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InterRail Newsflash February 2021

Dear Readers:

In the last few months, we have all spent a lot of time adapting to extraordinary circumstances. This path was not chosen voluntarily, and it has made clear to us in a rather impressive way how limited our scope of influence is or how fragile our existence. At the same time, it has become apparent in many areas how adaptable and inventive we are. Plato was probably right when he said that necessity is the mother of invention.

Accordingly, the pandemic has accelerated many processes or rather, in some cases, even set them in motion in the first place. Digitalization has received an immense boost. Business trips were replaced by virtual conferences. Wherever possible, working from home had to be implemented. Microsoft's CEO was quoted in an interview with analysts last April as saying, "We've seen an extent of digital transformation of two years in a span of two months."

Thus, a new "normality" awaits us, as a return to conditions that were considered "normal" a year ago already seems impossible today.

We asked Hans Reinhard, Chairman of InterRail Holding AG, how the InterRail Group has mastered the past months and what the coming months will look like.

We wish you an interesting read.

A question of perspective

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Hans Reinhard

How did InterRail's business develop overall last year?

Hans Reinhard: Even though we are all longing more and more every day for a time when the Corona pandemic is behind us, we cannot avoid looking at the 2020 financial year from the perspective of this pandemic. Certainly, COVID had the most impact on the China-Europe tradelane. Block train services between China and Europe handled by InterRail came to an almost complete standstill as early as the beginning of Q1 2020, especially as the pandemic outbreak in China led to the first lockdowns there. After China had successfully controlled the further spread of the Corona virus within three months and was able to ramp up industrial production again at the beginning of the second quarter, which meant that transport services were basically needed again, COVID had now paralyzed the whole of Europe through shutdowns and lockdowns. Accordingly, there were still almost no block trains to be handled. On the one hand, this led to considerable financial losses for the InterRail companies in China, Russia, Poland and Germany involved in the trade lane. At the same time, the sudden changeover to at least partial remote working meant that all employees had to cope with heavy burdens and even symptoms of stress.

It was all the more gratifying to then record an enormous increase in train departures from the middle of the year onwards. This was due, on the one hand, to pent-up demand in almost all industry sectors, but also to the enormous decline in capacity of other means of transport, such as air freight and sea freight in particular. This development in the third and fourth quarters enabled us not only to compensate for the declines in the first half of the year, but even to post better figures overall compared to 2019. However, our annual result was unfortunately negatively impacted by the major exchange rate effects, largely due to a weak USD.

I would like to highlight InterRail-Polcont, which posted its best result since integration into the InterRail Group in 2020. Basically, however, I do not want to focus on individual companies, but simply express the management's thanks to all our employees: They have all done a great job – at a time that presented everyone with enormous challenges, not only in business, but certainly also in their private lives. Thanks to their efforts, InterRail can look back on a positive annual result even in the difficult year 2020.

 

What do you expect from 2021?

Hans Reinhard: Unfortunately, foreseeing the future is not my strong point. But the year will certainly continue to be severely affected by the Corona pandemic for at least the first six months. But in the meantime, we are much better prepared and know how to deal with it. Where we used to travel from meeting to meeting in many cases, these meetings have now been effectively replaced by video conferences. Work from home has also become established in our Group, regardless of the country, and does not affect the quality of our services. Thus, we can also gain something from this difficult situation and profit from it. For the most part, the outlook for China-Europe traffics is encouraging. The large number of train departures is expected to be maintained at least for the first half of the year, and for the second half the status quo can be expected as well.

 

That we are geo-strategically well positioned along the New Silk Road, with our own subsidiaries in each country, helps us enormously in responding quickly to new customer requirements in terms of new routes or intermodal carriers. Of course, we would like to see more security offered by the global political situation; the new U.S. administration will certainly contribute its share.

 

A word about the subsidies for rail transport to and from China…

Hans Reinhard: The Chinese government changed its previous subsidy policy for 2021 to the effect that instead of the previously applicable 40% cost subsidy, only 30% are remunerated starting 1 January 2021. This had been announced and therefore came as little surprise to the market. However, as especially the competing modes of transport such as sea and air freight are operating with strong price increases on the market due to the enormous capacity bottlenecks, the reduction of the subsidies can be easily corrected for the time being by slightly higher rates. As the Chinese government has planned a total of 12,000 block trains on the New Silk Road for 2021, compared to around 9,000 trains registered in 2020, we can therefore look to the future with optimism. positively into the future.

 

What qualities do you think are most important for mastering challenging times?

Hans Reinhard: Of course, the private environment plays an important role in coping with times and situations of crisis. I have personally experienced over the course of my career that calmness and composure, and in particular a great deal of understanding for one's fellow human beings, are important tools. I consider it enormously valuable to always put one's own situation into perspective: there are so many people who are far worse off than we are. For me, such a view automatically leads to more gratitude and satisfaction.

 

What motto do you use to motivate yourself personally?

Hans Reinhard: To be aware that we actually belong to the privileged ones in this world, that I am allowed to be healthy and that I have good friends around me.


What do you miss most at the moment?

Hans Reinhard: Since Switzerland is currently in lockdown and personal contacts have been kept to a minimum, I naturally miss social contacts, but also spontaneous encounters. On the other hand, I now find time again for a good book or a nice hike. In many respects, it’s simply a question of perspective.

InterRail opens new office in Nur-Sultan

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(© AdobeStock)

InterRail Kazakhstan has converted its former sales office in Nur-Sultan into an operational branch as of the end of January 2021. The office is headed by Bekzat Madiyarova; she has been working as sales manager for InterRail Kazakhstan in Nur-Sultan since the end of 2018.

The company offers containerized as well as conventional rail freight services in import, export and transit and has a direct cooperation agreement with Kazakhstan Railways (KTZ). The rail services are complemented by multimodal solutions and the provision of appropriate rolling stock. This includes special wagons such as hopper wagons and open-top wagons for bulk goods.

6 Questions to Bekzat Madiyarova

Head of the new InterRail Nur-Sultan branch in Kazakhstan

When did you start working for InterRail?
I started at InterRail in November 2018.

Do you have a motto for life?
My motto is: Do what you love. Love what you do.

What do you particularly like about your job at InterRail?
I like being part of the InterRail team. I feel that here, I can express myself, achieve goals, and I have a perspective for future development.

If you were not working in the transport industry…. 
I think I would have found myself in the advertising business

What are your concrete goals for your new job? 
My goals are: to support the development of our new office in Nur Sultan, to search for new prospective customers and projects.

What specific impact has the pandemic had on your business? 
The pandemic has influenced all business in Kazakhstan, and particularly the logistics sector. It was a difficult time during the lockdown, many people closed or stopped their businesses. Now, we hope for a recovery of economy in Kazakhstan, but anyway we continue working and searching for perspectives under any circumstances. 

 

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Bekzat Madiyarova

News from the railroads

Turkey - China in 12-16 days

In early December 2020, Turkey sent the first container train on the Baku-Tbilisi-Kars railroad line to China. The 826-kilometer link, inaugurated in October 2017 after ten years of construction, connects Azerbaijan's rail network with Turkey's, providing easier and faster rail links between China, Central Asia and Europe. Trains go from Turkey through Georgia to Azerbaijan, where they cross the Caspian Sea, and then on through Kazakhstan to their final destination in China - a distance of about 8,700 kilometers. In the opposite direction, i.e., from China to Europe, container trains have already been running via the Baku-Tbilisi-Kars route since November 2019. In the meantime, the railroad line has become an important part of the southern route of the new Silk Road between China and Europe.

Market participants want to join forces

The growth in rail freight volumes along the New Silk Road urgently requires answers to infrastructural challenges as well as an increase in capacity for cross-border traffic. Rail operators, ports and other service providers are seeking closer cooperation to ensure the smooth transit of goods.

On the initiative of the Kazakh-Russian-Belarusian "United Transport and Logistics Company - Eurasian Rail Alliance" (UTLC ERA), top managers of Chinese, Russian and European companies held a digital conference on January 26, 2021, on behalf of the so-called "One Million" Club", where above-mentioned issues were discussed in depth.

The ambitious goal of the One Million Club, which was launched in 2019, is to increase the volume on the Eurasian rail route to about one million TEUs by 2025.

Many participants felt that rail transport between Europe and China, which despite its growth still only accounts for about three percent of all freight transported, will increasingly complement freight transport by sea. A total of about 23 million TEU containers are transported between Europe and Asia each year.

According to UTLC ERA, 21 countries and 92 cities are now connected to the Eurasian container transport network and new routes are being added all the time, such as the new routes to Kaliningrad via the ports of Mukran and Rostock established in 2019.

Alexey Grom, CEO of UTLC ERA, summarized the discussion as follows: "Our One Million Club is becoming more and more popular. The number of companies interested in cooperation is constantly growing. This is also reflected in the great interest in this digital conference. I am optimistic that together we can achieve a 20 percent increase in volume in 2021 and thus make further progress toward our medium-term goal of around one million TEUs by 2025. It is therefore our primary responsibility to motivate each other to set new records, to identify bottlenecks and to deal with them in a joint effort. “

The full media release can be found here: https://utlc.com/en/news/rail-operators-along-the-new-silk-road-combine-forces/