Regional Railway Service in Lombardia
An Overview

Written in October 2008, updated in December 2008 and in April 2009 (no more tendering for regional railway services)

Per i lettori italiani: questo articolo sintetizza il contesto normativo e contrattuale dei servizi ferroviari regionali della Lombardia, ad uso dei lettori stranieri. Molti articoli in italiano già trattano questi argomenti: i principali sono La riforma delle ferrovie, Il servizio ferroviario regionale della Lombardia, Liberalizzazione: a che punto (non) siamo, e Trenitalia 2007/2008, l'anno senza svolta. Come materiale di riferimento a questo articolo, è disponibile un file Excel con i dati principali del servizio ferroviario lombardo, che può essere utile anche ai lettori italiani.

Railway Service Overview

The population of Lombardy Region is about 9 millions. Milan has a population of 1.3 million but this increases to approximately 3.8 million when including the surrounding conurbation.

The Milan heavy rail network is a radial/through-running hybrid network shared by suburban service (Servizio Ferroviario Suburbano) and regional service (Servizio Ferroviario Regionale). The Suburban Railway Service currently consists of 8 "S lines" (though this is set to increase to 12 in the final configuration) and serves the 'Greater Milan' metropolitan area. The Regional Railway Service links Milan with the rest of the Region and joins the national railway network. The network is also shared by long distance services (Intercity, Eurocity, Eurostar) to other major Italian cities, which mainly use Milano Centrale as an hub.

The Ministry of Infrastructure and Transport has the power to grant licenses to national passenger and freight services. However, currently the only national operator for passenger services is Trenitalia which is wholly owned by FS Holding (Ferrovie dello Stato - Italian State Railways) which is itself wholly owned and controlled by the Ministry of Economy and Finance. For freight services, some operators different from Trenitalia manage about 11% of total trainkms of Italian freight traffic (additional charts and a list of operators are also available).

The passenger rail network in Milan has been recently augmented with the Passante cross city rail tunnel, the final section of which was opened on Dec 2004 (to the East) and on June 2008 (to the South). The tunnel allows through-running for north-western to south-eastern suburban services and better integration with the metro service.

Although the 'Greater Milan' area is served primarily by the railway suburban/regional services, the city's public transport authority (ATM - Azienda Transporti Milanesi) runs an extensive network in the city and metropolitan area, as well as a metro system, with three lines in a cross pattern through the city. The Milan metro system is about 74 km long (51 km underground) and has 87 stations (74 underground).

Contract Overview

Service contracts between Regione Lombardia and Railway Undertakings are of the net cost type, i.e. both regional subsidy and incomes from fares are used to cover the costs of railway service.

Also all other Contracts between Trenitalia and Italian Regions are of the net cost type, except for the Province of Alto Adige (Südtirol) which has followed a gross cost approach, to best fit the integrated fare system (same tickets valid for railways and any other public transport).

As regards Lombardia, regional subsidy is granted on a per km basis.

A base subsidy is defined for the whole production, existing when the contract is signed. For instance, in Trenitalia's contract a base subsidy of 184 mln Euro per year was defined in 2006 for a production of 23.5 mln trainkm, corresponding to an average subsidy of 7.83 Euro/km.

A subsidy for new services is also defined, generally a bit lower than the overall average subsidy: for instance in Trenitalia's contract this is 7.15 Euro/km.

Finally, a third subsidy is defined for bus services, when they replace the train due to works on railway network or other reasons.

The combinations of base subsidy and subsidy for new services determines the overall subsidy on a given year - and thus the average subsidy per km. For Trenitalia in year 2007 the latter is 7.77 Euro/km (weighted average of 7.83 and 7.15).

Data for contracts 2006-2007 are shown in the following table. The rightmost column shows data for the contract signed for the only tender assigned in Lombardy (Line S5). The service, based on this contract, has started in July 2008. The tender was won by a consortium formed by Trenitalia, LeNORD and ATM (urban public transport in Milan), i.e. the operators already working in Lombardy. Additional information about tenders are given in a following section.

As regards access charges to the network, in general train operating companies are required to pay access charges to the infrastructure company RFI (wholly owned by FS Holding). These charges are designed to cover staff and operations costs while renewals and investments are directly paid by the Italian State by means of a Program Contract with RFI. No access charges are presently used on Ferrovienord regional network: in this case Region has two additional contracts with Ferrovienord: one pays for the staff, operations and mainteinance costs (78 mln Euros per year in 2006-2007 contract), the other pays for investments.

Contracts between Regione Lombardia and Railway Undertakings, year 2006-2007
Parameter Trenitalia LeNORD S5 Tender
Duration 2 years (2006-2007) 2 years (2006-2007) 9 years (2008-2017)
Base Subsidy 184 mln Euro for 23.5 mln trainkm 65 mln Euro for a range between 8.4 and 8.5 mln trainkm 6.545 mln Euro for 1.90 mln trainkm
Subsidy per km for additional services 7.15 Euro/km 7.50 Euro/km 3.442 Euro/km
Subsidy per km for additional bus services 2 Euro/km 2 Euro/km 1.50 Euro/km
Access Charge (at present 2.89 Euro/km as an average value in Lombardy) Included, approx 67 mln Euro per year Not included. Applies only for services on Passante, approx 2.3 mln Euro per year. Does not apply on Ferrovienord network Not included. Approx 6.5 mln Euro per year
Property of rolling stock Trenitalia (except 16 E.464 locos, property of Regione Lombardia) Regione Lombardia (except 26 TAF Emu's, property of FNM, i.e. LeNORD's holding group) Regione Lombardia
Overall value of the contract for year 2007, according to base production and additional services 188.32 mln Euro (of which, 16.6 from Regional budget) 65 ml Euro (of which 3.7 from Regional budget) -


All subsidies in this text do not include VAT (10%) which is to be paid by each Region to the Italian State.

The large part of subsidy is provided from the State. In year 2000, when Regions received competence for regional railway traffic, the State divided the subsidy (previously given directly to FS) into different parts for each Region. The whole amount of subsidy was about 1222 mln Euro for the 15 Regions with normal constitution (Regioni a Statuto Ordinario), and about 1400 mln Euro including all 20 Italian Regions.

Unfortunately, state subsidy was never increased from the values of year 2000, thus causing budget problems to Trenitalia.

Some Regions increased subsidy, using their own budget. Among all Italian Regions, Lombardy and Tuscany provide the highest amount of subsidy from their own budget: in 2008 about 24 mln Euro, summing up Trenitalia's and LeNORD's contracts for Lombardy, and about 31 mln Euro for Tuscany. This additional subsidy covers the new services that were introduced during these years (see table 3 for details).

Nevertheless, in Lombardy, the average subsidy per km has decreased in the last years:

This is due to the effect of defining a lower subsidy for additional services. It should be noted that in year 2002 a mayor fare increase was introduced in Lombardy (between +15 and +20%). This provided Trenitalia and LeNORD with additional income from tickets, and allowed Region to sign the next a contract with a lower subsidy per km.

How to Compute a Budget for a Railway Undertaking

According to these rules, the budget of a Railway Undertaking which provides a Regional Railway service in Lombardy should count on:

With this budget, the Railway Undertaking should cover:

It should be noted that selling network (i.e. ticket offices) in Italy is provided by the Railway Undertaking (Trenitalia), and not by the Network Manager (RFI) or a separate Authority. This means that a new operator should provide its own selling network (tickets offices, ticket vending machines, ...) or sign a commercial agreement with Trenitalia.

The tender for S5 is a bit different, as the access charge is not included in subsidy (it is paid directly by Region) and there is no cost for rolling stock, as it is provided by Region, free of charge. Rolling stock maintenance is paid by the Railway Undertaking anyway.

It should be noted that also the large part of current Trenitalia's rolling stock can be considered as "provided free of charge", because it is more than 10 years old (average age 25 years), so that it was bought directly by the Italian State, before the reformation of FS and the birth of Trenitalia.

The New "Catalogue" Developed by Trenitalia

As mentioned before, starting from 2004, Trenitalia had to face serious problems to its budget. In 2007 it received an additional subsidy of 283 mln Euro directly from the State, for regional services, but this subsidy was not replicated in the Financial Law for year 2008.

In late 2007, Trenitalia presented a new method for computing subsidies, called "Catalogue". According to this catalogue, subsidy is provided on a per hour basis (instead of per km). Base price per hour depends on train size (number of places) and some extra costs are computed for trains running on night and Sa-Su. Access charge is paid separately (i.e. not included in base cost), and also selling network and other additional services are paid separately.

The catalogue uses a gross cost approach. It states all costs, then fare income is subtracted from costs, and the difference is the subsidy which is asked to the Region.

Costs contained in the catalogue are much higher than previous per km subsidies, so that total subsidy for Lombardy should increase by 38% if the catalogue is applied.

At present, it is not clear whether the catalogue will be used or not, because no additional funds are provided from the State to the Regions, and no Region in Italy is able to pay for a 30-38% extra subsidy from its own budget.

Should the State provide extra subsidy to the Regions, also the base subsidy would increase, so that what is now 7.82 Euro/km will probably become 9.50 - 10.50 Euro/km or so (of course an equivalency can be found between cost per hour and cost per km).

In the first months of 2008, the Italian State provided additional funds: 80 mln Euro in April and 300 mln Euro in June, on a national basis. Nevertheless, this subsidy was not divided on a regional basis, and was given directly to Trenitalia (and FS holding): such an approach is obviously ambiguous and in contrast with the competence given to the Regions for regional transport. At present, Regions cannot count on such funds and Trenitalia is still asking them to pay railway service at the "catalogue" price, threatening to reduce service in the Regions that will not accept the new price.

Furthermore, as these funds were given only for year 2008, no additional subsidy for year 2009 is available at present (October 2008): what will happen next year is even more unclear, and a reduction in the quantity of regional trains is no more a theoretical question.

Update December 2008. With a new law (Decreto-Legge No. 185, 29 November 2008) the Italian State has finally provided additional 480 million Euros per year, for years 2009, 2010 and 2011. This additional subsidy should cover Trenitalia's contracts towards Italian Regions (with ordinary constitution) and the State. Actually, it should be noted that a contract also exists between Trenitalia and the State, in order to support some long distant services, mainly night services between North and South; its value in 2007 was 234 millions; additional 104 millions were given in 2008, to support also many Intercity trains, which, according to FS, could not be run using only the incomes from tickets.

So, the new 480 millions (except a part which may be used for long distance traffic) will increase the present regional subsidy of 1222 millions per year, mentioned above. As in too many other cases, first money is given, then somebody is going to state how it should be used: the law says that the Ministry of Economy has to approve a subsequent act that divides new funds among Regions, within the next 30 days. This should make it possible to sign new contracts between Trenitalia and each Region, and should also prevent Trenitalia from reducing service. Upon all this, however, there is the problem of tendering regional services, that will be discussed in the next paragraph.

What About Tenders?

Regional transport has been radically reformed over the last 10 years as regionalisation has resulted in the transfer of legislative responsibility for the transport sector to the regional governments (see DLgs 422/97, available in Italian in the law reference section). In general the Italian government has devolved competence over local rail transport to the regions, which includes the granting of concessions to railway operators via a competitive tendering process. Therefore, Regione Lombardia is the regional authority responsible for tendering all rail services on the regional network.

Unfortunately, this is theory, not real life: tendering of the whole railway services in a Region is almost impossible if the current rolling stock cannot be transferred to the winner of the tender. This is precisely the case that occurs in Italy, as the current rolling stock is in the property of Trenitalia, as it was given to it when Trenitalia was established (although the great majority of trains was paid by the State in the previous years). In order to preserve its monopoly, Trenitalia will never accept to give or sell any train to a new operator. This may appear as a peculiar situation, if we remember that Trenitalia is still totally owned by the Italian State (and so it should not act as a "normal" private company trying to defend its market share), but this is exactly what is happening. In such a condition, a tender would lead to an unfair competition (if the Region does not provide rolling stock to other competitors) or to very high costs (if the Region buys rolling stock by itself, as for S5 in Lombardy). Of course a complete substitution of rolling stock for the whole Region would have almost unacceptable costs.

In such a situation, most Regions simply ignored the law, and did not make any tender. The only tenders started in Italy are the following:

A tender for Liguria, once again similar to Emilia-Romagna, was cancelled in 2004. The other two tenders designed in Lombardy in 2004 (Milano-Molteno-Lecco and Brescia-Edolo) were not explicitly cancelled, but the Region has never asked for offers.

Update December 2008. At present tenders are still required by the Italian law, and even the new European Rules 1370/2007 do not modify the situation, as in Article 5, they state that tender are not required only if the national law does not require them, and this is not the case of Italy. On the other hand, however, Trenitalia is asking Regions for a six-year contract. Without additional funds, it was not possible to sign any contract, and in fact only the Province of Trento signed a contract in Autumn 2008, but this is a particular case, as this Province has a special constitutions (Provincia Autonoma) and much more money. But now that new funds are available, as described in previous paragraph, new contracts are very likely to be signed, and the age of tenders is probably becoming further away.

Finally it should be noted that a law in year 2007 stated that tenders are no more required for those long distance services which receive a subsidy from the State (the so called Servizi Universali, see details, in Italian).

Update April 2009. No more tendering for regional railway services!

This is not the happy ending, unfortunately. Or it is. It depends on the point of view, of course.

A new Italian law, issued on April 9, 2009, adds a detail to the previous law that deals with local public transport (i.e. D.Lgs 422/97, see the original text, in Italian.). The new paragraph says that every contract of service regarding railways must have a minimum duration of 12 years (more precisely, 6 years that can be renewed for additional 6). The law states that this applies, whatever is the mode of assignment of the service to the operator, with or without tendering.

At present, April 2009, no Italian Region has a contract with Trenitalia (except the special cases we have discussed before). Nevertheless, the availability of additional subsidies from the State has created the conditions for signing new contracts. Furthermore, the Law that assigns these subsidies states that they are explicitly addressed to sign contracts with Trenitalia, and that subsidies will be granted to Regions, only after having signed such contracts.

Adding a new constraint on duration of contracts automatically confirms that during 2009 all Regions will sign contracts with Trenitalia, that will expire as late as 2021. This can be assumed as the end of tendering of railway services in Italy, at least for the next decade.

The text of Law 33/2009 can be found in the corresponding article, in Italian, dealing with tendering of Italian railway services. It is worth to mention that Law 33 is not a law specific for railways. It is a huge and confusing collection of hundred of things, modifying tens of other laws. We firmly believe that it represents one of the lowest points of Italian legislation.

Reference and Explanation of Tables in Excel Workbook

Main figures about Regional Railway Service in Lombardy are summarised in an Excel Workbook. The following paragraphs explain the contents of this workbook.

Table 1 - Trainkm per Year and Passengers per Day

This table gives an overview of current production of Trenitalia Regional Services under contract with Regione Lombardia.

Few bus services (4% of total kilometres) are under contract too, as replacement for trains on some lines/hours.

Passengers are reported as an average value of Mo-Fr data in winter period (approximated values!).

Passengeskms are computed on the basis of Mo-Fr, Sa, Su data for two months of each year: Jan and Jul. Jan data are used for winter period (38 weeks) and Jul data for summer period (14 weeks). They represent approximated values of real traffic, but can be used as a "truthful" reference.

Table 2 - Access Charges on RFI Network

These are overall values for all regional services in Lombardy, with some specific examples.

Access charges are computed according to DM 43T (see RFI's Network Statement for details), as a sum of charges for main lines, secondary lines and metropolitan areas (i.e. Milan in Lombardy).

The more a metropolitan area is involved, the highest is the resulting charge per km: this is why the charges for S Lines are generally much bigger than the charges for other services to Milan, and the latters are bigger than the average charge for the whole Region.

Data refer to 2006. Current charges may be higher, due to increased RFI's fares.

Table 3 - Growth of Regional Services under Contract with Regione Lombardia

This table shows the growth of production registered in Lombardy during past years.

The highest increase occurred between 2004 and 2005 due to the introduction of the S Lines (Dec 2004).

Additional increases are planned for the next years (complete accomplishment of S Line system), although they are still correlated to the availability of enough subsidy by Regional Government. At present (Autumn 2008), unfortunately, no additional subsidy for new services is available in the Regional Budget.

Table 4 - Performance of Railway System: Number of "Bonus" per Year and Line

In order to give an overview of the performance of railway service, we can use the number of "Bonus".

The Bonus is a 20% discount of the price of monthly tickets, which is granted to commuters when their line does not achieve a predetermined level of a quality index (indice di affidabilità). This index takes into account:

The highest the number of bonus per year, the lower the performance of the line. Of course the maximum number of Bonus per year and line is 12.

Table 5 - Fares

This table shows all fares available for regional trains in Lombardy. Trenitalia and LeNORD share the same fares, the so called TUR (Tariffa Unica Regionale).

For each kind of ticket, the cost per km and the discount with respect to standard ticket, are given.

No kind of half price ticket (Halbtax-Abo) is available in Lombardy (and in Italy too). 1st class tickets are available but their use on regional trains is almost negligible. Only direct trains (similar to DB's RE) have 1st class. 10-trip ticket is available but not widely used.

The monthly ticket with bonus (see table 4) grants a 20% discount. TrenoMilano is a monthly ticket which includes also the whole urban network in Milan. Bus+Train tickets for small/medium/large areas (see bottom box) are available only as weekly tickets and are not widely used.

According to regional law, fares are increased every year (in August) of 75% of the average inflation. Inflation in Italy is about 2.5% per year, so the average increase is around 1.8%. In year 2002, as mentioned before, a mayor increase in regional fares was applied. In 2008, inflation has increased, so a 2.5% growth of fares was approved.

Table 6 - Distribution of Passengers according to Distance and Type of Tickets

These percentage values try to focus on how tickets are spread according to distance and can be used as an approximate reference. They do not include:

The leftmost table shows distribution of tickets according to distance, the rightmost table shows distribution according to the type of ticket.

Combining the price per km (table 5) with these distribution, you can compute an average income per passengerkm: this value is 4.72 Eurocent per passengerkm.

It should be noted that this can be considered as the upper bound of income, because bonus, TrenoMilano and year ticket have a lower cost per km, so they decrease the average income.

Other data show an average income of about 4.00 Eurocent per passengerkm in year 2006.

The "reasonable" value is therefore somewhere between 4.00 and 4.72 Eurocent per passengerkm.

Main Issues on Italian Regional Service

It should be noted that the number of passengers, and thus the income for passengerskm, are the result of a low quality service, which is mainly addressed to traditional commuters (peak-hour travels only). It suffers from a lot of issues, which include:

It is clear that improving these aspect and introducing the service already planned (first of all completing the S-Line system) should cause an increase in passengers and incomes.

Related articles

Regional Railway Service in Lombardy - Our History

Contains a complete overview of Regional Railway Service in Lombardy (past, present and future). Text is in Italian but most pictures have English captions. Also contains detailed maps of present and future service (including S Lines).

External Links

Infrastructure Manager RFI

Rules issued by RFI:

Detailed data for each line of RFI network (click on a Region and then select a line):

Network Statement (available also in English): -> RFI -> Clienti e mercato -> Prospetto informativo della rete

Official site of Transport Department, Regione Lombardia (Italian only):

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