Best Methods of Railway Restructuring and Privatization by Koichiro Fukui Murray King Jorge C. Kohon Jan-Eric Nilsson

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Restructuring assets involves first profiling the distinct markets that the predecessor railway served and then determining which of these markets, or which others, successor rail-based companies should serve. The overriding principle should be to enter into or to sustain business commitments only in markets in which available assets can be used to provide lower cost or superior quality service vis-à-vis competitors. Rail-based enterprises that emerge from this process are defined within market boundaries and by specific customer needs within these boundaries.

Because the profitability of the various Shinkansen services differed significantly, the Supervisory Committee felt that an intermediary was needed to redistribute net income among the JRs on the basis of joint ownership shares. The Shinkansen Holding Corporation was established for this 24 purpose. Each of the six passenger JRs leased assets from this jointly owned company, which operated trains over the entire network. A number of distinct contractual arrangements involving the separation of ownership and track use rights have evolved in North America.

A primary design criterion in Great Britain was the creation of competition within distinct rail functions. The radical restructuring of British Rail tests the conventional wisdom that single operator control and vertical integration are essential to rail network connectivity, efficient train and equipment control, and economies of scale in railway operations. The British Rail experiment with unbundling turns these assumptions on their head and substitutes a fundamentally different paradigm — one based on competition in every function, on open entry, on auctioning of asset use rights, and on train operating control through a central track authority.