The TGV, after three decades serving  as milch cow for SNCF , is no longer as profitable as it once was, which raises the issue of the viability of its business model at a time when some of the projects adopted at the Grenelle Environment Summit  threaten being blown off-course.

SNCF has been celebrating the TGV’s 30th anniversary in style. Early April, taking the floor outside Paris-Montparnasse Station platform 1 in jubilant mood, CEO Guillaume Pépy articulated the multiple reasons underpinning this success story, including the world rail speed record of 574.8 kmh and a 50% market share in Europe. Yet for the “great communicator himself”, the success of the TGV brand would now seem to be called into question, with the Paris-Arras, Bordeaux-Strasbourg or Lille-Strasbourg routes given as cases in point...... With  the quality of train services increasingly criticised by users, Guillaume Pépy nowadays feigns  to swear solely by « everyday trains », in other words regional express trains (TER), regional express networks (RER) and other Ile-de-France commuter services (or “Transiliens”). Should this be taken to mean the TGV (accounting for 20% of the SNCF’s turnover) is destined to become just a niche market? Possibly so, with SNCF now conceding that 30% of  high-speed services operate at a loss after many years during which the money-spinning TGV, with 22-23% profit margins, cross-subsidised the group’s loss-making activities. But this is no longer the case, with profit margins apparently slashed by half in 2010 (15% being the profitability threshold).

This erosion is primarily explained by the usage fees charged by the French Rail Infrastructure Manager (RFF) to SNCF for operating its star trains, whose profitability has reduced due to the ever-higher level of these fees. For the record, SNCF in 2010 disbursed € 1.5 billion fees to access the high-speed (HSL) network, representing just under 50% of  the amount paid to RIT each year. For 2011, an extra € 200 million will have to be set aside for TGV trains to access this network, which represents a fee of € 11 per kilometre. Where 2012 is concerned, the railway regulatory authority (ARAF) has imposed a 1.5% increase in the usage fees for TGV trains. Subsequent price hikes will most probably be index-linked.

Virtually all local elected representatives would love their constituents to be TGV-connected. Phase 2 of the Eastern TGV corridor from Baudricourt to Strasbourg is well under way. Work on the Brittany–Pays de Loire high-speed line is making good progress despite a € 4.3 billion price tag, partly funded by the local communities on the route. RFF recently confirmed having awarded the public-private partnership contract to Group Eiffage, while for the Nimes-Montpellier HSL section the winning bidder is expected to be announced by the end of 2011. Last but not least, Phase 1 of the Rhine-Rhone HSL from Dijon to Mulhouse will be commissioned into revenue service at the end of  2011.

The bad news is that the southern spur (estimated cost : € 4.3 billion) and western spur (€ 2.3 billion) projects have stalled due to lack of funds, while question marks hang over the Poitiers-Limoges (€ 2 billion), Montpellier-Perpignan(€ 6 billion) and Lyon-Turin (€ 12 billion) schemes. To put it bluntly, should town-and-country-planning considerations prevail over cost-effectiveness criteria? Jean-Pierre Audoux, Delegate-General of the French Railway Industries Association (FIF) unequivocally states « that it makes more sense building four or five lines within a ten-year timeframe on the strength of their economic profitability than focusing on the 18 projects identified by the Green Environment Summit, which in all events will never see the light of day…”. Also worth remembering is the fact that the per-kilometre cost of building a high-speed line is a staggering € 10-15 million (source : Transport Journal  survey).

High-speed substitutes for Corail services ?

New lines are increasingly expensive to build, and this represents a direct threat for the new projects under consideration . The Southern Europe-Aquitaine HSL from Tours to Bordeaux, for example, was expected to cost some € 7.8 billion , yet despite a seemingly-agreed funding package, the contractor selected to build and operate the line is now claiming an extra € 60 million from RFF to offset the rising cost of raw materials.

In terms of the resources needed, the 2000 km of new high-speed lines scheduled to be built by 2020 pursuant to the resolutions passed at the Grenelle Environment Summit would seem  to be an unrealistic target as they represent an investment outlay of some € 70-80 billion! As an exasperated SNCF senior manager recently observed: “This is an incitement…Surely we need to prioritise maintenance of the existing network , which keeps deteriorating particularly on high-speed lines”. Rather than building new lines, it would be more logical to rehabilitate existing ones for trains worked at speeds in the 200 kmh - 250 kmh range. This will of course require realignment of some curved-track sections, upgrading of some signalling installations, boosting OHL electric power plus elimination of level crossings….. But the important fact to bear in mind is that this technical upgrade would cost seven to ten times less than building a new high-speed line…...

Parliament Member and Caen Mayor Philippe Duron is lobbying for adoption of this latter solution as it would trim journey times between his town and the capital to under 90 minutes. He argues the case that building new stations at Rouen and Paris La Défense, plus an Ile-de-France new line in the Mantes region, represents an outlay of some € 9 billion, which is  much cheaper than a  300 kmh +  HSL line costing € 15 billion!

Implementation of this scenario would result in the safer and faster interconnexion of lines between Bordeaux and Spain, and more importantly between Bordeaux and Toulouse. The jury is still out in SNCF circles and to date no bids have been invited for 200-250 kmh trains. All the same, President Mellier of Alstom Transport, leading train supplier to SNCF, is convinced that « there will sooner or later be a demand for high-speed operation on rehabilitated conventional lines”.  Over 400 Alstom-built tilting trains (Pendolinos) are in service throughout the world, but none in France where competing tilting-train models proposed by Bombardier, Hitachi and Siemens could well speed-up services currently operated with Corail sets close to technical obsolescence…...

TER services for end-of-journey runs?

The other option as advocated in particular by SNCF CFO David Azéma, provides for TGV services to be confined to main corridors, with passengers transferring to the TER network for the “last mile home”. This admittedly would render some one hundred trainsets redundant (fleet size: 540 units), which means SNCF could then downsize its orders for new TGV sets, particularly as it is again thinking of revamping some of the first-generation trainsets by  extending their revenue life to forty-two years.

Ironically the one new project seemingly to have secured universal assent was not that  selected by the Grenelle Environment Summit, namely the Paris-Clermont Ferrand-Lyon HSL, which happens to be the only line that boasts all the prerequisites: opening-up of a large town , doubling of the Paris-Lyon line plus good economic profitability. ...