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Globalising transport

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Page context: Home > Transport International Magazine > Issue 9 August 2002 > Globalising transport

ITF Assistant General Secretary STUART HOWARD analyses the massive restructuring of the world’s transport industries that workers and their unions face.

Governments are getting out of the transport business, which they no longer regard as a core responsibility. In the last few years transport has been transferred out of their hands and into those of international transport companies and supply chain managers.The procedures of national transport planning have been replaced by the dynamic of ferocious local and international competition between private commercial interests.

The privatisation of airlines has been joined by the privatisation of airports and even air traffic control. The ongoing privatisation of ports and terminals and port services continues across the world. Public transport services in town after town, and in country after country, continue to be handed over to private operators (large and small). Attention has now turned to the railways too.

Privatisation, often actively promoted by the World Bank, has led to the demise of many shipping, airline and rail companies (particularly in developing countries) and to their routes or assets being absorbed by the global operators.

FirstGroup is collecting assets in rail and bus services in different countries. Some companies, like the French conglomerate Vivendi, have built up international portfolios which include entertainment and utilities as well as transport.

International investment has also been about some transport operators building themselves into large global players offering global transport networks. In the new environment of cut-throat competition, the traditional industry response has been consolidation. Mergers and alliances between companies become particularly critical when transport operators now see as the key to their future their ability to provide a comprehensive global (or continental) route network.

Airlines continue to develop global airline alliances, such as Star, Oneworld and Skyteam. Huge container shipping lines such as Maersk Sealand or P&O Nedlloyd have come out of alliances, mergers and acquisitions. In both cases this industry concentration has been mainly motivated by the need for economies of scale and to be able to provide global route networks. Some cross-border railway investment, such as the German-Dutch rail freight operation Railion, reflects the start of a shift from national to continental route networks and access to key routes, in this case the German rail network’s need for a link to Rotterdam. For trucks the abolition of cabotage rules, which formerly restricted the right of trucking companies to operate delivery and pick up networks across international borders, now allows continental road haulage route networks.

So, transport companies are increasingly becoming both international and intermodal with investments running through shipping, ports, trucking and rail. Companies like Maersk Sealand link their port terminals to their own road and rail operations. Rail operators like the high-speed European rail consortium Thalys are signing ticketing alliances with airlines such as American Airlines as intermodal global route networks begin to emerge.

Airline alliances and international container shipping companies operate their global networks between key airport and port hubs from which they pick up feeder traffic. Much major transport infrastructure investment is currently focused on giant port terminals or huge airports which aim to grab first place as the key hub for a whole region or continent. In the race for the huge amount of funds, equipment and operational skills needed to compete as such a hub facility, airports and ports themselves are becoming transnational operators. Transnational airport companies, like BAA and Copenhagen Airports, are investing in, and pursuing management contracts in, airports in countries from Mexico to Italy.

Global seaport terminal operators like PSA and Hutchison are buying into terminals in key port hubs in different countries. When Maersk Sealand put US$200 million into building a brand new port terminal at Salalah in Oman, it drained 40 per cent of the container traffic away from Dubai (but Maersk Sealand saved four days’ sailing time for its Europe to Asia delivery route). Rail and road routes and freight depots are increasingly being oriented to this system of regional hubs. Rotterdam’s position as the key European hub port is being consolidated with the construction of a dedicated freight rail link from the Dutch port to Germany.

Negotiations between states forming regional or sub-regional markets are vital to this process. Liberalisation goes fastest where there is regional integration. A massive process of standardisation is taking place to allow these regional markets to function. Regional bodies from the European Commission to the Southern African Development Community have gained a growing importance as the venue in which the rules for transport are increasingly set. Ownership rules, technical standards, maintenance requirements, the gauge of railway track, the control of air space, the creating of rail corridors – there is a mass of rewriting of rules.

There is also a well financed, highly organised lobby of the transport industry (transport operators, freight forwarders and logistics companies) aimed at making sure that when new international or regional standards are set, it is the most liberal, least restrictive and least costly set of rules that will be applied. The last few years have seen nothing less than a huge project for the dismantling of any and all regulatory barriers against an unhindered, seamless global transport system.

There is currently enormous pressure to use negotiations in the World Trade Organisation to push for a full opening of transport markets. Such moves would once more unleash ferocious competitive pressures on transport operators and result once more in massive downwards pressure on workers’ conditions.

All of this restructuring of the world’s transport systems is aimed at delivering a high speed, high volume transport system at the lowest possible cost. It focuses on large hubs and profitable trunk routes. It fragments the industry into specialised providers of maintenance, catering, security, supplies, loading, and so on which are increasingly operated by subcontractors which are meant to develop their own economies of scale rather than bind together into a coherent system. In aviation these subcontractors are rapidly becoming transnational operators themselves. A company like LSG-Sky Chefs now provides flight catering in just about every major airport in the world, for example. Globeground was set up by Lufthansa as a transnational airport services company.

Increasingly lost in this vast process of global change are the public service and the local economic roles of transport, particularly in passenger transport. Privatised operators are primarily accountable to shareholders, not communities. Coherent urban transport systems have been smashed and replaced by a system of competing fragments oversupplying in the profitable parts of transport and undersupplying in the unprofitable but often socially and economically important parts. In some developing countries large public bus companies have been replaced by hundreds of one person operator bus services. In Sri Lanka, 94 per cent of the country’s formerly publicly owned 16,000 buses now belong to owner-operators running one bus each. Bus services have effectively become part of the informal economy.

The new dynamics and structure of transport have hit workers before anyone else. The process of global restructuring, along with the massive pressures to lower unit costs, have led to a wholesale assault on employment conditions and union rights. The shipping industry was the first industry in the world to truly globalise. National identity and national laws were rendered meaningless through the flag of convenience system. This has allowed shipowners to crew up from around the world from countries where supplying cheap labour to the world’s shipping industry has become a major industry in itself. Labour costs at sea have been driven as low as possible.

The pressure to reduce costs has been moving along the transport chain. There is already pressure mounting to allow an FOC type system to enter into air cargo. We have seen a major assault on unions in the ports and the reintroduction of unregistered labour there. For truck drivers the pressure is to drive for longer hours to tighter deadlines. Airline crews work longer hours with smaller crews. Ground staff have to provide faster turnarounds. Rail crews are cut, maintenance skimped, training pared to the minimum. Costs are saved by reducing numbers of staff, outsourcing work to low cost providers, and reducing standards of training.

For many years, unions have often appeared a lone and embattled voice while these changes have swept over our industries. In too many regulatory meetings on safety and operational standards, the ITF has appeared as the only voice calling for higher rather than cheaper standards. In too many cases, governments and regulators have apparently given a higher priority to liberalisation than to safety.

Transport is an industry of inevitable growth (despite the impact of events like 11 September 2001). Yet, as a result, it is also an industry placed under extreme pressures of demand. Air and road congestion will not be resolved by market forces, and neither will environmental standards be protected nor safety and security standards guaranteed.

The growing sense of crisis in the transport industry is likely to see the voice of the public and even that of business added to that of the unions in calling for some form of re-regulation. This will not be a call for a return to the old style regulatory and ownership regimes. It is much more likely to be for more targeted areas of government regulation and oversight. This is what we have previously called “smart regulation”. The question is how fast will the industry and governments be in getting smart?

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Issue 9 August 2002

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