The start of domestic flights by Ryanair in Poland is turning up the heat on the country's state railway, which is spending 36 billion zloty (€8.6 billion) over seven years to modernise as competition for customers picks up.
PKP state railway is accelerating investment to shorten travel times and win passengers with its biggest infrastructure upgrade since communism ended in 1989, according to Bloomberg.
The company has bought Alstom's high-speed Pendolino trains, which it will start rolling out on its main routes next year, when Ryanair is scheduled to start flights within Poland.
A unit of PKP will sign a deal this month to sell 1.5 billion zloty of six-year notes to the country’s development bank to upgrade train tracks, its chief executive emigiusz Paszkiewicz said earlier this month. Another PKP division is selling 500m zloty of bonds to help build the train’s power-supply system.
PKP needs to find investors for rail projects co-financed the European Union as part of the bloc’s 2014-2020 budget. In the EU’s previous seven-year spending plan, ending on December 31, the company signed deals for 25 billion zloty of train-infrastructure projects, including 12 billion zloty in EU subsidies, a Regional Development Ministry report said in April.
PKP Energetyka, the unit handling power investments, is selling bonds to Bank Gospodarstwa Krajowego, the state development bank, and ING Bank Slaski SA to help build infrastructure for the Pendolino trains.
The new sleek, streamlined trains will travel as fast as 230 kilometers an hour, while Poland’s current locomotives have a top speed of 160 km an hour, according to data from the Transport Ministry’s website.
The 340km journey from Warsaw to Gdansk on board the Pendolino will be cut in half to two hours and 40 minutes, compared with as little as two hours and 15 minutes for the 495km rail route between London and Paris.
The first Pendolino will depart from a Polish station in December 2014 and ticket prices will start from 49 zloty, according to PKP Intercity’s website. Ryanair will start flying between Polish cities in March, charging from 99 zloty per ticket, the company said.
Train traffic in Poland has dropped 24% in the past 12 years to 273.9 million passengers in 2012, according to the country’s rail transport authority. The drop compares with an 87% increase of domestic-flight passengers between 2010 and 2012, data from the Civil Aviation Authority show.
Poland, with 38 million people and a per-capita income of $10,500, has “room to grow” its airline business, Ryanair’s chief operating officer Michael Cawley told reporters in Warsaw last month.
About 30 million passengers per year fly to and from Polish airports, compared with 200 million in Spain, which has a similar population and annual income of $25,000, he said.