Fabrizio Favara and Victor Bañares: “Ilsa will invest 1 billion to become Renfe’s great rival”

The company, in which shareholders of Air Nostrum and Trenitalia hold a stake, has less than two years to compete with Renfe and SNCF in the Spanish high-speed rail network through its new brand Iryo

“We are talking with Adif to start operating from the second half of 2022”, says Fabrizio Favara (Rome, 1975), Ilsa’s CEO, in an interview in EXPANSIÓN, the first he has given since winning the capacity tender awarded by Adif in November last year.

Favara and Víctor Bañares (Bilbao, 1966), co-founder and general manager of Ilsa, have had no choice but to adapt their work agenda to the pace that Covid-19 has dealt the transport sector, yet they remain optimistic about the short and medium-term future of the railway and are very ambitious in their goals. “The vaccine will be the turning point for traffic to return to normal. The railway is the most resilient mode of transport, both in terms of safety and environmental sustainability, and liberalisation will help to attract new demand”, stresses Favara, a professional with extensive experience as manager of Ferrovie dello Stato, Trentitalia’s parent company. “The goal is that, within three years, Ilsa will achieve one third of the Spanish high-speed market, some 8 million passengers”, details Victor Bañares, co-founder of Ilsa after having held positions of responsibility at Renfe and Vueling, among other companies. At Ilsa they are convinced that, once the market is back to normal, competition will help demand for AVE to double, to 50 million passengers a year within five years. “We’re not looking to attract solely Renfe travellers, but also air and road travellers”.

The company intends to devote a huge amount of resources to achieve its goals. “Ilsa has to break even from the third year onwards with a planned investment of 1 billion euros in Spain, between rolling stock and other types of equipment”, stresses the CEO of the Italian-Spanish company, who estimates that around 2,600 jobs will be created, between direct and indirect jobs. “It is a remarkable effort because we want to do in two years what NTV took five years to do in Italy”, he says in reference to Trenitalia’s private competitor in the transalpine market.

“We must highlight the business project in terms of generating wealth for Spain. The investment represents 1% of GDP; part of our 23-train fleet is manufactured at Spanish plants and the maintenance service and catering, among other suppliers, are also Spanish”.

Among the features that distinguish it from its rivals, the directors of Ilsa highlight the fleet of latest generation Zefiro trains of Bombardier-Hitachi. “We are the only operator that is going to put a completely new high-speed fleet into service; we are not going to renovate trains”, say Ilsa’s executives, comparing their trains with the current Renfe fleet and with Ouigo’s Alstom Euroduplex, adapted to the Spanish market.

Ilsa commissioned 23 compositions for the Zefiro, a platform with the latest TSI 2019 standard from the European agency, ready to carry 500 people and which in Spain will circulate with its own brand and interior design. “We are not going to reveal our brand until next year, but our trains will be equipped with smart WiFi, a contents platform, a cafeteria service and a very innovative catering service”, says Bañares.

“The seating arrangement in the trains has been adapted to the Spanish travel conditions. In Italy, it is common to have seats facing each other; in Spain, there won’t be any”, adds Favara, who says that Ilsa will use digital channels (website and own app) to market tickets whose prices “will always be the most competitive at each time of the day”, he underlines.

The commercial offer and price reductions of up to 50% have been the major attraction of Renfe, with its low cost Avlo, and SNCF’s Ouigo. At Ilsa, they believe they “have a gimmick”. “Ilsa is going to use the dynamic price management system. It may be hackneyed, but Ilsa will get the best price possible every time. This is a revenue management system concept that has been used by airlines for some time now, far from the 50%, 40% or 30% discounts which, in fact, are not so because prices tend to be accompanied by the seasonality of the day, the week and the time of day. The service and the price of Ilsa’s ticket will be the most competitive the customer can find”, emphasises Favara. Ilsa’s managers also anticipate that their trains will have a product aimed at the company, the business traveller, and another targeted at leisure.

Ilsa will start operating in the second half of 2022 in the three corridors that form part of the 10-year framework agreement signed with Adif, the connections from Madrid to the French border, Easter Spain (Levante) and Andalusia. In total, 82 routes per day. Renfe’s private rival will start with 32 daily journeys between Madrid and Barcelona. Within one month, it will debut the services in the remaining corridors.

“It represents the first phase of the business plan; in the second phase, not before five years have elapsed, we want to transport people in the other high-speed corridors; towards the Basque Country and Galicia, among others”. In a third phase, the transport group envisages the international leap.

By moving it to the airport market, Ilsa aims to be the Iberia of the railways. “We are closer to being a full service operator that has a product for business and leisure traffic, but with a cost structure that makes our processes more efficient than those of our competitors”, adds Victor Bañares.

Ilsa’s vocation is to be a multimodal operator with a high connection to the aircraft. One of its key demands is that the AVE reaches Adolfo Suárez Madrid-Barajas airport. “With a third line or a dedicated corridor; but we need to get to the airport because we want to be the key provider of travellers on intercontinental air routes, like at Charles de Gaulle airport in Paris. It should be resolved in two years”. This requires strategic alliances with other modes of transport. “We don’t have any agreements yet, but we’re talking to several parties. We need a strong partnership at Barajas. Iberia presents itself as the great ally.

ROAD MAP

Ilsa has set itself goals. 30% share, around 8 million travellers per year.
The company will offer 82 daily routes, starting with the 32 journeys to Barcelona.
The trains will have WiFi, a content platform, a cafeteria and an innovative gastronomic offer.
Investment in capex will result in strong job creation. They foresee 2,600 jobs.
They want to be the exponent of digitalization. 10 million investment in its IT platform.
More than sales, Ilsa talks about dynamic price management. “We’ll offer the best price every time”.

“ADIF’S ROYALTIES ARE VERY HIGH AND MUST BE LOWERED”.

Those in charge at Ilsa believe that Spain must reflect extensively on the level of railway charges. “If we want to boost the railway system, we have to reflect extensively on the current level of charges. For example, the AVE Madrid-Barcelona has a very high cost today. Accordingly, if we want to promote the market, the current system of fees must be changed. Ilsa’s management recognises that there is a process in place and that the National Commission for Markets & Competition (CNMC) has provided some recommendations to change the standard. “It is important to keep intermodal competition in mind, a matter that falls on Adif’s shoulders, although we are willing to contribute ideas to improve the system”, Favara points out. He cites the example of Italy, where the administrator reduced the cost of access to the track by 50% “and that stimulus did not go into the pockets of the operators; it led to a significant reduction in the price”. In Italy, for a corridor equivalent to Madrid-Barcelona, the cost went from 11 euros to 5 euros. “Italy is the mirror where Adif should take a look at itself”.

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