Categories
France High-Speed Rail

In France, a Truly Low-Cost High-Speed Rail Option

Ouigo

» To convince even more passengers to take the train, the SNCF national rail carrier plans to offer very cheap tickets.

France’s SNCF national rail service has, since the introduction of the TGV in 1981, held to the belief that fast trains should not be segregated to serve only higher-paying passengers. As a result, fast trains have replaced all slow-speed service on most long-distance travel throughout the country; passengers are able to take advantage of fare deals that allow them to journey between cities hundreds of miles apart at €25 or less, as long as they book in advance.

This dedication to opening up speedy trains to people across the income spectrum is unique compared to most other European and Asian countries. In Germany, for instance, train service between major cities is often available at two speeds — fast Intercity-express and slower InterCity, at very different prices. In the U.S., too, a trip on Amtrak’s Acela “high-speed” service in the Northeast is routinely $50 or more than a similar journey on the slightly slower Regional.

SNCF has now extended the principle further with the introduction of its OuiGo* service this week. Attempting to spur more train ridership, particularly among car owners living in the eastern suburbs of Paris, OuiGo will offer 300 km/h TGV speed at very low prices, starting at €10 for journeys between the Paris region and the Mediterranean coast (Montpellier and Marseille, via Lyon), a trip of about 500 miles (10% of overall tickets will be as low as that, with the rest increasing to a maximum of €85). SNCF claims that these ticket prices are the lowest available in the world for high-speed trains. Current TGV tickets start at €19 for similar journeys, but generally are above €50. OuiGo tickets will always be cheaper than equivalent TGV tickets on similar journeys.

OuiGo brings the aviation low-cost concept to high-speed railways. In exchange for a cheap ticket, customers will be charged for a second carry-on bag; they’ll pay more for the use of an electrical outlet; they’ll be unable to change their tickets without a fee. There will be fewer conductors — only four per train, who will also be tasked with some maintenance. Double-decker trains will seat 1,268 passengers, not because seats have been compressed (unlike the airlines, thank god), but rather because the first class and dining car spaces have been replaced by economy-class areas. Trains themselves will be scheduled to run more often than typical TGVs, traveling about 80,000 kilometers per month, double the normal rate.

OuiGo is SNCF’s second lower-fare offering; the first, idTGV, was introduced in 2004 and has regular TGV amenities though trains generally travel at less convenient times and certain extras, like video games, are sometimes offered. The agency, though, has been planning a more full-scale incursion into the low-cost market since 2009 and OuiGo is its offering. There are currently no rail competitors to SNCF in the domestic market,** and it holds something close to a monopoly on the air-rail market on the city pairs it is planning to serve with OuiGo, but there remain a substantial number of people who make the trip by car, and that is the group SNCF hopes to target here.

Like Ryanair, Europe’s foremost low-cost airline, OuiGo will not serve the more convenient passenger terminals where most TGVs board and alight. Rather, the Paris region stop will be located 20 km east of the city in Marne La Vallée (the location of Disneyland Paris); Lyon’s, instead of being in the center of the city, will be out at the St. Exupéry airport. One major reason for this service pattern is that the public agency that owns the tracks (RFF) charges SNCF (also a public agency) more for the use of tracks and stations in center city areas than those in the suburbs. Labor represents for only about 20% of TGV operations costs, while track fees, which are becoming increasingly onerous (they will be augmented by €200 million in 2013 alone) and which pay for maintenance and upgrades, account for a large potion of expenditures.

It’s an innovative approach to providing train service at lower costs, one that sacrifices convenience to the city center for easy access for suburban automobile users, who, despite France’s rather well-developed transit networks, nonetheless constitute a large portion of the population. For them, an easy-to-access train station in the suburbs — combined with cheaper-than-normal tickets — may be enough to induce them to switch to the train.

But the service remains an experiment, with only a few destinations announced thus far and only four trains dedicated to the service, painted in bright light blue paint and outfitted with rose-colored seats. It will be interesting to see whether this fare and service model is appreciated by customers, or whether they will instead continue to either shell out a little more for seats on standard TGVs or drive long distances in their private cars.

Unions have denounced OuiGo as “third class” service, and while I wouldn’t go that far, it is certainly true that compared to the historic TGV approach, this low-cost model is a downgrade. Nonetheless, OuiGo will make it possible for a large group of the population that had previously avoided the train to hop on board at speeds just as fast as those offered by normal TGVs; shouldn’t that be considered a good thing?

The question is, if OuiGo is successful in attracting a customer base, will SNCF increase its segmentation of services by price range? Will service on regular TGVs increase in cost and become more luxurious, as the less wealthy segments of the population are subjected to something approaching the cattle car?

Update, 27 February: G. Hughes describes on his blog (in French) price differentials in track charges between the OuiGo service and a regular TGV on trips between the Paris region and Lyon. In 2014, SNCF will be charged about €10,900 per TGV train trip but €7,400 per OuiGo train trip because of OuiGo’s use of less-used stations and less-used track. These savings can then translate into cheaper fares.

* “OuiGo” is a franglais expression, combining the French “oui” (yes) with the English “go.” The name is intended to be read “we go,” fully in English. I won’t comment on the state of contemporary French marketing.

** The French rail market will be opened up to some competition from other rail providers later in the decade, and this is surely one explanation for the agency’s decision to move into low-cost services now. SNCF and several other companies do offer intercity bus connections between some French cities, though those trips are much slower and, if booked in advance, more expensive than TGV trips, so they account for a far small market share.

Categories
Finance Infrastructure

TIFIA Loans Likely Skewed Towards New Road Projects

Tappan Zee Bridge

» Thanks to last year’s transportation authorization legislation and a lack of applications from transit authorities, aid from the TIFIA program is likely to be heavily biased towards roads projects.

In his State of the Union address on Tuesday, President Obama argued that federal transportation funding in the United States should follow a “fix-it-first” philosophy, where the rebuilding of roads and bridges (and presumably transit lines) with structural deficiencies is prioritized over the construction of new infrastructure. There is a lot to like about this idea: It would maximize the use of our existing resources, and it would ensure that the government isn’t sponsoring an expanded mobility infrastructure before our existing structures are up to date.

Everyone should be able to get behind this idea.

Yet the projects the Administration will begin financing through the TIFIA reduced-interest loan program are likely to take the opposite tact, for the most part supporting new construction over maintenance of the old. Of 28 projects that have submitted preliminary applications through the middle of last month for financing over the next two years, all but four are new construction or expansion of existing road, transit, or airport facilities. Moreover, road projects are likely to account for a large majority of infrastructure funded. Of the applications that have been received by the DOT, more than 70% are highway projects.

This is a troubling reflection of the state of federal transportation funding, for it suggests that there is still far too much funding going towards new roads construction, rather than renovations or public transportation infrastructure. It suggests that TIFIA — deemed an “innovative” federal infrastructure financing program — may simply replicate more of the same thinking about how to spend Washington’s money on transportation.

TIFIA provides three types of federal aid: secured loans, lines of credit, and loan guarantees, all of which are to be paid back over a long period by project sponsors, generally through user fees (especially for highways) or local sales taxes (especially for transit). In the past, the DOT has funded 27 projects through TIFIA, accounting for $9.2 billion in federally leveraged assistance and $36 billion in total spending by all authorities, including local and state financing.

The new 28 projects that have been submitted for aid over the next two years are from locations across the country and account for a wide variety of transportation — Chicago’s Riverwalk pedestrian way, Seattle’s East Link light rail line, and Houston’s Grand Parkway superhighway are a few notable examples. That said, most of the projects would produce new or expanded roads, and all — with the exception of a $1 million request from Southeastern tours — are sponsored by city, state, or regional governments or authorities.

We’ve known about this problem for months. MAP-21, the two-year transportation bill passed in June, provided for a major expansion of the TIFIA program (now sometimes known as “America Fast Forward”), offering $750 million in aid in fiscal year 2013 and $1 billion in 2014. Local or state (or private) project sponsors will be expected to cover a minimum of 51% of costs through other sources, but TIFIA can be used to leverage up to 49% of aid. In essence, the government expects to be able to use that $1.75 billion to produce a federal lending capacity of $17 billion and leverage a total of about $50 billion in funding for various projects around the country. So far, letters of interest and applications for $41.3 billion worth of projects — all from legitimate entities — have been submitted. The table below provides an overview of these proposed projects.

Applicants for TIFIA Funding, as of January 17, 2013
ApplicantProjectEstimated Project Cost (million $)LocationModeChangeSubmission Date
Central TX RMA183 S896Austin, TXRoadNew Construction08/12
VA DOTRoute 4601724Richmond, VARoadNew Construction08/12
NC DOTI-77 HOT Lanes545Charlotte, NCRoadRevenue Production08/12
Knik Arm Bridge and Toll AuthorityKnik Arm Crossing1022Anchorage, AKRoadNew Construction08/12
TX DOTSH 288272Houston, TXRoadExpansion08/12
TX DOTSH 183876Dallas, TXRoadExpansion08/12
TX DOTGrand Parkway (SH 99)2648Houston, TXRoadNew Construction08/12
TX DOTIH 35 E1415Dallas, TXRoadExpansion08/12
NC DOTMid-Currituck Bridge611Outer Banks, NCRoadNew Construction08/12
NYS Thruway AuthorityTappan Zee Bridge5900New York, NYRoadReplacement / Expansion09/12
Chicago AviationConsolidated rental car facility, ATS station765Chicago, ILAirportNew Construction09/12
GA DOTNorthwest Corridor960Atlanta, GARoadExpansion09/12
Chicago DOTRiverwalk440Chicago, ILPedestrianNew Construction09/12
IN Finance AuthorityEast End Crossing (OH River Bridges)1276Louisville, KYRoadNew Construction09/12
KY PTIADowntown Crossing (OH River Bridges)1227Louisville, KYRoadNew Construction09/12
Kansas CityKansas City Streetcars102Kansas City, MOTransitNew Construction09/12
New OrleansTreme Iberville Project157New Orleans, LAUnknownUnknown09/12
LA DOTI-49 North631Shreveport, LARoadNew Construction10/12
MWAADulles Metrorail5999Washington, DCTransitNew Construction10/12
LA DOTLA 1 Toll Road371Leeville, LARoadNew Construction10/12
Southeastern ToursSoutheastern Tour Buses1UnknownUnknownUnknown10/12
OH DOTPortsmouth Bypass819Portsmouth, OHRoadNew Construction11/12
Cameron County RMASouth Padre Island694South Padre Island, TXRoadNew Construction11/12
LA MetroWestside Subway and Regional Connector3908Los Angeles, CATransitNew Construction11/12
Sound TransitEast Link4038Seattle, WATransitNew Construction12/12
PA TurnpikeSouthern Beltway651Pittsburgh, PARoadNew Construction12/12
DE DOTUS 301570Middletown, DERoadNew Construction01/13
FL DOTI-4 Ultimate Improvements2746Orlando, FLRoadExpansion01/13
Source: FHWA

Though the pre-MAP-21 TIFIA legislation provided specific guidelines that encouraged the selection of “innovative” transportation, MAP-21 effectively eliminated that criterion. Rather, in choosing the projects for financing, Congress mandated that the DOT is only supposed to consider whether the proposed project is eligible, whether its proponent is creditworthy, whether it would involve a public-private partnership, and whether construction contracting could begin within 90 days of application approval. All of the projects in the above list likely meet those criteria.

The result is that TIFIA has, in some ways, become a first-come, first-served program that is, according to analyst Phineas Baxandall, structurally skewed against public transit. The result is that projects like New York State’s proposed Tappan Zee Bridge Replacement — pictured at top — is likely to be approved for financing despite its questionable utility (this is particularly true because the project was selected by the White House in 2011 as a “priority” infrastructure project).

The other projects on the list, including most of the new highway projects, are likely to be approved by the DOT as well. There remains about $9 billion worth of projects that could be aided through TIFIA, but transit authorities do not appear to be rushing to get their projects on this list — and there is little that Washington can do to encourage them to. This should put in serious question the ability of the government to orient infrastructure funding towards renovation rather than new construction.

It would be incorrect to suggest that the previous guidelines made TIFIA a progressive transportation funder. Of projects that received commitments in the past, accounting for about $10.5 billion in aid, 77% of funds went to roads, most of which were new construction or expansion. One explanation for this preference is that TIFIA explicitly requires the financing of projects that have dedicated revenues associated with them; road projects with tolls on them offer this far more easily than transit projects that will almost definitely operate in the red throughout their useful lives and which require harder-to-get sales taxes to make the financing work.

The problematic skew of the TIFIA funding, however, is not the end of the story on transportation funding in the U.S. President Obama’s speech and related White House-released information suggests that the Administration wants the Congress to pass a new long-term transportation bill this year that, like previous Administration proposals, would significantly expand transportation funding through freed-up money available thanks to the end of the Afghanistan War.  This would include a $50-billion up-front allocation to infrastructure, of which 80% would go to renovations of existing facilities. Past Obama Administration transportation budgets have proposed shifting funding significantly towards transit and rail, increasing their share from 22.9% currently to 35.7% over the course of five years.

The Congress and in particular its Republican members have been reluctant, however, to move forward with such new transportation budgets, in part because the “freed-up” money from the wars ending is an imaginary concept in an age of significant budget deficits. The result has been a series of bills that present little to no progress on changing the dynamics of transportation funding in this county, and MAP-21 was no exception. Yet 2013 is a new year, and when it comes to approaching the question of how best to invest in the nation’s infrastructure, you never know what compromises might be reached this time.

Image at top: Tappan Zee Bridge, from New York State