High-Speed Rail

High-Speed Rail Competition Between Trenitalia and SNCF Coming in 2010

Two national rail companies will fight over Paris-Milan route

The European Union-required opening of international rail services to competition will begin in 2010 and force existing national rail companies in Europe to begin fighting for the right to serve their previously monopolized markets. The result of this competition will be the increasing privatization of what have been public services in the past, something I’ve railed against before. But it will also mean the commencement of in-fighting between national rail companies over routes between their respective countries.

France’s RFF, which oversees that country’s railroads, announced yesterday that thus far, only one agency has asked for the right to use French tracks: Trenitalia, the Italian rail company. Trenitalia wants to compete with France’s national rail company SNCF on the Paris-Milan route. Several other foreign companies that had been expected to sign on for competitive routes – including Germany’s DB, the private company Veolia Transportation, and Air France – have yet to make their intentions known and may actually be shut out for 2010. One problem for these companies is that they don’t necessary yet have the necessary rolling stock that would allow them to provide service on French lines.

Trenitalia’s interest in moving into the French international rail market is an interesting punch-back, because SNCF is investing directly in the Italian domestic market with a new company called NTV, which is part-owned by SNCF and which will be the first rail company to use the new Alstom AGV trainsets. Trenitalia clearly isn’t interested in being left on the side of the road as its French competitor is aggressively pushing forward.

While I’m not sure that international train routes in Europe should be left only to national rail companies operating under joint agreements – there are some advantages to having competition along international routes – I’m bothered by Europe’s rapid opening of rail services to private industry. While tracks will remain in the public’s hands – à la U.K. post-massive breakdown in its privatization scheme – competition in rail service, if anything, will decrease fares along the most-used routes, such as Paris-Lyon. But what we’re also likely to see is a decrease in service and probably increases in fares along less-used routes. That’s a major problem, and that’s a fundamentally good reason to have one national rail operator running all routes, so that less-used lines are subsidized by the more-used ones. To allow private operators, operating only on their choice routes, to take much of the profitability out of the hands of the public enterprise, doesn’t address the needs of the national rail system as a whole. I wouldn’t be surprised to see French labor unions blocking domestic rail competition in France before it becomes active in 2012 – and I’ll be on their side. Competition in the rail industry is not the best of E.U. ideas, and we shouldn’t even think about emulating the idea now that we’ve suddenly become interested in investing in our rail lines.

7 replies on “High-Speed Rail Competition Between Trenitalia and SNCF Coming in 2010”

On the contrary, this is potentially quite good news. In a monopoly, the lone provider is the sole arbiter of the price and thus they set it quite high. Since the rail infrastructure will remain in public hands, safety is protected. Existing national providers can keep the less-traveled routes at their current price, while competition will drive price down at the more-traveled routes. The for-profit corporations probably won’t even bother to compete in routes they don’t think will be profitable, so the status quo will probably be preserved in some places.

But what of the busier routes? Perhaps the national corporations will keep their current prices and offer premium service, while the private operators offer the rail equivalent of low-cost airlines. Or, it might be the other way around, where government money can keep prices for existing service low but private sector efficiency can give premium first-class travel for those willing to pay, like business travelers. Who knows what we’ll see? Conference rooms, high-speed internet in every car, cheaper food in cafe cars? We don’t know yet, because, satisfactory as they are, existing rail services in Europe have not had pressure to improve, until now. And, if it turns out that I’m right, it’s fantastic news for the United States, where we’ll be provided a model of successful HSR that better fits our entrepreneurial culture than Europe’s current model.

But, what you;re saying doesn’t make sense, MRig, currently TGV routes generate several hundred million dollars a year of profit for SNCF that they use to subsidise services on less profitable but still essential commuter and rural services. The private companies that will compete will inevitably significantly reduce this, meaning either a reduction of service on the non TGV French network or a very large increase in public subsidy.

Effectively it’s privatising profit and nationalising loss.

The current European model works. It has worked for decades. Prices may drop on the Competing International Lines but the rural lines will ultimately suffer because in the current scheme they are subsidized by the busier lines and in so doing everybody wins. Corporate enterprise wants money so naturally to satisfy their WANT they will go all out to get it. This meaning they neglect the lesser used lines and with that they neglect the NEEDS of the people in the greater scheme of things.
As Dominic said “Effectively it’s privatising profit and nationalising loss.” Privatization in this instance makes no sense and would be to the detriment of a great system. We tried it here in the US and it went tits up in a hurry. See what led to the creation of Amtrak.

@Dominic: I must confess I don’t know too much about the French system. Is the issue that these commuter and rural routes are not profitable, or that they are simply less profitable? I do know that the German system is more expensive than it needs to be, and I’d be very surprised if DB’s monopoly didn’t contribute significantly to that.

@Deacon: We didn’t try privatizing, the railways were already private until Amtrak.

Perhaps RFF should require private competitors to either contribute some of their profits to the rural and commuter routes, or run trains on some of them, as a condition for using its rail infrastructure on the more profitable routes. This could (potentially) split the losses between the public and private sectors while still allowing competition. And quite frankly, if there’s a hard-to-see way to make something profitable, I trust business over government to find it.

You’re both making strong arguments. My dissent is based upon the premise that, though government should control the rail infrastructure, competition should allow the market to find an equilibrium in the daily running of the trains. If this liberalization adventure is a failure, I’ll take it all back.

Living in Lausanne, which is a major stop between Milan and Paris I suppose I kindof like the idea of being able to hop either a TGV or a Cisalpino to Paris. Like you I do worry that this will wind up screwing things up: I’ve traveled by train in England and seen how competition can screw things up.

Some competition could be welcome – as MRig states different companies could offer different services (like premium business services like Eurostar offers but other HSR operators tend not to do) or more flexible prices, etc.

I agree that private companies can have the effect of squeezing cash that is effectively used to subsidise loss making services but provided the infrastructure operator is in public hands and charges similar access fees to any operator, much of this can be avoided. In the UK, the biggest problem with open access operators is that they tend to only pay the variable rates rather than a share of the fixed charges which is the far higher fee.

Of course, the biggest competitor to high speed rail in Europe are the airlines – so all in all the impact in terms of improved service, lower prices, etc is likely to be small.

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