Passenger Trains > French auditor calls for smaller TGV network

Some food for thought for the "High Speed Rail everywhere" crowd.

http://www.railjournal.com/index.php/high-speed/french-auditor-calls-for-smaller-tgv-network.html?channel=542&utm_source=WhatCounts+Publicaster+Edition&utm_medium=email&utm_campaign=IRJ+Rail+Brief+Oct+30+2014&utm_content=Full+Article+

French auditor calls for smaller TGV network


FRANCE will need to consider reducing the number of stations served by TGV services if the network is to stand any chance of being profitable, according to a report on the finances of TGV, which was published by the French Court of Auditors on October 23.


French National Railways (SNCF) currently operates nearly 5500 TGV services per week serving around 230 stations. Because of the huge range of destinations served, around 40% of travel time is on the conventional network.

While total long-distance ridership has increased over the last 30 years, TGV has seen a fall in passenger numbers since the economic crisis, with traffic falling 0.5% in 2013 to 53.8bn passenger-km. Operating margins fell from 29% in 2008 to just 12% in 2013.

The report argues that international experience proves the most financially successful high-speed networks around the world focus on high-density routes serving a limited number of destinations with good connections to regional services, maximising the journey time benefits between key cities. It notes that the Tokaido Shinkansen carries one-and-a-half times the traffic of the entire TGV network but serves just 17 stations.

On key TGV routes such as Paris – Lyon and Paris – Nantes, which are both served by 23 trains per day, revenues are described as "significant" and the auditor sees potential for developing services on such high-density corridors to maximise income. TGV has by far the largest market share on journeys of 1h 30min-3h and it is suggested that SNCF concentrates on targeting this segment of the market.

Profitability of new lines is lower than forecast, for example 5% on TGV Nord compared with an estimate of 20% and 8% on TGV Méditerranée compared with a forecast 12%. With lines being constructed in reverse order of forecast profitability, the report observes that the network has now expanded to a point at which further new lines are unlikely to generate revenues that justify their construction, at least in the short to medium-term.

"The French high-speed rail model is now in difficulty," says the report. "While TGV has been one of the brightest manifestations of French technological achievements, its balance sheet has been severely degraded in recent years. The French as a whole, from passengers to policymakers, want continued expansion of the network (beyond the four lines currently under construction) because they see high-speed rail promoting economic development of the regions and reducing the impact of transport on the environment. These assertions are justified, but it is no longer possible to pursue a policy of "all TGV," especially if we are going to speed up renovation of the conventional network, which has been neglected for 30 years."

The report warns that funding for TGV is likely to be squeezed in the future by the need to focus funding on the upgrading of the classic network and the emergence of competing modes, not least long-distance buses.

The task of making TGV profitable is therefore defined as a straightforward public policy choice. On the one hand, the construction of new lines could be cancelled or deferred until the very distant future. On the other, the report suggests a "difficult but necessary" restructuring of the TGV network, with enhanced regional services providing better connections for stations away from the high-speed network, which it says could be carried out gradually as part of a broader multimodal transport plan.

The auditors recommendations include:
•Better integration of high-speed services with regional rail and other modes
•Restricting the number of stops on high-speed lines and reducing the number of services operating over conventional lines
•Ensuring transparency on traffic data for individual lines to monitor revenue performance, and
•Focus financial resources on upgrading the conventional network

Replaced by long distance buses? Zut alors!

Discounts are widely available on TGV. The recent NY Times article mentioned a round trip TGV fare from Paris to Marseille of about $200, which I thought was considerably lower than it had been as recently as last Spring when my sister took the train.

Makes sense to me.

Most HSR cheerleaders want 200 mph trains that stop every 5-10 miles.
It's self-defeating.

Has nothing to do with negativity.

Basically, you can high-speed service where the train doesn't have
to slow down and stop very often, so it maintains high speeds all
the way (the selling point), or you have locals that do a lot of
accelerating and decelerating and stopping, which is convenient
for some but negates the speed advantage, thus lowers the revenue
as it's not as attractive or useful.



Edited 1 time(s). Last edit at 10/30/14 09:59 by Realist.

Couple of old sayings. Hear no evil, see no evil. Don't post something I don't want to hear.

Steal from Peter to pay Paul.

No matter how you cut it, you only have so much money to "invest" so if it goes one place then there is less for
anything else and that is what makes the story relevant.

So for example, you have X billion stimulus for HiSpeed rail but no new Amtrak engines.

As far as France, a lot goes back to Le Grande Charles, lots about pomp. Remember, he was a "big part" of the liberation of
France and the recolonization of Vietnam.

A joke we have in tennis, "doesn't matter if you win or lose as long as you look good."


Bob



Edited 3 time(s). Last edit at 10/30/14 11:07 by robj.

OK, let's step out of the question of where this post belongs, and ask another pressing question.

An accounting question.

When they quote an operating margin of 12 percent, is that equivalent to what we call "fare recovery" when talking about Amtrak? Do TGV fares really recover only 12 percent of operating costs?

I'm not being beligerent here, just ignorant. Can somebody tell me what that figure means?

Paris to Marseille is about 450 miles, a little longer than NY to Cleveland, and longer than the distance from Los Angeles to San Francisco.

If they're charging $200 for a round trip ticket on their premium TGV, I can understand why they're not making any money. As a matter of national policy, the alternate highways have tolls, and automobiles burn $8 a gallon gasoline.

Investopedia says:

"Operating income is revenue less operating expenses for a given period
of time, such as a quarter or year. Operating margin is a percentage figure
usually given as operating income for some period of time divided by revenue
for the same time period. Operating margin is the percentage of revenue
that a company generates that can be used to pay the company's investors
(both equity investors and debt investors) and the tax man."

By this definition if your train earns $100 in revenue and it costs $90 in
expenses to run it, the operating income is $10.

Operating margin thus would be $10/$100, or 10%.

Operating ratio is the operating expense divided by the revenue. In this
example, $90 divided by $100 is 0.90, or a 90% operating ratio.



Edited 1 time(s). Last edit at 10/30/14 12:08 by GenePoon.

If the French auditor were in the United States, he or she likely would favor drastic reductions in conventional Amtrak service as well as opposing high-speed rail service, fairly typical for the beancounter crowd.

reindeerflame Wrote:
-------------------------------------------------------
> If the French auditor were in the United States,
> he or she likely would favor drastic reductions in
> conventional Amtrak service as well as opposing
> high-speed rail service, fairly typical for the
> beancounter crowd.

The French spend a lot of money on their freight and passenger networks. And, suburban train services. And, local bus services. As a nation, the French take pride that just about every place on the mainland is accessible to any other place by public transport. The Austrians and Swiss have similar expectations.

But, they achieve this by imposing steep taxes on gasoline, using hydro and nuclear power, and putting steep tolls on every major highway. And they limit flights between points well served by rail. All decisions which would be unacceptable in the US.

Lackawanna484 Wrote:
-------------------------------------------------------
> reindeerflame Wrote:
> --------------------------------------------------
> -----
> > If the French auditor were in the United
> States,
> > he or she likely would favor drastic reductions
> in
> > conventional Amtrak service as well as opposing
> > high-speed rail service, fairly typical for the
> > beancounter crowd.
>
> The French spend a lot of money on their freight
> and passenger networks. And, suburban train
> services. And, local bus services. As a nation,
> the French take pride that just about every place
> on the mainland is accessible to any other place
> by public transport. The Austrians and Swiss have
> similar expectations.
>
> But, they achieve this by imposing steep taxes on
> gasoline, using hydro and nuclear power, and
> putting steep tolls on every major highway. And
> they limit flights between points well served by
> rail. All decisions which would be unacceptable in
> the US.

The French have thrown buckets of money at their freight services in the past, but Fret SNCF seems to be in a death spiral. The future of freight in France is Open Access Operators. As to passenger services SNCF is pushing Long Distance services onto TGVs which command higher ticket prices, or subsidized Regional Services. The problem is that with France in a recession many people can no longer afford even Coach pricing on the TGVs. Passenger counts on services to Lyon, Marseille, and Nice are holding up well, as are services to Switzerland. Everywhere else is suffering. Germany is in a similar situation although ICE services haven't been hit quite as bad. Conventional IC services have been devastated.

Lackawanna484 Wrote:
-------------------------------------------------------
> As a matter of national policy, the alternate highways
> have tolls, and automobiles burn $8 a gallon gasoline.

If we had those conditions here in the U.S., we'd probably have quite a few HSR routes.

What's happening is that freeways aren't so "free" anymore. New ones constructed in Orange County, CA and other places are charging tolls and some of the HOV lanes that used to be free are no longer free (San Bernardino Freeway in L.A. is an example).

$8 per gallon gasoline will probably be a reality in a matter of time.

And, through all this, we'll STILL be debating whether to build HSR routes.

CA_Sou_MA_Agent Wrote:
-------------------------------------------------------
> Lackawanna484 Wrote:
> --------------------------------------------------
> -----
> > As a matter of national policy, the alternate
> highways
> > have tolls, and automobiles burn $8 a gallon
> gasoline.
>
> If we had those conditions here in the U.S., we'd
> probably have quite a few HSR routes.
>
> What's happening is that freeways aren't so "free"
> anymore. New ones constructed in Orange County,
> CA and other places are charging tolls and some of
> the HOV lanes that used to be free are no longer
> free (San Bernardino Freeway in L.A. is an
> example).
>
> $8 per gallon gasoline will probably be a reality
> in a matter of time.
>
> And, through all this, we'll STILL be debating
> whether to build HSR routes.

You're probably right about that.

But France does have a tradition of accepting far more direct government intervention than the US has had. I can't imagine St Louis would take well to losing air service to Chicago, Kansas City, Memphis, New Orleans, etc. Or most of the US finding tolls on just about every interstate highway.

CA_Sou_MA_Agent Wrote:
-------------------------------------------------------
> Lackawanna484 Wrote:
> --------------------------------------------------
> -----
> > As a matter of national policy, the alternate
> highways
> > have tolls, and automobiles burn $8 a gallon
> gasoline.
>
> If we had those conditions here in the U.S., we'd
> probably have quite a few HSR routes.

problem is, the people that don't use the hsr routes would still be screwed. in fact, the whole country would be screwed by $8.00 per gallon gas prices due to the costs of EVERYBODY'S goods and services increasing.

> What's happening is that freeways aren't so "free"
> anymore. New ones constructed in Orange County,
> CA and other places are charging tolls and some of
> the HOV lanes that used to be free are no longer
> free (San Bernardino Freeway in L.A. is an
> example).
>
> $8 per gallon gasoline will probably be a reality
> in a matter of time.

and whatever politicians are in office then will be short timers and they KNOW it......

> And, through all this, we'll STILL be debating
> whether to build HSR routes.

66

Personally, I wouldn't dream of commenting on the French Railways; or how they plan to restructure it.

We in America can only wish we had half the passenger network they have. While we are having conniption fits over the CHSR project; this article says the French are building FOUR new TGV routes as we speak. We are soooo out of their league.

As an American rail fan commenting on French TGV's; I feel like a pauper commenting on a millionaire.

Joe



Edited 3 time(s). Last edit at 10/30/14 17:49 by floridajoe2001.

The Chinese Government studied their high-speed, dedicated passenger lines (DPL) program and came to roughly the same conclusion - it's not financially sustainable. The recommended solutions: 1) reduce maximum design speeds - they can't be achieved where stops are closely spaced; 2) re-purpose some existing rights-of-way rather than building new everywhere; 3) re-consider the value of very lengthy DPL corridors to more sparsely populated inland regions. The basic problem is that where you have the population density to support the service economically, the major cities are too closely spaced to allow the trains to reach design speeds, and where the cities are farther apart there's not enough traffic to justify the line (and air travel is both time-competitive and less costly).

It hasn't been remarked on very much in this discussion, but the mention of intercity bus competition refers to the recent legalization of non-city-transit buses, which were banned throughout France (probably ever since SNCF was formed). The European railways also have a substantial long-and-short-haul problem with recent liberalization in EU air transport regulation. Airline costs are substantially lower than rail on a per-seat-mile basis and hence fares are, too. If rail fares are reduced between endpoints (Paris to Berlin, say) to compete, it will cost more to go by rail from Paris to Brussels than all the way to Berlin. You know what the Brussels passengers will do then (buy a ticket to Berlin and get off in Brussels), thereby costing the railway still more revenue.

illini73 Wrote:
-------------------------------------------------------
> The Chinese Government studied their high-speed,
> dedicated passenger lines (DPL) program and came
> to roughly the same conclusion - it's not
> financially sustainable. The recommended
> solutions: 1) reduce maximum design speeds - they
> can't be achieved where stops are closely spaced;
> 2) re-purpose some existing rights-of-way rather
> than building new everywhere; 3) re-consider the
> value of very lengthy DPL corridors to more
> sparsely populated inland regions. The basic

This same set of conclusions was reached in the US in 1965 by LTK Engineering in the very first study of high speed rail in the US and looking specifically at the north and south ends of the Northeast Corridor. For NYC-DC, they looked at 125 mph (2.5 and 2.25 hour trips) and 150 mph (2.25 snd 2 hour trips) options, and they considered 0%, 50% and 100% increases in ridership over 1963 levels.

The only option which was financially renumerative was 125 mph with 50 and 100% increases in ridership. All other cases resulted in a net loss when depreciation charges were included in the monetary calculus. The cause for this calculus was that the infrastructure costs increased geometrically vs. the decrease in trip time with the variation being over an order of magnitude. A 10% decrease in trip time (2.5 to 2.25 hours) cost 167% more to build. Similar conclusions were reached for NY-Boston.

> problem is that where you have the population
> density to support the service economically, the
> major cities are too closely spaced to allow the
> trains to reach design speeds, and where the
> cities are farther apart there's not enough
> traffic to justify the line (and air travel is
> both time-competitive and less costly).

The problem is that travel time decreases logarithmically with increased speed, while capital and operating costs increase geometrically. The practical conclusion is that speeding up 30 mph track to 60 mph and dealing with congestion on the tracks is a better use of money in terms of overall travel time than speeding up 120 mph track to 150 mph. The other problem is that 150 mph is politically sexy while speeding up a complex junction is not.

The other problem is that infrastructure construction since 1973 is exhorbitatnly expensive due to the huge run-up in the costs of oil, labor, and mined minerals after the end of the gold standard in 1971 and the floating of the US dollar. Construction costs are about 10-30 times higher now than they were in 1973, while overall cost inflation is perhaps 5 times. People often make the flawed comparison to the Interstate Highway system, failing to consider that 90% of the system was ocmpleted between 1956 and 1973.

When LTK was investigating 2 hour 150 mph service, the cost was estimated at $570 million. Something like this now would be $50 billion. If it caused the ridership to double, so that revenue doubled, you are looking at a cash stream of an additional $1 billion to amortize $50 billion. Obviously it won't work even at 0% interest rates.

abyler Wrote:

> FRANCE will need to consider reducing the number
> of stations served by TGV services if the network
> is to stand any chance of being profitable,
> according to a report on the finances of TGV,
> which was published by the French Court of
> Auditors on October 23.

Any idea what their definition of "profitable" is?

Realist Wrote:
-------------------------------------------------------
> Makes sense to me.
>
> Most HSR cheerleaders want 200 mph trains that
> stop every 5-10 miles.
> It's self-defeating.
>
> Has nothing to do with negativity.
>
> Basically, you can high-speed service where the
> train doesn't have
> to slow down and stop very often, so it maintains
> high speeds all
> the way (the selling point), or you have locals
> that do a lot of
> accelerating and decelerating and stopping, which
> is convenient
> for some but negates the speed advantage, thus
> lowers the revenue
> as it's not as attractive or useful.


You are right about this. The Eurostar (connecting London-Paris) runs for about three hours between the two cities without stopping at about 180 MPH(in France, less in the Chunnel and England), on a two track directional running right-of-way.
No stops, and dedicated trackage outside the terminals with no commuter or freight.

Compare that with NEC between NYC and Washington: BWI Airport, Baltimore, Wilmington, Philadelphia, Metropark, and Newark. Six stops add 12-18 minutes to run time (not counting acceleration/deceleration) at zero speed.

Well, the most critical needs for the NEC are some tunnels and bridges or we are not going to have a NEC.

The TGV network was designed as an integral part of a European transportation network which was composed of mostly government owned carriers. Government owned airlines, government owned freight and passenger railroads, government owned buses, etc. That was in the 1970s and 1980s. Now, thirty years later, the environment has switched by 180 degrees.

Open access operators, discount airlines, privatized government airlines and railroads, etc.

I would interpret the auditor's comment to be more of "we can't continue doing things the way we do, at the prices we charge", Even at nose bleed prices by US standards, people still drive long distances. And, at cheap by US prices, people fly from Brussels to Ibiza or Capri for the weekend.