«Transit business may vanish in four days»

Photo: Eero Vabamägi

Back from Moscow to see about transit options, Estonian Railways CEO Sulev Loo advises that we Estonians learn from Latvians who gained remarkable-for-Europe economic growth from working actively Eastward. 

At the headquarters of Russian Railways, Mr Loo squeezed in between two high level Latvian delegations. It was a long time since Estonian politicians were spotted in Moscow.  

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-By last year, carriage of goods on railways fell to the level of 1991. From the last year but one, it went steeply downhill. Meanwhile, as compared to 1991, carriage of passengers is almost 2.5 times smaller. How are you coping with the infrastructure fees, the main income for the railways?

While we currently receive €37.5m in fees for using the infrastructure, €2.5m of it is from passenger transport. But as almost 75 percent of all transport is passengers, the proportion is out of place. If we will not to try and continue squeezing the poor transit businessmen, in this economic situation this would not be sustainable. Meanwhile, we are working on a new fees methodology to alter this.

-Who will pay the difference if movement of passenger trains will be significantly costlier, the passenger of the state?

You must ask that of Elron, but it is difficult to predict the ticket price rise.

-This means that every ticket would be costlier by €1?

The journalists like this simplified math. This year, the loss will be bigger and the railway tariffs topic is not ripe yet for public disclosure.

-What have your recent trips to Moscow added to Estonian Railways and goods flows thru Estonia?

Estonian Railways is part of the administration of 1,520 mm width railways with headquarters in Moscow. Over there, the head of Estonian Railways is received as head of the national infrastructure. All other enterprises are commercial players from the administrative standpoint; with them, they only talk business and they are not received just like that.

My main task is to bring clarity and, if possible, to have as say about planning. As head of Estonian Railways, I do not buy or carry goods, rather I am a messenger.

The fall of carriage of goods this January and February was brought about by oil price drop. If volumes at Russian ports are shrinking almost by a fifth, they will naturally be searching where to get more goods. If you are a mighty commodities exporter like Russia, there comes a point when both business circles and the state become interested in keeping the cash flow related to servicing the flow of goods.

-When they got busy building the Ust-Luga port, restrictions of Estonia-directed volume were explained by repairs on the railway. How is it happening, the directing of goods flows away from Estonia?

I once asked the late Aadu Luukas how quickly it might happen that we lose the transit business. He said it may happen in four days. There has never been an official redirecting of transport operations. Our region’s largest oil company Rosneft just sends part of their goods through Ust-Luga terminal and that’s just plain and logical.

We have lost the position and the economic contacts that we once had. Regrettably, the previous leadership at Estonian Railways was into court affairs and thus unable to do a good job.

-What do you mean by court affairs?

It was too much last year about gaining a position in the house, which hindered working from the house outwards.

The trouble with Estonian Railways is we have not been stable partners for owners of goods and trading companies. They do not want traffic stoppages and not knowing if they get their traffic plan confirmed.

At the moment, it makes more sense for our potential clients to choose some other means of transport as that will grant them smoother logistics. It’s not just about railway, but the agreements with terminals, and the chartering of ships.

Our job now is to break thru the wall, to be accepted again. If we want to cooperate with the big neighbour, we must at least be in economic dialogue with them. We must make up our mind if we want transit and in what form.

-In what way could the government support it?

Let’s look at how the Latvians are working. In Moscow last week, before and after me the Latvian Railways management was represented there on a very high level. The communication of the Latvians is very active. Last year, Latvian economic growth was very high for Europe, which means they must be doing something well and right. In our complacency, we have gotten stuck somehow.

-How do you look at the claim that the key of success is in hands of Estonian Railways leadership, so let them just get busy?

Let me recognise the transit businessmen who, while in a tough situation, have stood back to back, and we are in genuine cooperation. We need to consider that in Russia they view railway as a national administrative enterprise. For the managers of Estonian Railways and Port of Tallinn, therefore the responsibility is heavier than those at helm of ordinary companies. We, however, are accustomed to the European-like approach where a railways boss only represents the interests of a company.

-As you entered into office, at economy ministry you were viewed as a potential transit enterprises consolidator. Now, facing the merger of railway and port business under single administrative enterprise, will the boss be you or the new port chief Valdo Kalm?

I have come here to forward the railways with my experience, and I have no ambition for anything else lest I lose my focus.

No matter how the enterprises will be combined, railway must be managed by someone who is a railways expert, and the port by a ports expert. Already, we are in very close cooperation with Valdo Kalm so we may say we are pulling the train.

Obviously, the transit sector may save money by consolidating transport companies. Both railway transport companies in Estonia own engines and wagons, they employ drivers and other staff who do the same job. But there’s not much work left. If this continues, both cannot keep people on payroll and make profitable us of assets. Actually, that moment has arrived.

-Will there be belt-tightening then, near term, for Estonian Railways staff?

Talking about jobs, we can tighten the belt no more to keep the infrastructure going. The tracks need to be maintained and administrated, and there needs to be the readiness for accidents. We have no spare fat here.

Recently, we had these bright-eyed and willing-to-work people join us. We have Toomas Alle as head of infrastructure – undoubtedly an excellent railways and construction specialist. Also, we have Anvar Salomets from Technical Regulatory Authority who, despite his youth, may be considered an experienced railway guy. For communications and safety, we got former Telia Sonera operations head Erki Kimber. These guys have earned the respect and favour of our experiences experts. Truly, the changes in the house are very positive, though Estonian Railways have surely never been in a tough spot like this.

But there will be plenty of the simple rationalization. Like after we put GPS devices on general car fleet, we saved nearly a fifth of fuel costs.

-So you don’t fill your lawn mower with Estonian Railways fuel card?

I don’t have a fuel card, not even an official car. State enterprises tend to be in a situation where we are paid less as we are reconciled to lower motivation for staff. We must come to a place where we can pay decently for decent specialists. Business comes to successful companies, this is life.