Tuesday, June 04, 2013

Ouigo leads the way in low-fare high-speed rail

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Ouigo, SNCF's new low-fare TGV service, has got off to a flying start since its launch at the beginning of April. As David Briginshaw reports from Paris, the service has already achieved a high satisfaction rating with passengers and attracted more people to rail than expected.

ONLY a tiny logo on the door tells visitors they have arrived at the unassuming offices of the small but enthusiastic Ouigo team in La Défense in western Paris - a clear indication that the focus is firmly on keeping costs down. "We were given a very simple objective: imagine a new design of high-speed train service with a 40% reduction in operating costs compared with TGV," says Ouigo's managing director, Ms Valérie Dehlinger. "Our aim is to enlarge the market by getting people who travel by car to use the train with a very attractive offer in terms of price."

Virtually all of the €10m start-up budget has been spent on refurbishing and reconfiguring four double-deck TGV Duplex trains and developing new IT systems. Dehlinger is very proud of the fact that the whole operation has been set up in just 18 months and has been done entirely in-house without the aid of outside consultants. Indeed, all the 100 or so train staff, including the 10 managers, have been recruited from within SNCF and work under SNCF employment conditions.

"We had to build the whole system from scratch," says Dehlinger. The work entailed developing a brand image and marketing campaign, redesigning and refitting the trains, building a new information system and website, and designing a new operating and maintenance strategy, all with an eye on achieving the 40% cut in operating costs.

OuigoThis led to a radical rethink of the way high-speed trains are operated and maintained in France. "We needed to double the usage of our trains," Dehlinger explains. A TGV is normally in service for an average of seven hours a day, but Ouigo trains are out on the track for up to 13 hours/day, clocking up around 80,000km per month. This has been achieved by only conducting routine maintenance at night and carefully planning the work in advance so that it is carried out for seven-and-a-half of the eight hours which the trains spend in the depot. Heavy maintenance has also been reorganised so that everything can be completed within one five-day session every six months. All Ouigo services are operated by two trains in multiple, which reduces the risk of having to cancel a service due to a serious fault on one set.

"We optimised a lot of things to improve efficiency," says Dehlinger. "We set up a system to monitor closely what is going on. We have short lines of communication between operations and maintenance staff so that if there is a problem it can be dealt with quickly. For example, we had a problem on one of our trains recently so we sent a message to the maintenance team to explain the fault and enable them to organise spare parts and be ready for the train's arrival - it's the same idea as a pit stop for a Formula 1 racing car."

To reduce operating costs, Ouigo services operate where possible from less popular stations with lower access charges and use paths which are 20% cheaper than those at other times. The timetable has also been designed to maximise train productivity by avoiding any unnecessary trips to depots and keeping turn-round times to a minimum with the shortest being 26 minutes.

As a result, Ouigo services run from Marne-la-Vallée Chessy to the east of Paris, which is adjacent to Disneyland Paris and served by RER Line A, rather than Gare de Lyon in the centre of Paris. They run to an irregular timetable with 14 trains per week to Marseille, six to Montpellier and Lyon, and a few Lyon - Marseille shuttles. Trains call at intermediate stations including Lyon St Exupéry, which serves Lyon Airport.

Another cost-saving initiative has been to make better use of staff, so the same staff that check passengers' tickets on the platform at Marne-la-Vallée then board the train to assist passengers during the journey. The trains have been reconfigured to increase the seating capacity by removing all on-board catering facilities, which itself simplifies the operation, and by providing only one class of accommodation. As a result, two Ouigo Duplex trains can seat 1260 passengers compared with around 1000 for a pair of standard TGV Duplex sets. A new design of lightweight seat has been fitted throughout the trains, along with power sockets for which passengers are charged a fee of €2 per trip. A simple measure to have one large rubbish bin per coach rather than several small bins streamlines the cleaning process at the end of each trip.

The whole ticket sales concept has been rethought to minimise costs. Tickets can only be purchased through the Ouigo website and are distributed electronically. Passengers can choose to receive SMS updates for another €1 and suitcases are charged at €5 each.

Specific seat reservations are only allocated the day before travel to give Ouigo more flexibility. "We use an algorithm to place people in the train at the best location depending on whether they have baggage or not, to optimise passenger comfort, and to have rapid boarding and alighting at stations," Dehlinger explains.

Ouigo services were launched on April 2. In common with TGV, a yield management system is used to adjust fares according to demand. Fares range from €10 to a maximum of €85, which compares very favourably with TGV where the equivalent second-class fare would be €140. A flat fare of €5 is charged for children up to 12-years-old accompanying an adult, which makes Ouigo very attractive to families. As a result, children have made up more than 20% of passengers so far, which has presented a new challenge. "With so many children travelling, we have had to give staff a special kit to use when the children are sick," Dehlinger explains.

"We have carried slightly more passengers than expected, but the revenue is a little less than forecast because we offered a lot of low fares to launch the brand," Dehlinger told me on May 15. Ouigo expects to reach breakeven within three years on a stand-alone basis, which means excluding the effect on SNCF's overall business of passengers transferring from other services. The average load factor started at 30% and should reach 50% by the end of the year reaching 65% by 2017, and Dehlinger says they are already above target. Fares for groups will start to be offered in September, which should help to boost traffic further. "Group travel is an important part of the market because of Disneyland," says Dehlinger.

Ouigo sends passengers a short questionnaire after each trip and has had a 20% response rate. "In our business plan, we thought that 70% of our passengers would come from TGV or iDTGV, but so far only 50% have. The surprise is that 25% of passengers said that they would not have travelled at all without Ouigo. The remaining 25% would have taken the car or bus and a few would have flown." Dehlinger says about 90% of passengers say would recommend Ouigo to a friend or family member.

Dehlinger is cautious about expanding Ouigo services or launching new routes either in France or abroad. "We need to see whether this new model works, and how our trains perform with the new intensive operation before we start to expand, but we are already looking at how the new maintenance regime could be applied to the main TGV fleet."

Ouigo is clearly off to a good start and in a very short time has developed some innovative ways of operating and marketing a high-speed train service, which is particularly relevant in the current economic climate.

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