Travel, Logistics & Infrastructure Practice

Safe, smart, and green:

Boosting European passenger
rail’s modal share
Despite pandemic-related decline in demand, European passenger rail has
potential for sustainable, long-term growth–companies and governments can
take action to make investments that will help improve modal share.

by Anselm Ott, Nicola Sandri, Luuk Speksnijder, and Koen Wolfs

© Alexander Bagno/Unsplash

October 2021
 Passenger rail in Europe has seen limited growth
in modal share over the past decade, with very few
exceptions, and demand was put under further
pressure during the COVID-19 crisis. But there
is increasing investment in rail as a sustainable
option. The EU has made funding available to
support rail infrastructure projects, and countries
have committed to projects that will improve and
increase passenger rail services to relieve road
traffic congestion, reduce emissions, and improve
the sector’s digital connectivity.
To ensure this commitment is effective, rail
companies and governments may wish to make
strategic decisions around where and how to invest,
and focus spending on projects that support their
desired outcomes. For instance, stakeholders
could assess the impact of actions and investments
against key drivers of modal share to ensure that
capital is spent effectively. And they could leverage
enabling factors to avoid costly budget overruns and
project delays.
This article explores the macrotrends affecting
the sector and examines key drivers that countries
and companies could leverage to increase modal
share and to secure long-term growth. It also offers
options to consider and highlights best practices
that stakeholders can adopt to take action
and define a strategy for sustained passenger-
rail growth.
Passenger rail is under pressure, but
has significant potential for long-term
growth
Rail growth has come under pressure from the
impact of the COVID-19 crisis on users. The
Community of European Railway and Infrastructure
Companies (CER) reported that total revenue
for the EU rail sector fell by around €26 billion
between 2019 and 2020, and passenger operators
accounted for €24 billion of this figure.¹ Over the
same period, many European countries reported
a marked decline in passenger kilometers. In
Germany, France, Italy, and Spain, passenger
kilometers dropped by between 40 and 60 percent.²
Revenue losses are likely to continue in the short
term as demand is only expected to recover
between 2023 and 2025—and costs do not scale
back if revenue falls.³
Furthermore, some passenger segments such
as commuting and business travel may not fully
recover, as demand could be permanently affected
by increased remote working. For instance, it is
estimated that between 20 and 25 percent of the
workforce in advanced economies could work from
home between three and five days a week.⁴ This
represents four to five times more remote work than
before the pandemic. McKinsey’s Travel, Logistics
& Infrastructure practice estimates that about 20
percent of business travel may not return.
Despite this outlook, several macrotrends such
as sustainability, urbanization and population
growth position passenger rail as part of the
solution for tackling mobility and sustainability
issues, and indicate that the sector could achieve
long-term growth.
Sustainability is a key transportation factor as
Europe seeks to realize its net-zero goals. Rail
generates approximately 4 to 6 times less CO2
emissions than travel by car (with an internal
combustion engine), depending on the length of the
journey.⁵ Even compared to electric vehicles, rail has
a lower carbon footprint per passenger kilometer,
at 6 to 41 grams compared to 46 to 77 grams for
electric vehicles.⁶ Compared to air travel, rail is the
also greener option, generating about 10 to 15 times
less CO2 emissions per passenger.
Increasing urbanization and population growth lead
to more congestion in cities; rail can help relieve
road traffic congestion and reduce air pollution.
Urbanization has been steadily increasing in Europe,
from approximately 64 percent to 75 percent over

1
Oliver Cuenca, “European rail sector revenues fall €26Bn in 2020,” International Railway Journal, February 4, 2021, railjournal.com.
2
Railway transport, Passengers transported, Eurostat, September 21, 2021, ec.europa.eu.
3
In the Netherlands, The Knowledge Institute for Mobility Policy (KiM) forecasts that rail will reach pre-COVID-19 levels in 2024. See “Public
transport and the corona crisis”, KiM, July 9, 2020, kimnet.nl; and the Dutch railway NS indicates that the number of travelers will reach pre-
COVID-19 levels in 2025. See “NS Jaarcijfers: Maximale inzet in financieel dramatisch jaar 2020,” NS, February 25, 2021, nieuws.ns.nl.
4
“The future of work after COVID-19,” McKinsey Global Institute, February 18, 2021.
5
Based on a CO2 comparison tool available at Eco passenger, ecopassenger.org.
6
Hannah Ritchie, “Which form of transport has the smallest carbon footprint?,” Our World in Data, October 13, 2020, ourworldindata.org.

2 Safe, smart, and green: Boosting European passenger rail’s modal share
 the past 50 years.⁷ Even though the EU’s population
is expected to peak by 2025, several countries,
including Sweden, Switzerland, France, Spain,
and the Netherlands, are showing positive
population growth.⁸
As a result of these macrotrends, rail is seen as
one of the safest, most innovative, and sustainable
modes of transport. This EU-wide support is
illustrated by several initiatives: 2021 has been
designated as the European Year of Rail, for
example, and rail is a central element of Europe’s
Sustainable and Smart Mobility Strategy.
But even with this positive sentiment, passenger
modal share has shown limited growth over the past
decade, levelling off at around 8 percent since 2013.⁹ Deal. The Green Deal aims to transform the EU
Modal share, however, varies by country (Exhibit 1).
Switzerland has the highest modal share of roughly
20 percent. The country increased its modal share
by 2.4 percentage points over the past 10 years by
investing heavily in the rail network, integrating its
ticketing system, and increasing user satisfaction.
There’s much other countries can learn from
Switzerland’s experiences.
Given the macrotrends, and strong European
support, this is a good time for all rail stakeholders
to reflect on their growth ambitions for the future.
Rail growth is supported on a
European and national level
The European Union has defined various programs,
and made funding available, to support rail as the
backbone of the European economy and position it
as an important component of the European Green
into a resource-efficient and competitive economy
and has set a target of net-zero emissions by 2050.
Providing more public transport is a key factor for
reducing emissions.10

7
Urban population (% of total population) – European Union, Word Bank, accessed 21 September, 2021, data.worldbank.org.
8
Annual population projection, Eurostat, accessed 21 September, 2021, ec.europa.eu.
9
Modal split of passenger transport, Eurostat, accessed 21 September, 2021, ec.europa.eu.
10 “A European Green deal: Striving to be the first climate-neutral continent,” European Commission, ec.europa.eu.

Exhibit 1
Modal
Modal share startedflattening
share started flattening around
around 8 percent;
8 percent; Switzerland
Switzerland exhibited
exhibited the
the highest
highest
absolute absolute
growth atgrowth at over 2 percentage
over 2 percentage points. points.

Modal split of passenger transport European Union 28 countries Selection of EU countries

Absolute growth 2010–2019 (%p)
Trains Passenger cars Motor coaches, buses, and trolley buses
<0% 0–1% 1–2% >2%
100 100 100 100 100 100 100 100 100 100
Belgium 0.8
9.3 9.4 9.4 9.8 9.5 9.3 9.1 8.7 8.6 8.5
Denmark –1.6
Finland 1.0
France 1.1
Germany 1.4
Ireland 0.8
83.5 82.9 82.4 82.7 82.9 83.1 83.4 83.4 83.4 Italy 0.4
83.2
Latvia 1.8
Netherlands 1.1
Portugal 0.2
Spain 1.7
Sweden 1.8
7.2 7.4 7.7 7.8 7.8 7.8 7.8 7.9 8.0 8.1
Switzerland 2.4
2010 11 12 13 14 15 16 17 18 2019 UK 1.0

Source: Eurostat modal share of transport

Safe, smart, and green: Boosting European passenger rail’s modal share 3
 The European Commission defined 2021 as the
European Year of Rail to help shift passenger and
freight transport from road to rail, and to highlight
rail as a sustainable, smart and safe means of
transport. It also launched the Sustainable and
Smart Mobility Strategy which lays the foundation
for how the EU transport system can achieve its
green and digital transformation and become more
resilient to future crises. The strategy includes
ambitious targets for rail, such as doubling high-
speed rail traffic by 2030 and tripling it by 2050.11
The EU has provided funding to support the
Green Deal and COVID-19 recovery plans. For
instance, the Next Generation EU facility and the
Multiannual Financial Framework (MFF) which
includes National Recovery and Resilience Plans
(NRRPs), together now provide a total budget of
€2 trillion. An estimated €86 billion of this funding
could be used for rail projects over the next six years
(Exhibit 2).12 To illustrate the potential impact of this
amount, €86 billion could cover the construction
costs for 3,200km of high-speed rail, or the costs of

11 Mobility Strategy, European Commission, December 9, 2020, ec.europa.eu

12 McKinsey analysis of NRRPs, cohesion data overview, EC Europe, INEA, CEF, CF/ERDF, Horizon Europe, DG and Agencies.

Around
Exhibit 2 €86 billion in funding is becoming available for rail between
2021 and
Around 2027.
€86 billion in funding is becoming available for rail between 2021 and 2027.

Funding breakdown of Multiannual Financial Framework and NextGenEU 2021–2027¹

2,017.9 1,815.1 Total

NextGenEU
MFF

729.2
806.9

1,211.0

1,085.9

205.9 119.9 41.4

78.8 86.0
78.5 37.4
127.1 48.6

Multiannual Next Total Non- Transport Non-rail Rail

Financial Generation 7-year transport2,3
Framework EU (NGEU) budget
(MFF)

1MFF rail budget 2021–2027 extrapolated, based on historical allocation rail vs other transport EU (38%) 2014–2020. NRRP = national recovery &
resilience plan.
²Non-transport sectors fully excluded: Migration and Border Management, Security and Defence, Neighbourhood and the World, European Public
Administration.
3Non-transport sectors partially included: Single Market, Innovation and Digital; Cohesion, Resilience, and Value; Natural Resources and Environment.
Source: Cohesion data overview 2014-2020, EC Europe, INEA, CEF, CF/ERDF, Horizon Europe, DG & Agencies

4 Safe, smart, and green: Boosting European passenger rail’s modal share
 purchasing about 8,000 intercity trains.13 It is worth
noting that not all of this funding would go to rail and
infrastructure operators, but would include a variety
of stakeholders.
Beyond European funding through the MFF and
NRRPs, some countries have already committed
to funding at a national level. The Netherlands, for
instance, has committed approximately €2.5 billion
of its national growth fund to two important projects
that will reinforce and expand key transit corridors
to relieve congestion and increase rail capacity. The
country plans to expand the “Noord-Zuid” metro
line in Amsterdam, and expand and modernize the
“Oude Lijn” heavy-rail route between The Hague and
Rotterdam.14
For some countries, an increase in NRRP funding
will have limited impact, while for others it may
constitute a significant leap in available funding. For
example, in Italy the CAPEX budget of the state-
owned rail network, Ferrovie dello Stato Italiane,
was €8.1 billion in 2019.15 An extra €31.4 billion will
be made available for infrastructure for sustainable
mobility in Italy through the NRRP between
2021 and 2027.16 In theory, this could constitute
a potential yearly increase in the rail network’s
CAPEX budget of around 55 percent, providing
opportunities for investments to transfer traffic from
road to rail, reduce passenger travel times, improve
connections, and enhance the digital transformation
of the rail system.
Available funding for the rail sector highlights the
importance of decision makers allocating funds
to the right projects, and managing projects
effectively, to ensure that the sector benefits from
an increase in modal share. Stakeholders taking up
opportunities to invest would benefit from thinking
through their approach to execution and whether
enablers of success are in place to limit their risks
and avoid budget overruns and inefficient spending.
What could rail and infrastructure
companies that want to act now to
increase modal share consider?
As a first step, companies could map the impact
of actions and investments to modal share drivers
to ensure that capital is spent effectively and
that projects yield the intended benefits. Various
successful initiatives have been implemented in
Europe that offer guidance on ways to influence
rail’s modal share. These range from operational
measures, such as real-time monitoring and
predictive maintenance, to more commercial
measures such as alternative pricing schemes,
including budget trains and flat-fee subscriptions.
McKinsey analysis has identified the following five
potential broad drivers that companies can leverage
to provide better services for passengers and
increase modal share:
— Time efficiency. The Netherlands provides
a good example of providing time-efficient
rail travel options that lead to an increase
in passenger numbers. The country built a
successful regional rail network, “Randstadrail”,
by connecting a set of old train tracks and
existing tram/metro tracks to create a light
rail line between The Hague and Rotterdam.
This successfully reduced road traffic and
increased the number of rail passengers from
29,000 a day in 2007 to 125,000 a day in 2018.17
Another approach could be to apply takt-based
scheduling to increase efficiency and provide
consistent passenger schedules. The Swiss
network has centered operations around a takt-
based timetable, where trains come together
on the hour, and the half-hour, at core stations.
Pulse timetabling—where trains come together
or “pulse” at 15, 30, or 60-minute intervals—is
also used extensively in intercity and regional rail
systems in Germany and the Netherlands.

13 According to the World Bank, average construction costs for high-speed rail are between $25 million and $39 million per kilometer (€21
million−€33 million per kilometer). Taking the midpoint of the range would allow for 3,200km of high-speed rail at a cost of €86 billion. See
“Cost of high speed rail in China one third lower than in other countries”, World Bank, July 10, 2014, worldbank.org; According to de Volkskrant,
the cost of ordering 99 Intercity New Generation (ICNG) is €1.1 billion, or €11 million per ICNG. See Peter de Waard, “Kunnen de NS de nieuwe
Wespen nog annuleren?”, de Volkskrant, May 2, 2020, volkskrant.nl.
14 “25 miljard euro uit groeifonds naar spoorprojecten,” Spoorpro, March 9, 2021, spoorpro.nl.
15 “FS Italiane: 2019 Annual Report,” FS, March 31, 2020, fsitaliane.it.
16 Italian Parliament, Studies–Budget: Italy and the European Union Economic Policy and Public Finance, The National Recovery and Resilience
Plan (PNRR), September 23, 2021, temi.camera.it.
17 “RandstadRail nu hét voorbeeld van light rail,” OV Magazine, July 5, 2018, ovmagazine.nl.

Safe, smart, and green: Boosting European passenger rail’s modal share 5
 — Ease of use. Simplifying ticketing, so that
passengers can use one ticket across different
modes of transport, can facilitate ease of use
and attract customers. The Dutch transport
system, for example, introduced multimodal
synchronized ticketing with its OV-chipkaart
(chip card), that gives passengers convenient
access to trains, buses, trams, and even
bicycles with just one card. Another example is
the Spanish rail operator, Renfe, that recently
approved the tender for the development of
its proprietary Mobility-as-a-Service (MaaS)
platform called “Renfe-as-a-Service,” which is
expected to launch by the end of 2021. This app
will allow passengers to purchase tickets for a
variety of modes of transport.
— Reliability. Advances in technology and
digitization are enabling solutions and innovative
ways to attract customers by improving rail
reliability. Siemens, for example, leveraged real-
time monitoring and predictive maintenance to
push the high-speed line between Barcelona
and Madrid to a 99.9 percent on-time score,
while reducing operational costs.18 In Italy,
Gruppo Ferrovie dello Stato has been leveraging
an innovative monitoring tool that collects real-
time information, allowing for effective and
timely management of specific events related
to railway traffic.19 In addition to digitization, the
quality and maintenance of the rolling stock and
adjacent systems are key underlying levers for
improving the predictability of traffic.
— Environmental impact. Rail is already one of
the most sustainable modes of transport, with
more than 90 percent of passenger kilometers
in many European countries being provided on
electrified tracks.20 That said, there is further
room for improvement through hydrogen or
catenary electrification for diesel lines, as only
54 percent of the rail tracks in Europe had
been electrified by 2016.21 More importantly,
companies are switching to green energy. For
example, in 2017 the Dutch railway network,
NS, became the first in the world to run trains
completely on wind energy.22 Hydrogen rail
projects have been gaining traction, and many
European countries are piloting hydrogen
projects or plan to do so. For example, Alstom
and Snam have teamed up to develop hydrogen
trains in Italy.23 Beyond decarbonizing their
own emissions, rail companies could also
cooperate with suppliers to decarbonize their
entire supply chain.
— Price of the journey. Price is a major
consideration for passengers.24 Ouigo, a French
low-cost high-speed train service, introduced
a budget high-speed train that competes with
airlines on price. This SNCF subsidiary has
shown steep growth since inception, targeting
25 million passengers in 2020, prior to
COVID-19.25 In other examples, the City of
Vienna introduced a €365 flat fee for a full year
of unlimited public transport, leading to a 2
percent modal share increase. And in Germany,
VAT on rail travel was reduced from 19 to 7
percent, effectively reducing consumer costs
with some fares of 50km or over coming down by
around 10 percent.26
Though all drivers are important, they may not all
have the same impact, and this could vary by region.

18 “Thanks to predictive maintenance the #Velaro E trains between Barcelona and Madrid run w/ 99.9% availability,” Siemens, November 9,
2016, twitter.com/siemens.
19 “Il Gruppo FS Italiane presenta il nuovo sistema SOI per la digitalizzazione nel monitoraggio della rete ferroviaria,” TTS Italia, November 22,
2019, ttsitalia.it.
20 Deutsche Bahn, Key figures 2019/2020, deutschebahn.com.
21 Report from the Commission to the European Parliament and the Council, European Commission, February 6, 2019, ec.europa.eu.
22 “Green energy for train, bus and station,” NS, accessed 21 September 2021, ns.nl.
23 “Agreement between Altstom and Snam for the development of hydrogen trains in Italy,” Alstom press release, June 4, 2020, alstom.com.
24 Research from the Netherlands shows that while time efficiency and reliability are important to passengers, price is the primaryconsideration
See “Verklaring van de ontwikkeling van het ov-gebruik in Nederland over 2005-2016,” The Knowledge Institute for Mobility Policy (KiM), July
19, 2018, kimnet.nl.
25 SNCF: Your Global Transport Partner 2020, June 25, 2020, sncf.com.
26 Andrew Murphy, “German rail fares go down as part of climate measures,” Transport and Environment, January 16, 2020,
transportenvironment.org.

6 Safe, smart, and green: Boosting European passenger rail’s modal share
 In addition to the role that individual companies
could play, national and European regulatory
policies could also help grow rail’s modal share. As
a McKinsey article “The liberalization of the EU
passenger rail market” shows, market liberalization
can have a positive impact on passenger demand,
pricing, and the offerings available. In Italy, for
example, the introduction of Italo NTV in 2012—as
part of the commercialization of the long-distance
market—led to a 69 percent increase in passenger
kilometers between 2011 and 2018. The increase
was driven by higher frequency, more connections,
and shorter travel times.27 It was also underpinned
by the combined impact of a modal shift from other
forms of transport—such as the reduction of 1
billion passenger kilometers on the Milan-Rome
plane route—and the unleashing of strong and
previously hidden demand. The French government
also introduced various policies that favor train
travel instead of air to reduce carbon emissions. For
instance, French MPs recently voted to suspend
internal flights if the trip could be completed by train
within two and a half hours.28 Regulatory policies
such as these could play a key role in incentivizing
customers and shaping a modal share increase.
Other operators and authorities can learn from
Switzerland’s experience as the country with the
overall highest modal share in Europe. The country
applied rigorous commitment, drove execution,
focused on alignment, and invested approximately
CHF50 billion to achieve a 20 percent modal share.29
On a per-capita basis, it becomes even more
apparent that this contributed to Switzerland’s high
modal share. By comparison, Switzerland invested
€440 per person in rail infrastructure in 2020,
whereas other advanced European economies
typically invested between €40 and €250 per
capita (e.g., Germany invested €88 per capita).30
Switzerland’s high investment and commitment
resulted in increased ridership and satisfaction
(Exhibit 3).

27 “The liberalization of the EU passenger rail market: Growth opportunities and new competition,” July 2019, McKinsey & Company.
28 “France to ban some domestic flights where train available,” The Guardian, April 12, 2021, theguardian.com.
29 Investment funds for rail infrastructure in Switzerland along various expansion programs: CHF 30.5 billion from 1998-2018 (FinöV); CHF 6.4
billion from 2016-2025 (FABI); CHF 12.9 billion from 2025-2035 (FABI).
30 “Germany invests too little in rail infrastructure,” Allianz pro Schiene, August 2021, allianz-pro-schiene.de.

Exhibit 3
Lessonscan
Lessons canbebe learned
learned from
from thethe Swiss
Swiss rail rail network.
network.

It took Switzerland over 40 years of rigorous execution to build its world-class network using
a phased approach

Switzerland maintained public support through repeated referendums, despite high costs

Switzerland had a focus on alignment and integration—eg, one of the prerequisites was to have
an integrated ticketing system

Switzerland made huge investments, in 2017 the investment per capita was almost twice as high
as the #2 in Europe

Switzerland’s high investment and commitment resulted in increased ridership and satisfaction,
creating even more public support for rail investments

Safe, smart, and green: Boosting European passenger rail’s modal share 7
 What can companies and countries do now to
concretely position themselves for growth in modal
share? Investment is only one half of the equation.
Stakeholders can make sure that three potential
enablers are in place to ensure that investments
lead to increased modal share.
Three potential enablers to improve
investment success
There are three potential enablers that companies
and countries may want to leverage to ensure
that investments are successful and ultimately
increase modal share: applying CAPEX excellence,
enhancing digitization and analytics, and improving
governance and incentives.
Applying CAPEX excellence
Some rail infrastructure projects may incur
budget overruns or encounter delays, and this
phenomenon is a Europe-wide issue. Overruns
and delays are often caused by five challenges:
financial complexity, planning difficulties, a complex
stakeholder environment, procurement risks, and
internal project-management challenges. Applying
CAPEX excellence can mitigate these challenges.
For instance, stakeholders can ensure that there
is a structured process for value creation from
origination to commission, by applying several
techniques such as lean construction and integrated
planning. They can also implement the right
governance and monitoring systems to track the
production pipeline, profitability, resource utilization,
and physical progress.
Leveraging tools such as digital twins and five-
dimensional building information modeling (5D BIM)
can also help to optimize processes. 5D BIM is a
digital representation of the physical and functional
characteristics of a project. It allows users to create
models that demonstrate how changes to materials,
layout, square footage, and other design elements
not only affect the appearance of a facility, but also
the cost and schedule of construction.
These tools help to detect project deviation in
construction accurately and timeously. They also
31 “Digital America: A tale of the haves and have-mores,” McKinsey Global Institute, December 1, 2015.
8 Safe, smart, and green: Boosting European passenger rail’s modal share
offer features such as agile engineering, field
virtualization, and advanced operations including
incorporation of advanced analytics, big data, and
automation.
Typically, CAPEX-excellence programs can realize
savings that could be reinvested to increase modal
share through other projects.
Enhancing digitization and analytics
Even though countries and companies understand
the value of digitization and analytics, not all have
actually put it at the forefront of their strategies.
McKinsey’s Global Institute’s Industry Digitization
Index provides evidence that the transportation
and logistics industry shows relatively low levels of
digitization.31
Rail companies could leverage digitization and
analytics to improve performance in the following
five areas:
— Process optimization and asset management.
For instance, real-time fleet management and
predictive maintenance can drastically improve
efficiency and reliability. Companies have
already started leveraging advanced analytics
for predictive maintenance and construction
planning. One European rail infrastructure
provider reduced the number of trains affected
by construction work by 10 percent through
analytics-driven closure allocation.
— People management. Digital performance
management can create transparency around
performance, and ultimately drive customer
satisfaction. Companies can also use automated
planning systems, for example to allocate shifts
and tasks for maintenance workers, to increase
predictability.
— Network strategy. Companies can leverage
advanced analytics and scenario modeling to
create a holistic network design that can unlock
economic potential and maximize timetable
efficiency.
— User experience. Companies can improve user
experience through providing improved facilities,
such as high-speed WiFi, or partnering with
MaaS suppliers to provide door-to-door trip-
manager apps that increase ease of use.
— Customer analytics, pricing, and optimized
payments. Companies can use analytics to
effectively target customers through the right
pricing schemes, and enable a seamless journey
from a payment perspective. Rail companies
can learn from their airline counterparts,
particularly regarding how to target customers
more effectively, increase user satisfaction, and
reduce churn.
Improving governance and incentives
Governance for rail-infrastructure projects may
sometimes be characterized by low effectiveness
in project steering and limited incentives to save
costs, or inaccurate estimates, all leading to
delays and cost overruns. Some issues could also
center around under-resourcing, a limited focus on
continuous improvement, a lack of transparency on
progress and bottlenecks, and complex stakeholder
management.
The following example illustrates the factors
involved in setting incentives. In 2014, the
modernization of the EU public procurement
framework strengthened the concept of the Most
Economically Advantageous Tender (MEAT) criteria
when awarding contracts.32 MEAT takes into
consideration aspects other than the lowest price,
whereas price or cost criteria remain key factors
that influence contract choice.33 Contracts could
therefore consider quality-price ratios, in addition to
costs, to ensure best value for money.
Good governance will involve a crisp definition of
overall organization and project scope, detailed
role descriptions and a precise team structure
for each type of project, clear processes for how
different units should work, explicit interaction and
32 Anna Lupi, “The use of MEAT," Forum on Competitiveness of the European Rail Supply Industry, European Commission, October 5, 2017.
33 “MEAT principle: a more sustainable approach to public procurement for infrastructure,” Construction Project Europe, September 4, 2018,
construction-products.eu.
34 IONITY website, ionity.eu.
Safe, smart, and green: Boosting European passenger rail’s modal share
decision-making processes, as well as investment
in capability building to sustain new, more agile
ways of working. In addition to a strong governance
setup, projects can benefit from rigorous control of
financial metrics, and to make sure that transparent
KPIs are in place.
Optimizing modal share could benefit
from international collaboration
The European rail industry is well placed to deliver
smart and green transportation. Funding is
available for projects that will increase modal share
and sustainability. However, improvements on a
country-by-country basis could lead to suboptimal
results. International collaboration can help achieve
optimal results across the three dimensions of
CAPEX excellence, digitization and analytics, and
governance and incentives.
— CAPEX excellence. In the late 1990s, the
construction of a key European freight corridor
ran over time and over budget. Delays in
construction, particularly of critical connections,
led to decreased capacity, with fewer trains
running than originally planned. In this instance,
greater collaboration across countries could
have led to increased project and investment
efficiency.
Pooling funds internationally and aligning
planning between operators and authorities
across countries can help support faster growth
and greater cost and time efficiencies. The
automobile industry provides a private-sector
example of such an approach. In 2017, several
automotive manufacturers created the joint
venture IONITY to rapidly develop a high-
power charging network for electric vehicles in
Europe and enable growth in electric vehicle
sales. IONITY also provides compatibility
across vehicles, and an intuitive and consistent
experience for customers.34
9
 — Digitization and analytics. As noted in
McKinsey’s “Digitizing Europe’s railways: a call
to action,” stakeholders may need to change
the way the industry operates to accelerate the
digitization of Europe’s railways. The pace of
overall digital progress across Europe is slow,
in ERMTS for example.35 Furthermore, multiple
rules regarding traffic operation still co-exist,
and on the manufacturing front, original
equipment manufacturers (OEMs) use different
technology platforms. In other industries, players
across the value chain combine their digitization
efforts. For example, multiple premium-car
OEMs use HERE Technologies, that provides
mapping and location data, to combine their
work on autonomous vehicles.
on certification of rolling stock, leading to
high costs and slow adoption. This raises the
question of whether a train manufactured in
France still requires an extensive certification
process in Germany. In an optimal pan-
European setting, regulation for certification
(and other processes) that was set at a
European level with sufficient trust and
standardization among countries could help
reduce such duplication of efforts.
Greater international collaboration could help
set the industry on a path of transformation,
and ensure that each country’s investments
yield optimal results.

The railway industry could choose to set itself

a truly European ambition for example, a single
digital infrastructure for Europe by 2050. This
might help companies and countries reap the full
benefits of digitization and analytics.
— Governance and incentives. Companies and
countries are sometimes incentivized on a
national level, which may lead to regional
inefficiencies, thereby increasing the costs
of the system as a whole and negatively
impacting the price of transit. For example,
national standards are sometimes enforced
The European railway industry has potential to
significantly improve passenger rail’s modal share,
but decision, action and cooperation are needed
to make this a reality. There is clear momentum
across countries to invest in rail as a sustainable,
smart and safe means of transport, and there are
examples of success for decision makers to learn
from. Companies and national authorities could
benefit from taking action now to evaluate the
impact of their actions on modal share, collaborate
across borders, and define a strategy towards a
path of sustained rail growth.

Anselm Ott is a consultant in McKinsey’s Düsseldorf office; Nicola Sandri is a partner in the Milan office; and Luuk
Speksnijder is an associate partner in the Amsterdam office, where Koen Wolfs is a consultant.

The authors wish to thank Theo Delporte, Andrea Ricotti, and Lex van der Vegt for their contributions to this article.

Copyright © 2021 McKinsey & Company. All rights reserved.

35 European Rail Traffic Management System (ERMTS): ERMTS is the European standard for Automatic Train Protection (ATP) and command
and control systems. It is a safety system that enforces compliance from trains with speed restrictions and signaling status. It creates an
interoperable railway system in Europe.

10 Safe, smart, and green: Boosting European passenger rail’s modal share