Public transport in Europe is undergoing a profound transformation, driven by long-term demographic, regulatory and environmental trends, say three professionals from Cube Infrastructure Managers.

Public transport bus, tram, rail and ferry operators have been attracting significant investments from infrastructure investors. The essentiality of efficient public transport systems for long contracts with public sector counterparties, availability-based revenues, inflation protection through cost indexation, as well as secular growth drivers such as liberalisation, urbanisation, ageing of societies, road congestion and electrification are driving this trend. 

With more than 75 percent of the European population already living in urban areas, a figure which is expected to rise to 84 percent by 2050, cities are becoming larger, more dense, more congested and more dependent on efficient public transport systems. Road congestion remains a chronic issue, affecting productivity, quality of life and air quality. Air pollution levels in urban areas also remain far above recommended thresholds, posing public health risks. 

At the same time, Europe’s population is ageing. By 2050, nearly 30 percent of EU citizens are expected to be aged 65 or older. This shift underscores the need for accessible, safe, user-friendly and economic transport solutions that serve diverse mobility needs. Public transport is widely recognised as the most effective way to address these intersecting challenges, providing a cleaner, more inclusive and scalable alternative to private vehicle use. 

The EU aims to reduce transport-related greenhouse gas emissions by 90 percent by 2050, placing sustainable transport modes at the heart of the continent’s climate strategy. 

Europe’s regulatory model for public transport has already evolved significantly over recent decades. Many countries have embraced liberalisation through competitive tendering. Public authorities retain control over network planning and service specifications, while private operators compete to provide the actual service. 

This structure enables governments to focus on strategic priorities – such as effectiveness, long-term city planning and climate – while operators concentrate on delivering services efficiently on a daily basis, optimising operations including fleets, depots and staff. Well implemented, this division of roles can result in high-quality services at lower cost. However, real-world execution varies significantly across countries and regions. The Nordic countries were early adopters of competitive and professionalised public transport markets. There, liberalisation has driven innovation, efficiency and strong performance. 

Other European countries have been slower to follow. Germany still maintains a dominant presence of transport entities which are controlled by the state and municipal entities, thereby limiting competition, private sector participation and innovation. In France, reforms in the Greater Paris region have started to open markets, but private sector participation is still limited. Meanwhile, in Spain, reform efforts have been long discussed, but remain stalled, leading to a fragmented and uncertain environment for operators and investors alike. 

Availability-based revenues with cost indexation are a key attraction for infrastructure investors. Under gross cost contracts, common for example in Denmark, operators receive fixed payments regardless of ridership levels. This arrangement provides financial stability for both sides and simplifies contract management. Net cost contracts or hybrid mechanisms, by contrast, transfer ridership risk to operators, although operators have very limited means to increase passenger numbers, reducing predictability and increasing the cost of capital in tenders. 

Tender design also differs. While some public transport authorities define high-quality standards and award tenders purely based on price, others combine price, quality and other considerations, such as ESG in their evaluation of offers, which gives authorities more discretion in selecting a specific operator. 

Some public transport authorities have tried to increase competition by insourcing depots or even fleets. Such insourcing can backfire if operators are forced to manage undermaintained legacy fleets and risk-averse authorities tend to delay innovation. While UK operators have widely adopted leasing models, operators in the rest of Europe prefer integrated business models operating their own fleets because asset-intensive models offer higher resilience and better lifecycle alignment. Private operators tend to have the highest competency in selecting innovative fleets and pricing them adequately in tenders. 

Tackling emissions 

Public transport is also rapidly being reshaped by climate imperatives. Electrification of bus fleets is accelerating as cities and governments push to reduce emissions and improve air quality. Advances in battery technology (longer range, slower degradation and extended warranties) have made electric buses a viable and attractive solution which has spread beyond urban and suburban networks. As the capex for electric buses and batteries has fallen and the economic life of electric buses has extended, while at the same time maintenance and “fuel” costs are significantly lower, electric buses now offer a compelling total cost of ownership compared to conventional vehicles. 

In Denmark, electrification has not only resulted in higher capital intensity and margins, but the length of many contracts has been extended to reflect the longer economic life of electric buses. Sophisticated operators are increasingly using project return instead of margin thresholds to price contracts in tenders, as margins can fluctuate depending on the intensity of fleet usage in urban or suburban environments. 

However, the transition to electric fleets is not without its challenges. One of the most significant barriers is the significant capex and time required for depot electrification. Early movers have gained valuable experience and create sustainable competitive advantages for future tenders. 

Supply chains for electric buses are also shifting. Europe has been lagging behind in developing battery production and large-scale vehicle manufacturing. While efforts to localise production and build European capacity are underway, volumes remain limited and full strategic autonomy from China is still years away. Meanwhile, concerns over supply chain resilience and geopolitical dependencies have led some governments to re-evaluate procurement strategies, complicating the landscape for fleet sourcing. 

Even though zero-emission buses represented 49 percent of city buses in the EU in 2024, the pace of electrification remains uneven. The Nordics lead in electrification, supported by strong public policy frameworks, a level-playing field in competitive tenders and infrastructure investors backing private operators. Countries with delayed or limited liberalisation of public transport are delaying their decarbonisation. 

Cube started investing in Nordic public transport operators and piloting electric buses as early as 2012, a transformative move replicated in other geographies. Electrification was also a key driver in Danish bus network operator Umove’s transformation to market leadership under Cube’s ownership. 

Electrification has been gaining momentum in municipal waste collection, which shows intriguing similarities to public transport in terms of regulation, fleet and operations. This and additional sector-specific growth drivers, such as increasing waste separation, have already attracted infrastructure investor interest into that sector. 

Clean, efficient public transport is central to Europe’s long-term social, environmental and economic resilience. Its future depends on smart regulation, well-structured public-private partnerships, long-term investment in fleets and depots, and operational excellence. Operators that demonstrated early commitment to sustainability, innovation and quality are best positioned to lead the next chapter of mobility in Europe.