Liberalisation and competition in Spain’s railway network

The Spanish Regulator approves the operation of high-speed passenger trains in USO routes.

Spain is an interesting case study for other European countries that are experiencing an increase in rail competition following the liberalisation of the Spanish passenger high speed railway sector that started with the entry of Ouigo (a SNCF company), along the Madrid-Barcelona route, in May 2021. In November 2022, Iryo, a company owned by Trenitalia and shareholders of Air Nostrum,  also started to run its trains on the same line. Economic theory and experience from other jurisdictions indicates that competition can promote a reduction in ticket prices and an increase in traffic volumes. In Spain, this is being observed currently. According to the Trainline platform, the average ticket for  Madrid-Barcelona is now 43% cheaper compared to the situation prior to liberalisation.

Looking at passenger traffic, the increase in the Madrid-Barcelona route is notably larger than that of the Madrid-Valencia and Madrid-Seville routes. The latter two routes did not  experience competition over the first quarter of 2021 or the third quarter of 2022.

However, in addition to the benefits brought by liberalisation, which we have observed in other sectors such as telecommunications, competition can also generate friction between companies. Therefore, the role of the regulator is important not only in order to establish the conditions for competition to develop, but also to adequately resolve any conflicts that may arise between operators.

In the context of Iryo's recent entry into the routes where Renfe operates under a universal service obligation (USO) , i.e. Madrid-Cuenca, Madrid-Albacete, Albacete-Cuenca y Barcelona-Camp de Tarragona, the CNMC assessed the potential competitive impact that the new operator could have on Renfe. To do this, it compared the characteristics of Iryo’s services (journey time, price and frequency) with those of the services operated by Renfe subject to USO. The CNMC concluded that these would not be substitutes due to differences in said characteristics and therefore Iryo’s services would not constitute competition for the routes under USO. The results of this analysis suggest that Iryo’s entry into the market was responding to a potential demand for differentiated products, precisely a benefit created by competition.

Frontier regularly advises on competition in the transport sector. For further information please contact or call +44 (0) 20 7031 7000.