Secondary Railways and Inner Areas in Italy. Planning and Economic Opportunities

Abstract

The 90s European policy about railway liberalization, to promoting a modern infrastructure network for railway transportation, aimed to increase competition among national players, to exploit the opportunities related to the new technology opportunities and to make easier and faster all connections between the hinterland and the main cities. Up to today, European investments are focused on the main areas and the high-speed railway because, even if the number of users is a minority with respect the overall population, the profitability of the investment is significantly higher with respect to the average of the transportation industry. This strategy has increased the difference between high growth and low growth areas with the former served by efficient transportation facilities and the latter characterized by low quality level transportation services. The lack of good transportation serviced in the hinterland increased significantly the risk of creating new ghost towns because a lot of citizens were obliged to migrate to the bigger cities due to the lack economic opportunities and public services offered to citizens in the area. In Italy population is living mainly in hinterlands served by local railway services that due to the low quality of the service offered are often underutilized and sometimes the railway company decides to stop offering the service. The main target for the future will be to develop a new policy (at European and national level) for supporting the growth of local railways starting from the change of the regulatory framework at Country and European community level. The new infrastructure, urban planning, economic, and social framework has to support the development of local railways in order to revitalize dismissed areas and low density towns and to support their role for the society and the environment. In fact, the railway service is one of the main instrument in order to avoid the exclusion of people living in small towns from job opportunities offering them a solution to commute every day at a reasonable cost and avoiding the risk of urban concentration and sprawling. Local railway services have an impact on the demand of real estate assets in the hinterland for people not interested to live in the metropolis and interested to spend more time every time in commuting in order to have the opportunity to live outside the city. Railway companies working in the passenger transportation are firms that are working in a limited competition market (oligopoly) and may take advantage of public subsidies for reaching their break even. The type of service offered to customer is significantly different with respect to high-speed trains because the demand is interested to pay only for basic services and all ancillary services cannot be sold at a reasonable price. The analysis considers all the Italian railway companies that are currently authorized to offer passenger and freight transportation services and evaluates the main difference for local railway companies operating in the passenger services with respect to all other players in the industry. Results show that firms operating in the local railway services have different economic and financial equilibria because they are less profitable but also less exposed to a risk of bankruptcy.