March 01, 2018

A growing appetite for change in France

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THE French government has initiated discussions with regional authorities and stakeholders following the publication in February of two watershed reports into the future priorities for infrastructure investment and the structure of French National Railways (SNCF). Both reports favour a slimmed-down conventional network rather than building more high-speed lines, while a major reorganisation of SNCF is recommended to address some of its long-term problems.

The Duron report on national infrastructure investment puts forward three scenarios over the next 20 years, but in all cases high-speed rail expansion is scaled back or slowed down, in favour of upgrading major stations and urban networks, and constructing relatively short sections of new line to relieve congestion.

Perversely, the Spinetta report on the future of rail praises SNCF for developing the high-speed network, which along with expanded commuter services, have helped to boost passenger rail traffic. Indeed, he makes the rather surprising statement to those working in the industry, that “rail transport is not in decline.”

On the other hand, Spinetta criticises SNCF for operating TGVs well beyond the high-speed network claiming journey times longer than 3 hours are uneconomic due to higher operating costs compared with air. Spinetta is probably showing his air transport bias, being a former chairman of Air France-KLM. SNCF is a highly experienced high-speed operator and knows how to fill its trains and needs to retain the freedom to operate the network commercially, as it does now.

An area where Spinetta has good cause for complaint is freight. SNCF has been unable to manage its freight business profitably for many years by failing to adapt to major changes in the market with the result that Fret SNCF has a long-term debt of €4.3bn. Spinetta proposes transferring the debt to SNCF Mobility and giving Fret SNCF more independence. But moving the debt around is hardly a real solution, and there is no guarantee that giving Fret SNCF greater independence will make it a better organisation. Once relieved of its debt, privatisation might be a better solution, or recapitalisation with the sale of a stake to an investor as Belgium’s SNCB has already done successfully.

Spinetta is rightly critical of the failure to prepare for the opening of the passenger market to competition, as enshrined in the Fourth Railway Package. Backed by the all-too-powerful railway trade unions, SNCF has vigorously opposed putting regional services out to tender, despite frequent calls from the regions increasingly desperate to allow it. While there has been considerable investment in new trains, French regions have observed in frustration the transformation of regional services achieved across the border in Germany through the introduction of concessions. To make matters worse, SNCF has failed to develop regional services resulting in declining traffic, which is now putting the future of several lines under threat.

Spinetta echoes Duron’s call to achieve a massive improvement in the quality and capacity of the conventional network which has suffered from decades of underinvestment, resulting in equipment failures and speed restrictions to the detriment of performance and even safety.

The government says decisions on the future direction for rail will not be taken until the consultation has been completed, but president, Mr Emanuel Macron, prime minister, Mr Edouard Philippe, and transport minister, Mrs Elisabeth Borne, appear united in their desire to shift investment priorities away from expensive, high-profile projects so beloved by the French for decades, towards upgrading everyday existing infrastructure.

There is also recognition that action must be taken to address the long-term railway debt - currently €46bn - built up through the construction of the high-speed network, and which continues to increase remorselessly. The raison d’être for setting up quasi infrastructure manager French Rail Network (RFF) in 1997 was to relieve SNCF of its debt burden and allow RFF to focus on managing the debt. But the debt simply grew as more lines were built, and is now back with SNCF following the abolition of RFF in 2015 and the creation of SNCF Network as the infrastructure manager alongside SNCF Mobility as the operator.

Whether the government is willing to tackle the debt problem head-on remains to be seen, but moving money around is no longer sustainable. The point will be reached whereby the interest payments become crippling.

Spinetta calls for a reduction in the cost of running the railway. One of the causes is high labour costs as French railway staff enjoy very generous terms of employment. Spinetta probably recognises that trying to change these terms for existing staff is nigh-on-impossible given the strength of the unions. Instead he proposes less-generous terms for new employees.

But even this relatively modest proposal has already attracted the attention of the unions, which are planning action against this and some of the other 43 recommendations for reform in the Spinetta report. French governments have a poor record in trying to curb the power of the unions, so it will be interesting to see if Macron and his team fare any better. The difference now is that there appears to be appetite for change.

David Briginshaw

David Briginshaw joined IRJ in 1982 as associate editor, and was appointed editor-in-chief in 2001. He has travelled the world extensively interviewing many of the CEOs and senior managers of the world's railways and transit systems which has given him an in-depth knowledge of the global railway industry.

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