Changing the collective agreements at Israel Railways is one of the most burning issues in transportation today. Minister of Transport Israel Katz knows this, but his intentions are still unclear. To date, he has demanded that railway employees allow the installation of critical safety measures on trains, such as cameras in the drivers' cabins and GPS systems for positioning.
But when asked how far he intends to go on structural reform of Israel Railways, Katz is ambiguous. He supports some changes, but opposes the reform plan published in the media. As a friend of the strong workers committees, Katz says that he will support measures that will strengthen the position of Israel Railways' employees and that he will oppose any attempt to dismantle or privatize the company. Israel Railways will continue to be a monopoly.
Can't stand on its own feet
The Ministry of Finance also understands that Israel is too small for several train operators. It is far less clear why Israel Railways should continue to own the network of railway lines, train stations, and huge swathes of real estate around them. Israel Railways does not publish regular financial reports, but according to figures collated by "Globes", it owns assets worth NIS 20 billion, and its annual turnover exceeds NIS 1 billion.
The ratio between assets and turnover, as well as the return on equity all indicate a distorted and illogical operational structure that cannot stand on its own feet.
The professional echelon at the Ministry of Finance, Ministry of Transport, and the Government Companies Authority are prepared to be satisfied with modest targets, the most important of which is relaxing the collective agreements with the Israel Railways workers committee. Otherwise, there is no way to meet the passenger service, scheduling, and passenger safety targets.
The second step is to transfer responsibility for maintenance of Israel Railways' rolling stock to their manufacturer, Canada's Bombardier Inc. (TSX: BBD). This step is necessary because Israel Railways' employees do not know how to maintain the rolling stock and they are not subject to minimal supervision or control.
The third step is to establish two subsidiaries: one to market cargo services, and the second to handle business development of train stations.
The government hopes that these changes will transform Israel Railways from a failing company into a "somehow functioning" company, but it admits that this is only a partial correction of the distortion. The great chance to create an advanced company was missed in 2003, when Israel Railways was established.
A neglected stepchild
120 years ago, the Ottoman Turks built Israel's first railway line at an insane pace. With no planning committees or workers committees, they built the railway from Jaffa to Jerusalem in less than two years, and in the same period of time built the Jezreel Valley line from Haifa to Tzemach; 230 kilometers of track with more than 300 bridges altogether.
But once the era of the Ottomans and the British ended, Israel's railways deteriorated. For decades, the government neglected them and channeled budgets to roads. The railways were a neglected stepchild of the Ports and Railways Authority. Since the reform of 2003, which separated the ports and the railways, the government has tried to close the huge gap between the railway and roads networks.
More than NIS 30 billion has been promised for a series of railway projects: electrifying the trains from diesel; build a new Jezreel Valley line, a line from Acre to Carmiel, and completing the high-speed line to Jerusalem.
The future includes building the eastern line along Road 6 (the Yitzhak Rabin Highway), a high-speed line to Eilat, and, most important of all - a fourth line along the Ayalon in Tel Aviv, which will double the traffic at the national railway bottleneck from 10 trains an hour to 20.
A lack of capabilities
These projects are just as ambitious as the railway lines built by the Turks, but their construction has become far more expensive and complicated, and many times slower. Again and again, plans are delayed for the same reason: Israel Railways lacks the necessary capabilities.
The first warning sign came during the construction of the high-speed line to Jerusalem. This line is now due to open in 2017 and its cost has reached NIS 6.5 billion: eight years behind schedule and NIS 3 billion over budget.
The conclusion reached by Israel Railways CEO Yitzhak Harel was to transfer the building of other lines to other companies. Israel National Roads Company Ltd. will build the Jezreel Valley and Carmiel lines; the Cross-Israel Highways Company will build the eastern line; and the Eilat line will go to a private contracture under a BOT contract.
But Israel Railways continues to create new problems almost daily: safety flaws, irregularities in procurement tenders, and incessant labor sanctions and internal disputes. If this is the situation now, it is clear that Israel Railways has no chance of meeting the high expectations made for it for the future.
Israel Railways by the numbers
- Number of employees - 2,160
- Annual operating budget - NIS 1.3 billion
- Annual income from passengers - NIS 550 million
- Annual income from cargo - NIS 140 million
- Annual government subsidies - NIS 350 million
- Other subsidies - NIS 150 million
- Passengers to be carried in 2012 - 36 million
- Passengers target for 2020 - 72 million
Railway lines planned by 2020
- Tel Aviv-Rishon LeZion line: cost - NIS 2.2 billion; completion date - September 2011
- Double tracking the Lod-Beersheva line: cost - NIS 2.7 billion; completion date - December 2012
- Rishon LeZion-Bnei Darom line: cost - NIS 1.03 billion; completion date - December 2012
- Double tracking the Tel Aviv- Kfar Saba line: cost - NIS 683 million; completion date - March 2012
- Double tracking the Motzkin-Nahariya line: cost - NIS 590 million; completion date - April 2013
- Ashkelon-Beersheva (Western Negev) line: cost - still in the tenders stage; completion date - 2015
- Acre-Carmiel line: cost - NIS 2.5 billion; completion date - 2015
- Tel Aviv-Jerusalem high-speed line: cost - NIS 6.7 billion; completion date - 2017
Published by Globes [online], Israel business news - www.globes-online.com - on April 26, 2011
© Copyright of Globes Publisher Itonut (1983) Ltd. 2011