Annual report Main events during the financial year
VR Group continued the work to put its operations on a more efficient basis so that it can achieve its profitability and cash flow targets. Achieving the targets is necessary so that we can carry out our rolling stock investments in an increasingly competitive environment.
Despite a fall in volumes, VR Transpoint’s rail logistics maintained its profit level through higher operating efficiency. Trends in raw material prices in the global markets and the realised risks in Russian transit traffic were two major factors behind the lower volumes. Exports to Russia and raw timber volumes were also lower than in 2014.
VR Transpoint sold the Hungarian operations of its international road logistics in June 2015.
Construction of the new terminal in Riihimäki for domestic road logistics started at the end of the year.
There were further improvements in the operating efficiency of rail logistics. Higher average train weights, a result of closer customer cooperation, more efficient planning and advanced working methods and technology, has allowed VR to adjust its total train kilometres. This positive trend has continued since 2012. There were substantial improvements in occupational safety in VR Transpoint. The work accident frequency rate decreased to 11.2 per one million hours worked (14.7). There was also a substantial decline in shunting deviation frequency: It amounted to 43.6 per one million hours worked (51.2).
Major changes are taking place in the competitive environment of rail passenger services as long-distance coach services have opened to competition. In 2015, VR launched an extensive programme aimed at improving the competitiveness of trains in long-distance traffic. The aim is to increase the number of journeys by introducing changes in pricing, better services and faster connections. A competitiveness improvement programme should bring cost savings of EUR 50 million each year. As part of its efficiency programme, VR began extensive co-determination negotiations in passenger services, rolling stock maintenance and train operations. The negotiations concern a total of 2,800 employees and it was estimated that VR would have to cut a maximum of 570 jobs. Most of the savings achieved through these reductions will be used for lowering ticket prices on a permanent basis. At the same time, VR will simplify its pricing structure.
During the year, VR has reviewed the services on the rail network, while at the same time it has conducted negotiations on the content of the outsourced services and its public service obligation with the Ministry of Transport and Communications. The cuts of EUR 12.3 million in outsourced rail passenger services that are based on the Government Programme led to substantial changes in the content of the outsourcing agreement.
The aim is to provide more services and increase speeds on routes where VR sees growth potential. At the same time, VR aims to increase filling rates by adjusting services more effectively in accordance with the demand. The first changes in market-based services were introduced in October 2015.
The number of passengers will only increase if prices are permanently reduced and the pricing structure is simplified. Achieving price reductions was one of the most important objectives of the efficiency programme. In spring 2015, VR started responding to the price competition in public transport by means of extensive discount campaigns. The popularity of the campaigns exceeded all expectations and, after a period of decline, there was an upturn in passenger numbers. On several routes, substantial increases were achieved.
VR can only develop the train experience if it is in close contact with its customers and understands the expectations of its passengers. During 2015, VR conducted a number of customer satisfaction and corporate image surveys in long-distance traffic. Passengers were also asked about their views on train travel.
In 2015, a project aimed at improving the usability of the onboard WLAN was carried out in cooperation with telecommunications operators. Pendolino, IC and Allegro trains were equipped with 4G connections. As the network has become faster, its capacity has also increased. As a result, a larger number of passengers can use the network simultaneously in a more effective manner.
In May, VR-Group Ltd and Helsinki Region Transport (HSL) signed a letter of intent on train operations and the maintenance of the Sm5 commuter trains until 2021. The aim is to conclude the final agreement, which will be based on direct award, in spring 2016. Under the agreement, VR will introduce new efficiency measures in commuter traffic. Preparation and implementation of the measures are already under way. The efficiency measures apply to rolling stock operations and maintenance, a new service model, customer satisfaction and punctuality.
The month of June saw the opening of the Ring Rail Line, the first direct rail link between Helsinki Central Railway Station and Helsinki Airport. The travel time between the two locations is less than 30 minutes. Construction of the Ring Rail Line was the responsibility of the Finnish Transport Agency, the government body maintaining and developing Finland’s rail network.
Pohjolan Liikenne won new bus operating contracts in the HSL region in the autumn tendering round. The company will also continue to operate local bus services in Kotka and Imatra. In both cities, the services will be on a contractual basis from 1 July 2016. The contract in Imatra will remain in effect until summer 2019 and that for Kotka until summer 2021. Both contracts also include an option for a two-year extension.
As a result of co-determination negotiations, Avecra streamlined its administration and adjusted its operations in accordance with the company’s new strategic objectives. It was decided to move the warehouse in Oulu to Tampere, as Tampere is a better location for supplying passenger trains in the entire rail network.
The punctuality of long-distance services in 2015 was 87.2 per cent (87.8%), while the figure for commuter services was 94.7 per cent (93.7%). Rolling stock and safety equipment malfunctions as well as track work, which continued almost throughout the year, and the extra speed limits resulting from them were some of the factors behind the delays. The challenges faced during the first weeks of Ring Rail Line operations were reflected in the punctuality of commuter traffic.
VR Track won several contracts in the alliance projects of the Finnish Transport Agency. Europe’s first public alliance project, the renovation of the track section between Lielahti and Kokemäki, was completed in early 2015. During the year, VR Track won two alliance projects in Finland: the Tampere tram project and the improvement of the rail links to the Äänekoski bioproduct mill. Other important contracts included the renovation of the track section between Vaala and Kivesjärvi. The biggest projects under way in Finland during the year were the double tracking of the track section between Ruha and Lapua, which is part of the extensive Oulu-Seinäjoki rail project of the Finnish Transport Agency, and six regional maintenance contracts. VR Track Sweden Ab has become one of the largest providers of maintenance services in the country. The company also won its first design project, which involves the redesign of the level crossings in Uppsala.
