» France will be a battleground for intercity rail travel beginning in 2012. Whether the country’s citizens will benefit is up for debate.
Last week, Le Figaro reported that Veolia Environnement will be working with Italy’s Trenitalia national rail company to compete on French high-speed rail routes beginning in 2012. The ramifications of the move are significant: it will open up existing lines to multiple operators, producing consumer choice currently not available because of a decades-old monopoly on intercity operations by French national rail corporation SNCF. This competition is mandated by European Union law, which is intended to reduce transportation costs by opening up services to multiple operators.
But even if some routes see lower fares, the overall effect on the rail system is less positive. Competition on the most valuable routes seems likely to reduce investment on less profitable segments. In the meantime, operators, interested in increasing revenues, will be predisposed to angle services towards more wealthy passengers — meaning fewer travel opportunities for people across the economic spectrum.
The new competition from Veolia and Trenitalia isn’t surprising: both have been considering entering the French market for the past year. Veolia was in discussions with Air France about operating a train service, and Trenitalia is already planning two trains a day between Paris and Milan and Paris and Genoa next summer; some of these trains will also stop in France’s second and third largest metropolitan areas, Lyon and Marseille.
Together, the companies hope to take on Eurostar on the Paris to London corridor, Thalys on the Brussels to Paris Corridor, and DB German Railways on the Paris to Frankfurt international corridors. The market is currently only open to travel in which 50% of both volume and turnover is by passengers traveling between multiple countries as France won’t open its domestic market for a few more years. But Veolia clearly has its sights on the more lucrative and more trafficked travel between destinations within the country, and its chosen routes will allow it to sell tickets for trips between Paris and Lyon, Paris and Lille, and Paris and Strasbourg, three of SNCF’s largest ridership generators.
In other words, Veolia and Trenitalia are going straight for the French rail company’s throat. SNCF is reciprocating by competing directly with Trenitalia on Italian domestic routes with its 20% investment in NTV, which will offer high-speed service there starting in 2011.
Veolia may be able to offer lower prices because SNCF’s employees are well-compensated for their work; those driving for and working on the private company’s trains are likely to receive 30% lower benefits. SNCF claims that its arsenal of hundreds of TGV trains, tens of thousands of employees, and good reputation will be too much for even an industrial mammoth like Veolia, which is the world’s largest provider of outsourced public services. Yet that company’s recent merger with Transdev, a major transit operator, makes it a transport monolith; together, the companies operate the light rail systems in Barcelona, Madrid, Sydney, Dublin; the metros in Seoul, Genoa, and Porto; commuter rail in Miami, Boston, and northwest Germany; and bus rapid transit in Las Vegas and Bogota — among others.* This will be a battle of titans.
SNCF’s position in France, then, is under threat. Veolia’s choice to compete on the company’s major intercity routes is not surprising: they’re where the money is. SNCF brings in 85% of its passenger fare revenues from its TGV division, effectively subsidizing many of its local commuter and slower intercity services with high-speed operations. Meanwhile, the rising fees being charged for track use — a result of conflicting interests between the infrastructure owner and the rail operators — could make the situation worse by reducing profits on the high-speed lines.
If SNCF is forced to lower prices on its most profitable routes, it will see decreasing revenues and potentially be forced to scale back services on the lines it operates at no profit. On the other hand, if SNCF decides to attempt to increase profit, it could actually increase fares and improve service quality, with the intention of expanding its wealthy and business clientele.
Either way, the lives of France’s citizens aren’t likely to be materially improved by what isn’t going to be pure competition but instead something more closely resembling a fight between an oligarchy of mega-operators. One of two outcomes is predictable: service will be compromised on less valuable lines as ticket prices decrease slightly on the heaviest traveled corridors even as employee compensation is reduced, or fares will increase and high-speed trains will become a commodity for members of the upper half of the income spectrum alone, as it already is in countries like Germany.
Though France’s situation might seem irrelevant from the North American standpoint — it, after all, has been operating high-speed trains for almost thirty years while neither the U.S. nor Canada have a true fast rail system — the involvement of private interests in transportation investment is clearly an issue in similar U.S. projects. California’s planned high-speed system, which will transport passengers between Los Angeles and San Francisco in 2h40 by 2020, will be primarily funded through government spending, but the State High-Speed Authority expects to attract several billions of dollars in private financing to pay for the project’s costs.
In the California Authority’s most recent report, it argued that fares should be set at around 83% of equivalent air fares, after arguing in previous years that fares set at 50% would also be an option. The latter choice would produce a slightly lower annual yield, despite the fact that it would attract almost 20 million more annual passengers by 2034 compared to the more expensive option. In order to interest private involvement in the process, the Authority seems to be choosing to prioritize profits over increased mobility. That’s because a private company’s interest, of course, is to maximize profits, not necessarily to be an engine for social improvement. The State of California, on the other hand, has — or should have — a different mission.
But the rail system wouldn’t necessarily be built without the private funds; neither the federal or state government is flush with cash at the moment, so increased public funds wouldn’t be simple to assemble.
This quandary, then, is similar to that faced by the French and European rail systems — opening what had been a public enterprise to the private market may increase investment (and even perhaps improve some services), but the consequence seems likely to be an increase in social inequalities by reducing access to transportation for the less wealthy and for those who don’t live in the most populous regions.
The correct answers to these questions is subjective, coming down to what ideology is expressed by decision-makers. Transportation can be conducted in such a manner that encourages profit creation, or it can focus on expandeding transportation provision to everyone. Which route will we pick?
When SNCF opened its first TGV high-speed line between Paris and Lyon in 1981, its marketing campaign used the motto Le progrès ne vaut que s’il est partagé par tous (Progress is worthless unless it’s shared by all), a slogan that seems quite pertinent in all matters of transportation investment. And indeed, the company has fulfilled that objective in many ways, offering fast trains at low prices for everyone throughout its history and systematically providing deep discounts to the young, the old, and those with large families.
Will it be able to do the same in a system where competition is encouraged? Or will it be forced to sacrifice the goals of mass transport for the benefit of bigger profits?