March 13, 2015

TGV strategy seeks return to growth

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TGV strategy seeks return to growth SNCF

FRENCH National Railways (SNCF) has unveiled details of a plan to return its high-speed business to growth and make "TGV the preferred means of transport for the French."

TGV has suffered a worsening financial situation since the economic crisis began with operating margins falling from 29% in 2008 to 10.4% in 2014. At the same time, infrastructure costs have soared from €1.3bn in 2008 to €2.1bn in 2014, and are set to reach €3bn by 2020, while competition from other modes including low-fares airlines and online car-pooling has intensified.

The new CEO of SNCF Voyages Mrs Rachel Picard announced a series of measures on March 11 which will be implemented over the next two years with the aim of reviving TGV's fortunes. The plan has three key objectives:

  •  improve the quality of travel
  • offer reduced fares, and
  • reduce costs and strengthen operating margins.

In September, SNCF Voyages will unveil new seat designs which will be used in the refurbishment of existing TGV Duplex trains and 40 new Duplex sets which will be delivered by Alstom between 2016 and 2019. The new trains will seat up to 556 passengers, compared with 456 on the current Duplex trains. Passenger Wi-Fi will also be rolled out across the fleet.

In a bid to tackle the perception that TGV is a premium-priced product, SNCF has increased the proportion of low-priced tickets from 15.9% in 2013 to 18.5% and the objective is for this to reach 20-25% of total ticket sales. As part of this strategy the successful Ouigo low-fares concept will be extended with new services from Roissy Charles-de-Gaulle and Massy stations near Paris to Nantes from next year and Bordeaux from 2017. SNCF is also evaluating the possibility of introducing Ouigo services from the Paris area to northern and eastern France by 2020.

On March 24 SNCF will launch last-minute deals for loyalty card holders with discounts of 40-50% for trips booked up to four days before departure for up to four passengers. Around 600,000 discounted tickets will be offered under the scheme over the next three months.

A new affordable fares scheme will be launched for small businesses in May and other group offers will also be introduced this year.

In 2016 SNCF says it will aim to introduce a clearer pricing structure for TGV services with a review of the yield management model.

Alongside revenue-generating measures, SNCF also aims to reduce TGV operating costs by up to €80m through improved train utilisation, increasing seating capacity, and raising the proportion of online ticket sales.

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