Poland Freight Transport Report Q3 2009

In April 2009, it was announced that a number of private rail freight companies had launched a trade body in order to protect their interests. The move comes as a price war between state-run PKP Cargo and Germany's Deutsche Bahn (DB) threatens to destabilise the sector. According to local sources, PKP Cargo can drop its prices very low and then ask the state for a bail-out. DB is also state-owned and so also benefits from anti-competitive advantages. With DB in the process of taking over the second largest rail freight company in Poland, PCC, there is the possibility that a duopoly will be created in the market, which would be detrimental to private competition. Meanwhile, the fact that PKP Cargo is part of a single group with state-owned railway company PKP Polish Railway Lines is also considered unfair by some rivals. After all, PKP Cargo owns the majority of cargo terminals in the country and other operators have to submit applications to use the terminals, up to 30 days in advance. Meanwhile, prices for accessing the country's rail infrastructure are considered to be prohibitively high.

However, not all commentators agree with the creation of a trade body and believe the rail operators should combine to take on the road haulage industry, which is the biggest competitive threat. Also, instead of the Polish Parliament agreeing to a PLN1.5bn bailout for PKP Cargo, there are calls for the money to go to PKP PRL, which could spend the money improving rail infrastructure, which would benefit the entire sector. In 2008, PKP Cargo announced losses of PLN200mn.

Meanwhile, In June 2009, it was reported by Puls Biznesu that Polish airline LOT was planning to sell stakes in a number of its subsidiaries in order to service debts. New CEO Sebastian Mikosz is reportedly considering divesting its 3.3% stake in gambling group Casinos Poland, as well as three companies that specialise in airport servicing. The firm will ask for permission for the sales of assets at the upcoming general shareholders meeting. Meanwhile, Poland's Treasury Ministry in combination with state-run investment fund Silesia, have recently purchased a 25% stake in LOT. The shares came from bankrupt airline Swissair. As a result, LOT is now 93% owned by the Ministry and Silesia. However, the purchase is seen by many as smoothing progress for the takeover of the airline, with Germany's Lufthansa one of the reported suitors. When asked about the rumours at a recent airline meeting in Kuala Lumpur, Lufthansa CEO Wolfgang Mayrhuber denied that the company was in negotiations with LOT.

Leading indicators suggest that while the Polish economy may have sidestepped recession during the first quarter of 2009, the collapse in consumer spending in the following quarters will likely tip the economy over the edge by mid-year. Moreover, though our global outlook projects an economic trough in H109 for most developed markets, we believe that the Polish economy will bottom out in Q209-Q309, and will enjoy a fairly spritely recovery thereafter. We now expect GDP to fall by 2.7% in 2009 (versus a +3.5% projection made in our last quarterly report). We see a recovery with 2.8% expansion in 2010, and growth of 4.3% in 2011. The effect on our freight traffic forecasts for the period as a whole, compared with the preceding one, is therefore negative.

Poland registered a 21.9% year-on-year (y-o-y) slump in the mass of loads lifted to 52.7mn tonnes in Q109. In the same period, the country recorded a 28.8% y-o-y plunge in mass of loads moved to 8.7bn tonne-kms. Polish Railway Cargo (PKP Cargo) registered 35.4% and 38.2% y-o-y declines in mass of loads lifted and moved respectively in Q109. In Poland, the transport sector is not significantly different from elsewhere in Europe, whereby freight is dominated by the private sector but passenger transport remains within state control and ownership