Are we at a point of no return?

International rail passenger services in Europe were opened to competition in 2010 and domestic markets are likely to be next. What will it mean for a country such as France, whose rail services are still largely operated by the national state-owned SNCF?

Liberalisation is a term that is frequently applied to the railway. But what does it mean, and is it applied in the same way in each country?

In Europe, open access operators have been free to run cross-border passenger trains since January 2010. In other words, if an operator believes it can make money, it may choose to launch a service. So far we have seen a number of operators who have announced their intentions, such as DB wishing to operate to London from Frankfurt and Amsterdam via Belgium and France, and a consortium of Trenitalia and Veolia wishing to operate from northern Italy to Paris and Lyon. No doubt other proposals are being considered privately, but these have not hit the press.

The domestic markets in many European countries are also subject to competition. Different models are in force in Italy, Germany and the UK, but all have ostensibly the same aim – to permit competition to the legacy operators by introducing services that offer alternative products, prices or destinations. In France, however, the domestic passenger market is still largely controlled by SNCF which operates the world-renowned high speed TGV services, the regional TER services (under contract to the French administrative regions), and the Corail services – non-TGV Intercity services which are an essential lifeline to many places which the TGV has not yet reached.

For some years, French politicians and operators have been discussing how best domestic liberalisation may be implemented, for it is likely that the European Commission will have issued by the end of the decade a Directive for an opening of the domestic rail market. France needs firstly to influence the detail of that and, secondly, to prepare itself in the best way. But what is the best way? Competition on the long-distance services may prove attractive to new operators if they can differentiate themselves in some way from the current SNCF services – akin to Hull Trains or Grand Central in Great Britain. These could be services running to destinations not currently served by the TGV, but for which significant journey time reductions could be delivered through operation over long stretches of high speed line. They could also be alternatives to the current SNCF service, perhaps with a strong price differential: SNCF has already developed a low-cost variant of its high speed offering – the idTGV ticket – which may give ideas to new operators.

It is the opening to competition of the regional services which is more problematic. Regions may well be tempted to launch a tender for their service, whereby SNCF and other operators would compete to operate the TER services for a fixed duration, and an assessment would be made according to factors of value for money, ability to deliver commitments, and added value of the operator. They might alternatively be tempted by the German model, which is characterised by very small franchises operating a simple range of services. Whichever approach is eventually to be adopted, there are big issues to be decided: the level of subsidy necessary, the fate of the rolling stock currently in use (which has been purchased by the regions), access to maintenance facilities, how SNCF employees can be protected, and the most cost-effective way for RFF (the French infrastructure manager) to maintain and renew the infrastructure. Without satisfactory resolution of these issues, there will be no level playing field for the candidates bidding.

Senator Francis Grignon has been leading an analysis of the potential and has made his recommendations to the French government this year. He has studied the situation in a number of different countries and will no doubt attempt to identify a means to satisfy the legal and political imperatives that he faces in France. In addition, the new French regulatory body, ARAF, has been established with significant powers. In the meantime, we’ll have to watch closely how and where new international open access operators enter the market – and how that might evolve into an offer that France might accept for the liberalisation of domestic services. No doubt there will be much international interest. Vive la liberalisation!