Acting as a guiding mind in terms of redesigning and reallocating capacity, ADIF Alta Velocidad helped to stimulate demand for high speed rail travel in Spain, challenging the belief that infrastructure managers should remain passive or only reactive.
When the European Union mandated the opening up of domestic passenger rail markets to competition in its Fourth Railway Package, most member states faced the same question: how to turn legal liberalisation into real, functioning competition on the tracks. Removing exclusive rights is one thing. Creating a stable, competitive market on a network with capacity constraints, sunk costs and powerful incumbents is quite another.
Spain’s answer was unusually bold. Instead of simply allowing new entrants to request access to track capacity under existing rules, infrastructure manager ADIF Alta Velocidad rethought how the available capacity should be structured, packaged and awarded. The result today is the only high speed rail market in Europe where three operators compete meaningfully on multiple major corridors.
Large network, low usage
Spain approached liberalisation with a paradox. The country has the largest high speed rail network in Europe, stretching for more than 3 700 km. Lines radiate from Madrid to Barcelona in the northeast, to Valencia and Alacant to the east, to Sevilla and Málaga to the south, and northeast northern axis towards Galicia and Asturias. Yet despite the vast investment in new infrastructure, usage lagged behind other countries with comparable high speed networks, such as France, Germany, Italy or Japan.
Photo: Colin M Thompson / Shutterstock
Cuckoo in the nest. An Iryo ETR400 trainset stands at Madrid Atocha in the company of two RENFE AVE Talgo sets and an Avant unit used on medium-distance services.
Spain built its capacity ahead of demand. The infrastructure manager carries liabilities totalling tens of billions of euros, and its track access charges are relatively high. Increasing passenger volumes was not merely desirable — it was a priority financially.
However, policymakers feared that the introduction of competition might destabilise the status quo. The Madrid – Barcelona corridor had long been the crown jewel of the network, generating the highest revenues and margins. Profits on that route effectively supported other long-distance services with thinner margins. If competitors were allowed to cherry-pick the most profitable routes of incumbent operator RENFE, that could undermine the implicit cross-subsidy model and potentially weaken the entire longdistance portfolio.
Any liberalisation policy therefore had to address two problems simultaneously: how to stimulate demand and how to avoid creamskimming. The Spanish solution was not to dilute competition, but to design it.
Squeezing more trains in
ADIF AV’s response went beyond passive capacity allocation. It acted as the guiding mind for the reforms — conceiving, structuring and sequencing competition within the boundaries of EU law. The exercise was not a political concession regime, nor a bespoke national carve-out. It was a formal track allocation process on a network that had been declared congested under EU Directive 2012/34. Within that legal framework, ADIF AV used every available instrument creatively.
Responding to competition. The advent of new operators led incumbent RENFE to launch its Avlo lowcost services which now account for 12% of all ridership on the high speed network.
Rather than passively waiting for actual or putative operators to submit requests for train paths, ADIF began by optimising the timetables on the three main high speed corridors. This was not a marginal adjustment. It was a fundamental redesign of departure slots, turnaround times and station assignments — including shifting some services between Madrid’s Atocha and Chamartín stations to overcome capacity constraints. The objective was clear: to squeeze the maximum number of commercially viable paths out of the existing infrastructure, and make effective use of the stations, which were actually the bottlenecks.
The results were impressive. Potential daily capacity in terms of train paths on the three corridors was increased by roughly 60%, from 119 to 189. This was achieved not through adding infrastructure, but through system-wide planning and better co-ordination.
No cream-skimming
Once the optimised capacity had been defined, ADIF did something unprecedented in the regulation of European high speed rail networks. It packaged 70% of the theoretical capacity into three long-term framework agreements. Such agreements are permitted as part of the EU railway regulatory framework; they are designed to provide train operators with long-term visibility of Responding to competition. The advent of new operators led incumbent RENFE to launch its Avlo lowcost services which now account for 12% of all ridership on the high speed network. track capacity while preserving the flexibility of annual path assignment. The remaining 30% of capacity was reserved for allocation in the future.
The largest package represented 60% of the allocated capacity and was clearly suited to the incumbent operator. A second, medium-sized, package accounted for another 30% and was designed for a strong challenger. A smaller package, with the remaining 10% of the allocated capacity, was envisaged for a low-cost model.
Crucially, each package included paths on all three major corridors. By bundling them together, ADIF AV sought to ensure that any operator seeking access to Madrid – Barcelona would also commit to serving Sevilla/ Málaga and Valencia/Alacant/Murcia. Cream-skimming became structurally impossible.
The packages were allocated through a competitive bidding procedure. Because the aggregate demand exceeded the available capacity, ADIF AV opted for a sealed-bid process. The decisive criterion was intensity of use: the operator committing to run the most services — in other words, to use more train paths — would prevail. Environmental and social commitments were included as tie-breakers, but the scale of the planned operation was central.
Importantly, the entire exercise remained within EU law. As soon as the network had been declared as congested, European rules required the use of objective, transparent and non-discriminatory allocation criteria. The framework agreements, the 70% ceiling on long-term reservations and the competitive procedure were all grounded in the European regulatory architecture. The real innovation lay not in bypassing the framework, but in using it proactively.
National regulator CNMC provided the institutional backbone. It supervised the declaration of congestion, reviewed the structure of the framework agreements and monitored the allocation procedure. It also acted as mediator when pandemicrelated disruptions required adjustments. CNMC’s steady oversight has helped to ensure that the reforms have remained rule-based rather than discretionary.
55% more services
The outcome has reshaped Spain’s rail landscape. Not surprisingly, RENFE secured the largest package. Trenitaliaand Air Nostrum-backed Iryo won the medium bundle, and SNCF subsidiary Ouigo España was awarded the smallest. Together, the three committed to run around 55% percent more services than RENFE had provided before the liberalisation. Spain moved, almost overnight, from a monopoly to a structured triopoly.
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The infrastructure manager’s guiding role extended beyond simply track allocation. Stations — especially Madrid Atocha and Barcelona Sants — present real spatial constraints. In consultation with all operators, ADIF AV reorganised the station services, centralised certain logistics functions to prevent congestion and guaranteed non-discriminatory access to facilities. For example, it took over responsibility for providing assistance to passengers with reduced mobility, helping to ensure uniform standards of service regardless of which operator’s trains those passengers might be using.
Capital and fleet essential
Rolling stock has often been a decisive barrier to entry in other liberalised rail markets, but this proved less problematic in Spain — thanks to the specific conditions. Secure in their guaranteed access rights, Iryo and Ouigo were able to rely on trains supplied by their parent companies, Trenitalia and SNCF. These were both experienced high speed operators with strong technical know-how and substantial capital resources to sustain the fledgling operations through an initial start-up phase.
That significantly reduced the transitional friction and allowed rapid market entry once the capacity had been secured. However, this pathway was realistically available only to operators who were already active in other high speed markets and thus had access to suitable rolling stock. Newcomers without an established fleet, industrial backing or prior operational experience faced very high entry costs and long procurement timelines. In practice, operators without rolling stock resources of their own were materially excluded from participating in the competitive process.
More passengers, lower fares
Meaningful competition really began in May 2021 when Ouigo launched its first services on the Madrid – Barcelona axis. RENFE responded with its own low-cost brand, Avlo, and then Iryo entered the market in late 2022. Five years later, the scale of change is unmistakable.
The first impact has been a structural shift in Spain’s long-distance transport market. By 2024, long-distance public transport exceeded 85 million passengers/year. Since 2019, rail traffic had grown by 40%, and coach services by 24%, while air traffic remained broadly stable. Rail’s share of the long-distance market rose to 56·5% — 5·2 % higher than before liberalisation.
Taking on the airlines. High speed rail has cemented its position as the principal mode of travel on the important Madrid – Barcelona corridor. A RENFE S112 Talgo trainset stands at Barcelona Sants.
Ridership on the three main corridors increased by 68% in five years, to 33·7 million passengers in 2024. Nationally, high speed services are carrying 77% more passengers than they were in 2024. Around 49 million trips were made on commercial rail services in 2024, an increase of 14·4 million since liberalisation. Meanwhile, the new entrants have captured 34% of the market, with Iryo accounting for 21% and Ouigo 13%. Within RENFE, Avlo now has a 12% market share, signalling some active repositioning.
Just like incumbent Trenitalia in Italy, RENFE is carrying more passengers in Spain today than it did before the introduction of competition — evidence that the market has expanded rather than merely been redistributed between operators.
There have been substantial price developments. Average revenue per passenger on the main corridors declined by 33% between 2019 and 2024, and by 44% in real terms. The reductions were most pronounced on the Madrid – Barcelona route, where the head-to-head competition began.
Liberalisation has also transformed ticket distribution. Digital platforms such as Trainline, Omio, Trenes.com and Uber allow intending passengers to compare operators and complete their purchases in a single transaction. In 2024, 10·9 million tickets were sold through these platforms, accounting for 22% of all commercial trips, and a 242% increase since 2019. Competition has reshaped not only pricing but also access.
Financial sustainability
The crucial question now is financial sustainability, and whether competition has expanded the total market enough to offset the thinner margins being achieved.
Collectively, all three high speed operators reported losses in 2024, although these were far smaller than in the immediate post-pandemic years. As the new entrants reach scale and complete their fleet investments, their financial performance may stabilise. Spain’s experience may yet come to resemble Italy, where the high speed competition ultimately enlarged the overall market and proved beneficial for both incumbent Trenitalia and its younger rival NTV Italo.
Photo: Rimage Pablo Prat / Shutterstock
Going head to head. A RENFE Series 103 AVE trainset meets an SNCF TGV working an international service from Paris at Barcelona Sants.
However, Spain began from lower utilisation levels, and its infrastructure debt remains substantial. The long-term framework agreements provide stability but they may limit dynamic contestability. The model has optimised entry but may constrain additional future players.
Active intervention
What is already clear, however, is that Spain’s approach challenges the conventional wisdom that infrastructure managers should remain neutral, as reactive administrators of capacity.
ADIF AV took a proactive approach in acting as a guiding mind for liberalisation, in terms of optimising the timetable, structuring competition through bundled packages and orchestrating a coordinated entry process. It also aligned incentives with network utilisation and safeguarded cohesion.
Liberalisation in network industries is not just about opening doors. It is about addressing bottlenecks, sequencing entry and designing allocation mechanisms that translate legal rights into economic outcomes. The Spanish experience shows that infrastructure managers can play a constructive, strategic role within the rules of EU law.
For an industry long associated with monopolies and rigid structures, that is a profound transformation. Spain did not simply liberalise its railway, it rethought and redesigned it. This offers other European countries an alternative for turning legal reform into real competition on the tracks.
* Juan Montero is Director of Transport at Florence School of Regulation.