Regionalization railway passenger traffic in Switzerland: more

performance without competition. An example for France?

Christian Desmaris – University of Lyon – Laboratory of Transport Economics

July 2013

Why this paper ? The regional passenger traffic in France has been strongly

reshaped over the ten past (2002), but this reform appears today as unfulfilled, both in a financial and institutional bind: Institutional. French law does not actually open the possibility of bidding in

contrast with the European laws which open the competition in the next future (OSP, 2007-2019) and Fourth railway package (2013).

Financial. SNCF production costs are high and rise much and and regularly. (Crozet and Desmaris, 2011).

Our suggestion: the Swiss reform of regional passenger rail transport can it serve as a model in France? Many reasons: Institutional. The Swiss railway regionalization ended the monopoly of

historical operator and provides good results for taxpayers and travelers. A Similar regional railway reform agenda: 1995/1996 vs 1995/1997-2002. But

in France, unfinished reform. The Size. In France, the regions are PAT. Switzerland is similar with one of great

French regions in terms of population and surface.

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Our four questions:1. What is this switzerland rail reform design?2. What are their impacts on public finances

and on travellers’ welfare?3. How to understand the dynamics in the

regional and local traveller railway transport reform in Switzerland?

4. What learning lessons from Switzerland passenger railway reform for policy makers in France?

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1. The Swiss railway reform (1)

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1. First step in 1995/96: a regional traffic reform Three axes:

1. Regionalisation : cantons as full responsible for the order of regional transport services ; but FOT co-signs the agreements.

2. Net-cost contract : Unplanned deficits will no longer be covered by the State. Very incentive. Two years contracts.

3. Liberalisation regional traffic. – No more SBB monopoly; Possibility of tendering for rail regional transport services.

Regionalisation paradox: more potentail competition and more need of traffic coordination (FOT)

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1. The Swiss railway reform (2)

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2. Second step in 1998/1999: a new regulatory framework very near European pattern (first and second package)A significantly renewed SBB organization and its

business model (01/01/1999)1. Independence from the political and administrative powers,

but special status of a public limited company - quadri-annual contract

2. Confederation has accepted to erase SBB debts3. Activities have been divided into four distinct branches:

Passenger Traffic, Cargo, Infrastructure and Real Estate4. Sovereignty tasks have been transferred to the FOT

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1. The Swiss railway reform (3)

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3. Third step 2009/…: a highly controversial and unfulfilled reform in 2013 Three particularly controversial points:

1. The tendering procedures in regional passenger transport (train / bus) : optional or compulsary?

2. The respective share of the Confederation and the Cantons for the financing of infrastructure

3. The choice of the optimal architecture for the infrastructure management - Swiss rail system is vertically integrated (as Japan)

Swiss railway pattern reform: so specific Pragmatic reform: step by step … Various and conflictual objectifs: quality vs productivity and

rentability ; more rail share vs more efficiency in using publics funds

Competition in the law. but specific public governance in fact,WCTR Rio - July 2013

2. Significant performance gains

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1. An inverse of the public compensation trend (1)Grants allowed by the Confederation to the regional traffic operated by SBB

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2. Significant performance gains

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1. An inverse of the public compensation trend (2)Grants allowed by the Regional authorities for the regional traffic operated by SNCF

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2. Significant performance gains

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2. More faster train and more distance in train – Rail 2000

OFS (2012). Mobility in Switzerland - Results of the micro-census Mobility and Transports 2010.

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    1994 2000 2005 2010 Var %

Distances per day in km

Car 21.3 23.6 23.7 23.8 11.7

Train 4.2 4.7 5.6 7.1 69.0

All 31.3 35 35.2 36.7 17.3

Travel times per day in minutes

Car 32 35.3 34.6 33.2 3.8

Train 4.6 4.9 5.2 6.4 39.1

All 77.5 84.5 88.4 83.4 7.6

Speeds in km/hour Car 37 35.5 36.2 38.6 4.3

Train 49.8 53.5 60.9 61.4 23.3

2. Significant performance gains

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3. A large development of the total SBB supply – train-km

Statistics from UIC

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3. The 3 keys of the Swiss rail reform success

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Key 1. A very responsible public governance (1) A) A collective choice in favor of a long-term rail

infrastructure investment planning

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3. The keys of the Swiss rail reform success

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Key 1. A very responsible public governance (2) B) A cap on public operating contributions in favor of

infrastructure funding

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3. The keys of the Swiss rail reform success

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• 1. La stratégie des pouvoirs publics– Un transfert de la responsabilité financière et de la

commande de l’Etat aux cantons (régionalisation)

2003 2010Structure 2003 (%)

Structure 2010 (%)

Variation in million

CHF

Variation en %

Confederation 570.2 545.4 65.1 51.4 - 24.8 -4.3

Cantons 298.0 513.7 34.0 48.4 + 215.7 72.4

Communes 7.3 1.9 0.8 0.2 - 5.4 -74.0

Total of public contributions (millions

CHF)875.5 1 061.0 100.0 100.0 + 185.5 21.2

Key 1. A very responsible public governance (3) C) A larger involvement of the regional authorities in

decision-making and funding

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3. The keys of the Swiss rail reform success

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Key 1. A very responsible public governance (4) D) A really incentive and empowering SBB corporate governance

• An absolute financial constraint imposed to the Swiss Railways by the Confederation

(a) After reduction due to savings programs.

AgreementsTotal amount (CHF million)

Annual average (CHF

million

Index base 100 : annual average

1999-2002

1999-2002 5 840 1 460 100.0

2003-2007 6 020 (5 602) (a) 1 505 (1 400) (a) 103.1

2007-2010 5 880 1 470 100.7

2011-2012 3 322 1 661 113.8

2013-2016 6 624 1 656 113.4

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3. The keys of the Swiss rail reform success

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Key 2. An historical operator capable of great increasing productivity and managerial innovations (1) A) To obtain significant labor productivity gains (1)

1980 1995 2000 2005 2010 2011

Variation en %

1980-1995

1995-2011

Passenger-kilometres in million (1)

9 167 11 712 12 835 13 830 17 513 17 749 +27.8 +51.6

Tonne-kilometre in million (2)

7 220 8 156 10 658 8 571 13 111 12 346 +13.0 +51.4

Staff (3) 38 367 33 529 28 272 25 943 25 356 25 840 -12.6 -22.9

Labor productivity in traffic unit million (1 + 2) / (3)

0.43 0.59 0.83 0.86 1.21 1.16 +38.7 +96.6

Our calculations from Historical statistics of railways (UIC). WCTR Rio - July 2013

3. The keys of the Swiss rail reform success

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Key 2. An historical operator capable of great increasing productivity and managerial innovations (2)

A) To obtain significant labor productivity gains (2)

Our calculations from Historical statistics of railways (UIC). WCTR Rio - July 2013

3. The keys of the Swiss rail reform success

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Key 2. An historical operator capable of great increasing productivity and managerial innovations (3) B) To increase the railway company earnings

(CHF million) 2002 2003 2004 2005 2006 2008 2011

Passengers 113.7 93.4 152.2 78.6 193.7 276.8 213.9

Freight -96.1 -33.1 -2.8 -165.7 -37.3 -29.9 -45.9

Infrastructure 106.5 0.3 43.7 17.4 91.8 30.4 72.4

Real Estate - -4.6 15.2 21.0 27.8 3.3 2.4 (a)

Real Estate before internal balances - 152.1 184.6 219.6 229.8 291.6 182.5

Group-level units -136.4 -34.3 -164.2 -123.2 -20.5 68.8 96

Eliminations - 3.2 -1.4 5.6 4.0 -4.6 0

Total SBB -12.0 24.9 42.6 -166.3 259.4 345.0 338.7

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3. The keys of the Swiss rail reform success

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Key 3. More numerous and more satisfied passengers (1) A) A constant strong growth in the Swiss passenger traffic

 

1980 1995 2011Variation (%) 1980-1995

(a)

Variation (%) 1995-2011

(a)

Passenger-kilometres (in billion)

9.2 11.7 17.7 +27.2 (+1.5) +51.3 (+2.6)

Passengers (in million)

216.3 253.2 356.6 +17.1 (+1.0) +40.8 (+2.2)

Trains-km (in billion)

66.9 90.4 136.0 +35.1 (+1.9) +50.4 (+2.6)

(a) In parentheses average annual variation

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3. The keys of the Swiss rail reform success

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Key 3. More numerous and more satisfied passengers (3) B) The country where the demand for rail remains the highest

in the world

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3. The keys of the Swiss rail reform success

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Key 3. More numerous and more satisfied passengers (4) C) Indicators of overall traveler satisfaction for the SBB clients

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SBB Management Report 2011 (2012), p. 21.

4. Three lessons and propositions for the French Railway Policy (1)

LET – CNRS - Université de Lyon 21

First lesson: the rail transport high quality has a major cost for the Community

A financial cost: Rail quality production requires huge and continuous investments

(ECMT, 1999) Very high rail public subsidies per capita : €800 in Swiss vs €170 in

France (Prud’homme, 2009) A political cost:

State as to be the "major assembler" of the all public transport system.

FOT key rule of a potential "network manager" (Genoud, 2000). A managerial cost:

The Swiss governments fully assume their role as owners : a strategic management of the the incumbent operator.

An exceptional stability of the leaders in charge (SBB, Ministries).

4. Three lessons and propositions for the French Railway Policy (3)

LET – CNRS - Université de Lyon 22

Third lesson: the regional rail transport high success results of a global triangular governance More implication of regional public authorities A radically overhauled of the organization and management of

the incumbent railway operator SBB. Large public transport users and citizen support.

Some doubts about sustainability of these dynamic of progress: Critical strategy of systematic savings: disinvestment and

social access more difficult (Nahrath and al.. 2008) . Increase in traffic versus more infrastructure maintenance

(Leuenberger. 2010) Limits of the quest for the more efficient use of public funds:

slight increase in public contributions for regional transport.

4. Three lessons and propositions for the French Railway Policy (2)

LET – CNRS - Université de Lyon 23

Second lesson: performance gains without market competition - The secret of a successful railway governance

The core of the reform: to impose a "performance constraints" to public transport companies via generalizing contractual agreements: net cost

contract. Regional rail passenger traffic is an exemplary illustration.

Tendering is legally possible, but no real case in the railway domestic sector "Competition for the market" is possible... Yardstick competition: a significant role in the

performance? FOT and benchmark regulation: 26 cantons and plurality of domestic private networks.

4. Three lessons and propositions for the French Railway Policy (4)

• Three challenges for the French railway actors for more progress:– First proposal SNCF-RFF/ government: accept the establishment

of a strong regulation based on contractualized goals, productivity and service gains vs increased investments in network and put SNCF at the head of all public railway system.

– 2nd proposal SNCF/Regions as TA: more productivity and transparency vs limited and graduated competition.

– Third proposal involves SNCF/Customers: better quality of service (punctuality, information) vs extra financial contribution from the rail users themselves.

• Does all actors want these new equilibrium? Does SNCF and government able to do that?

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As conclusion: Transferability to other countries to study. Probably very difficult…

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A strike can hide another strike…

Bibliography

LET – CNRS - Université de Lyon 26

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