cars over a twenty-four hour period. We transport it and ship it in port to the vessels that come for goods for export. Thanks to this, since the beginning of the marketing year (since July), there has been 20% increase in transportation of cereals, as well as 30% increase of exports. That is why scheduled routes that we have offered to the market today are positively rated. Therefore, it is appropriate to apply them to other types of cargo, so that having sufficient traction resource we can carry more cargo, and therefore earn more money, which can also be directed to passenger transportation,” Andriy Ryazantsev summed up.

The full interview with Andriy Ryazantsev is available on our site.

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