Interview With CEO of Leo Express: There Are Opportunities To Expand Our Service In Ukraine

Leoš Novotný, the owner of Czech railway operator Leo Express, in an exclusive interview to the CFTS portal on the reasons of entering into Ukrainian market, limits of ambitions, and the peculiarities of business growth.
Mykola Zasiadko 22 October 2015 15:38

In early October, Leo Express, the Czech railway company, announced the start of its service in Ukraine. The operator marked on its network map two new cities – Uzhgorod and Mukachevo. However, the matter does not concern departing of a branded black Stadler Flirt trains from Ukrainian railway stations. Leo Express just launched its own bus service on the Mukachevo – Uzhgorod – Kosice (Slovakia) route that connected with the train Kosice – Ostrava – Prague. Thus, Ukrainians got another opportunity for fast, cheap and easy access to the capital of the Czech Republic (the prices were announced from 21 euros), and Leo Express expanded the geography of its business. Our country has become the fourth in the Leo Express list, after the Czech Republic, Slovakia and Poland.

It's worth noting that Czechs made a risky move by entering into Ukrainian market. Neither economic problems, nor a military conflict in Donbas region stopped them. It looks a bit strange for an investor from a prosperous Europe. However, if you look at the history of Leo Express and its CEO Leoš Novotný, you understand that such a risky move is in line with the spirit of the company.

Leo Express began its operations three years ago in a country with a population of only 10 million people where the competition between České dráhy, the state owned operator, and RegioJet, the private one, was already run. But anything could not stop Leoš Novotný. Now he is thinking of expanding its business not only in Ukraine.

Leoš Novotný is 30 years, he hails from the town of Uherské Hradiště. Here his father founded a company producing durable and chilled products. So Mr Novotný from his childhood knows what business is. At the age of 15 he began working at the father's company, and then he studied at the University of Warwick. A few years Mr Novotný worked for investment banks in London, Vienna, Moscow. And in 2009, when he was 24 years old, he decided to set up Leo Express. Three years later, the first branded black train runs on the railways of the Czech Republic.

For several years, Leo Express suffered losses. If in 2013 they amounted for about USD 5.7 m, this year things went up. The figures indicate this. In the first half of 2015 revenue increased to USD 5.4 m, a year ago it was USD 3.7 m, and the losses decreased to USD 1.6 m (in the first half of 2014 they were about USD 2,7 m).

Why did LEO Express begin operations in Ukrainian Transcarpathian region? Did it caused by the economic or historic reasons?

Our company is on the mission to make train travel in Central Eastern Europe the first option for transportation. Therefore we gradually strengthen our network and bring exceptional services via connecting buses and trains to all places where people need to travel. Transportation is backbone of economy and it´s higher quality accelerates economic growth. We see positive effects of private bus and railway transporters already on the main corridors in Czech Republic and Slovakia, and we would like to amplify them to other lines and regions in Central Eastern Europe. Transcarpathian Region shares with us part of its history, and we welcome onboard every passenger who value his time and like to spend time on their way meaningfully and comfortably, with free WiFi connection, food, drinks or movies.

Are you interested in expanding services to other Ukrainian cities, besides Uzhgorod and Mukacevo?

We do analyze other possibilities for further extension of our lines to Ukraine. There are several options under our considerations at the moment.

So Ukraine became the fourth country where Leo Express operates. Are you regarding the beginning of operations in other countries?

Our public transportation concept, trains with stewards and high quality services attract many people around the world. We not only actively seek for interesting markets but are also invited to many discussions about future of public transportation. There are several options where do we expand next but our ambitions are definitely regional at least (Central Eastern Europe – CFTS).

In Czech and Slovakia LeoExpress operates trains primarily on the Prague – Ostrava – Kosice route. RegioJet and Ceske Drahy have more railway routes. Will Leo Express expand its network in these countries?

This is actually not true. We run our operations at more routes than Regiojet as we have also line from Prague to Southern Moravia. České dráhy are state owned monopoly and their services are ordered and donated by state and local municipalities. We operate routes at our own commercial risk – without any donations from state. So once state will stop donating České dráhy at the lines where we operate (as it does now) and will ensure same and fair conditions for all transporters operating on railways  – we are ready to expand to other routes. At the moment we strengthen our network mainly by connecting bus services and various door2door services in Czech Republic, Slovakia and freshly also in Ukraine, and we focus on particular regions alongside our main corridor (Prague – Ostrava – Kosice route – CFTS).

Leo Express operates both trains and buses. Do you plan to open other services, for example, city transit transportation or air flights?

We consider ourselves being operator for 21st century. It means that we flexibly respond to wishes of our customers. First we see market – people who need to travel somewhere. Then we seek for the most comfortable and effective way how to get them there. We do not consider ourselves as strictly railway or bus operator. We want to be flexible and reliable partner for modern travelers. Our wish is to be door to door operator, using the fastest and most comfortable vehicles in order to get you by your door – with guarantee of top level services no matter if you use our bus, train or ship.

The financial figures for two years show that Leo Express had losses. What measures do you take to make your company profitable?

Our first year was due to illegal dumping practices of our state owned competitor (České dráhy – CFTS) really under expected numbers. But we also had positive EBITDA after first year of our operations, which is the fastest out of all private operators in Europe. When you compare it to other players on the transportation market it´s much higher than usual EBITDA results – we exceed Arriva by 20% for example. It´s necessary to realize that we are huge startup and our project is not about “hot money” that will come after first month. We are on mission to change public transportation. We have managed to gain trust of customers as well as banks and investors and today, we grow extraordinary quickly. In the first half of 2015 our turnover increased by 45% and EBITDA has more than tripled.

Tell about yourself. Were you interested in railways before launching Leo Express?

I was interested in projects that can change quality of our lives. Public transportation is one of them. If we manage to make it more comfortable, offer better services and keep the price same, we will manage to bring people back to it. We will persuade them to leave cars and this will help to them as well as to our environment. And this is what brought me to the idea of changing quality of services on rails, followed by buses and other transportation modes.

Why did you decide to make railway business? Aren't you disappointed in your choice?

I am happy with my choice and will never give it up. I am sure we are leader of future transportation. It might not take days, or weeks, but we are already proving that change of railways and other public transportation is possible and that people only benefit from it.

Where did you take initial capital for launching the railway company?

Our project is funded from diversified sources – when we presented our business model to bankers, they were "hungry" to provide us funds, so huge portion of the initial capital comes from banks. The rest is from private investors who believe and support change we initiate and lead.

What can you wish to Ukrainians?

It might sound weird but I wish them improvement of public transportation services. It all leads to more frequent travelling that brings people closer. There is no doubt that it also helps to accelerate economic growth. We see this effect on every route we operate our trains and buses.

Tags: bus, Ukraine, Czech