In the case of France, there was a pressing need to address the anomalies of the former structure where the infrastructure manager, French Rail Network (RFF), was only responsible for managing the network and building new lines, while French National Railways (SNCF) retained responsibility for train control and infrastructure maintenance. This has now been addressed as these functions have been transferred to SNCF Network, the new infrastructure manager subsidiary of SNCF.
The only exception is the decision to retain responsibility for stations within the new train operating subsidiary SNCF Mobility. This could lead to disputes in the future if and when France finally opens the door to private passenger operators.
Rail regulator Araf has already listed its concerns over the ability of the new infrastructure subsidiary, SNCF Network, to treat open-access operators fairly. The track record of holding companies is not encouraging with far too many reports of discrimination against private operators in favour of the incumbent. There is bound to be a desire within an organisation to protect itself from outsiders, so it is rather naive to think that so-called Chinese walls between subsidiaries will be the guardians of fair play.
It is even harder for private operators to succeed when the rules of the game keep changing. The decision in France and Germany to allow long-distance bus operators to run scheduled services in competition with rail has already forced one private rail operator to withdraw its services and is damaging national rail operators as well. Veolia ran its last long-distance trains in Germany in December after pleas to the German Ministry of Transport to relax the laws relating to access charges went unheeded. How can it be right that train and bus operators have to work to different sets of rules and charges? But this is what happens when politicians change the rules without thinking through the consequences.
SNCF says a major benefit of reintegration will be its ability to reduce costs, and it has pledged to improve productivity by e1bn during the next five years. The problem is that SNCF has not reached agreement with the finance minister over how to fund the much-need modernisation of the classic network. Previous increases in track access charges have been used by the government to reduce its payments to RFF rather than improving the infrastructure. SNCF fears that it will have to fund network upgrades by increasing borrowing, which is fine while interest rates are low, but they won't stay low forever.
The new SNCF faces several challenges. A report published by the French Court of Auditors in October into the deteriorating financial performance of TGV high-speed services needs to be addressed. However, the reduction in the profitability of the TGV network is largely caused by rising access charges, which now account for one-third of costs, and the sluggish French economy, which has not recorded any growth for the last two years. The report recommends concentrating services on the high-speed lines and forcing passengers to change trains to reach cities off the network. But this will increase journey times, and make rail less attractive as passengers do not like changing trains on long-distance trips. Any attempt to implement such a policy is unlikely to be accepted by either politicians or passengers.
SNCF also needs to revitalise its Intercity services which have been left to endure a slow and painful death. Despite linking many important towns and cities away from the TGV network, SNCF has been unable to develop them into a commercially-attractive operation. Indeed, an agreement with the government signed in December 2010 to revitalise Intercity failed to prevent a 50% increase in losses and the withdrawal of 10% of the services. A government commission is now looking into how to develop the network.
SNCF is not alone as conventional Intercity trains often fall between subsidised regional services and profitable high-speed operations. One solution could be to allow private operators to have a go, but in France there is considerable opposition to this, as its reluctance to introduce concessioning of regional services shows. The German model is proving highly successful in reducing costs, improving service quality and stimulating traffic, something which France would do well to learn from.
Finally, SNCF needs to tackle the lacklustre performance of its railfreight operation, which was in doldrums even before the global economic crisis hit. It is interesting to note that private companies now account for 35% of freight trains, despite France opening up the network to open-access operators later than other European countries.
Hopefully, now that SNCF Mobility can focus purely on running trains it will be in a better position to tackle some of these issues. Only time will tell.