July 01, 2017

High-speed rail projects gain momentum despite challenges

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THIS month we report on a flurry of activity in the high-speed rail sector where three projects are coming to fruition in France, and French National Railways (SNCF) is starting to rebrand its iconic TGV. Across the Channel in Britain, construction is about to start on Britain’s second high-speed line, while in the Baltic states the three countries are putting aside their differences to push ahead with the Rail Baltica high-speed project. In Asia, the Kuala Lumpur - Singapore high-speed project is gaining momentum.

High-speed rail has the ability to transform travel between cities by shrinking journey times dramatically, but it is increasingly difficult to implement, particularly in densely-populated or prosperous countries where land prices are escalating, environmental protection is becoming more onerous and opposition to such projects is growing. Britain’s HS2 project has a very high price tag for these very reasons and had to overcome very-well-organised and vociferous opposition from people living along the route.

Strong and unwavering political support is therefore vital for the successful realisation of high-speed projects. SNCF has always enjoyed this and HS2 has had cross-party support despite the challenges posed by the economic crisis, constant pleas to spend the money on the conventional network or public services such as health care and education.

International projects face the added challenge of overcoming cross-border political differences and national rivalry. Singapore and Malaysia have rarely seen eye-to-eye since Singapore broke away from Malaysia in 1965. But now the two countries appear seized by the opportunities that a standard-gauge high-speed railway linking Singapore with Kuala Lumpur will bring. Malaysia’s MyHSR Corporation and Singapore’s Land Transport Authority (LTA) will jointly hold an industry briefing in Singapore on July 5 for the Assets Company, which is responsible for designing, building, financing, operating and maintaining both the rolling stock and the infrastructure, to explain the tender parameters and technical specifications to potential bidders.

Indifference in the three Baltic states of Estonia, Latvia and Lithuania to the ambitious Rail Baltica project to link the three capitals with Poland appears to be turning into enthusiastic support if the supportive speeches and strong attendance at the first Rail Baltic forum in Riga are anything to go by. This project, which will form part of the North Sea-Baltic TEN-T corridor, will not only cut journey times significantly, but will plug the three states more firmly into the European Union by providing them with their first standard-gauge connection. While some funds have already been secured, the project relies heavily on EU funding which may become less certain following Brexit. Wisely, RB Rail’s CEO Ms Baiba Rubesa says the three countries must be willing to consider alternative sources of funding.

France has funded the three extensions to its high-speed network, two of which open this month and the third at the end of the year, through public-private partnerships. While all three projects are on time and within budget, SNCF is not so happy because of the increased access charges it faces to use the new lines. Indeed, SNCF has been cautious about how many trains it will operate on the lines for fear of racking up excessive charges. This in turn could mean that the PPP concessionaires will not earn as much revenue as they predicted when the funding was arranged prior to starting work on the project.

France and Spain took control of the Perpignan - Barcelona high-speed rail link between both countries in December 2016 after the PPP contract with concessionaire TP Ferro was terminated following the company’s liquidation in September. TP Ferro, which was owned by construction firms ACS and Eiffage, entered into receivership in late 2015 after declaring debts of e560m. Traffic on the line was one third less than forecast when the 50-year concession was awarded in 2003. This was a salutary lesson for all concerned and a warning of the potential risk for private companies considering investing in high-speed projects.

Even experienced and well-established high-speed operators can get their fingers burnt if they take their eye off the ball and fail to react to changes in the market, as SNCF has discovered. After years of steady increases in traffic and revenue, SNCF’s TGV network took a knock in 2013-14 when people started to take advantage of cheap car sharing schemes and long-distance bus operators entered the market. SNCF’s initial response was to set up its own long-distance bus operation and introduce a no-frills low-cost TGV service called Ouigo.

Ouigo has been extremely successful as it has demonstrated that there is a market for a low-fare high-speed product, and that it is possible to operate high-speed trains more cheaply by streamlining maintenance and working the assets much harder. SNCF will now expand the Ouigo network and plans to cut operating costs by 30% on its conventional TGV network.

More than this, SNCF has taken the bold, and some might say risky, step of re-branding TGV as inOui as part of an initiative to improve the quality of its high-speed services. While the leaked story caused consternation that such an iconic and well-known French brand was being changed, SNCF is quietly pleased at the huge amount of free publicity it received. Only time will tell if SNCF has made the right decision or made a horrible mistake. In any event, SNCF appears committed to getting TGV back on track.

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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