Market conditions and operating environment
The instability of the Finnish economy made the year 2014 a challenging period for all business divisions. Structural changes in the Finnish industries, in which companies are transferring operations to other countries, and the outlook for the key sectors in Finland and the areas adjacent to it had a particularly strong impact on the logistics division. However, the impact of the structural changes in industries in 2014 was not as substantial as predicted. Weakening of the rouble and the sanctions imposed on Russia strengthened the negative impact of the general economic situation on exports to Russia.
In passenger services, the market situation in Finland changed as a result of the overall economic situation, higher unemployment and tougher competition in long-distance traffic. This was reflected in the number of passengers in long-distance traffic and the turnover generated by the sector. Services to Russia were still growing at a rapid rate during the early part of the year. However, at the end of the year, weakening of the rouble caused a substantial decline in the passenger numbers on Allegro trains.
Opening of rail passenger services to competition and the EU legislation containing provisions on it will have an impact on the operations of VR Group. Competition should also be viewed from a wider perspective because in passenger traffic, trains are already in competition with other modes of transport, especially private motoring. The number of passengers is affected by factors such as consumer and travel habits, the regional distribution of the population, developments in the infrastructure and transport services for different modes of transport, and the environmental friendliness of different modes of transport. Pricing, punctual services, and a smooth, simple total travel process also affect demand for transport services.
The Finnish Transport Agency is responsible for the condition of Finland's state-owned rail network and its development. The condition of the railway infrastructure for its part determines how rail services can be developed and their ability to compete with other forms of transport. Government spending on the construction and maintenance of the rail network has a major impact on the smooth operation of passenger and freight services and on their punctuality. It also affects the infrastructure engineering business. About 90 per cent of the Finnish rail network is single-track and it is partially in poor condition. This makes train traffic more sensitive to disruptions and affects the smoothness and comfort of train travel.