Operail cost cuts risk Estonia's rail capacity

Operail cost cuts risk Estonia's rail capacity
© Operail

Railway company Operail has cut operating costs as much as possible, but continued to operate at a loss in the third quarter.

In order to make the company profitable, the management is looking for ways to expand into foreign markets. However, cross-sector cooperation and political leadership are needed to ensure the sustainability of rail transport in Estonia.

In the first nine months of 2023, Operail transported 1.5 million tonnes of goods in Estonia, which is 68% less than in the same period last year. Operail's operating income from freight transport in the first nine months was 16.9 million euros - 43% less than in the same period last year. "Freight volume in tonnes has decreased more than revenue - we have done our best to maximise revenue in difficult circumstances," said Raul Toomsalu, the group's CEO.

While the decline in volumes was caused by sanctions against Russia and the end of non-sanctioned Russian freight, the problem now is the high cost price of rail transport in Estonia compared to both domestic road transport and rail transport in neighbouring countries. "For example, there was no multimodal transport of Estonian grain this autumn because the harvest was small and it was transported by truck," Toomsalu explains.

Operail has significantly reduced its cost base to adapt to the difficult circumstances. The group has laid off half its workforce. It has abolished night shifts at stations, stopped servicing smaller stations, closed local maintenance stations and replaced them with mobile repair and maintenance teams, and retrained staff to perform the tasks of several existing positions.

In order to return the company to profitability, it is therefore necessary to increase the revenue base. Operail plans to invest the proceeds from the sale of assets at the beginning of the year in strategic expansion. "We are looking beyond Estonia," Toomsalu concludes.

Join Our Circle of Insiders: Receive the Weekly Digest That Keeps You Ahead!

Not using RAILVIS Platform yet?

Rent a wagon, sell a locomotive, find a container, convert free capacity to profit. The RAILVIS Platform is the tool you need. It's faster, better organized, and more secure than email or phone calls.

Try RAILVIS Railway Marketplace
RAILVIS screenshot