No exceptional rescue for the SNCF?

In France as well as abroad, the public authorities are coming to the rescue of the tourism sector which has suffered perhaps more than any other from COVID-19. The airline industry, of course, but also the hotel industry, the railways, the restaurants and even public transport: all activities that are essential to the economy and the smooth running of the country.

Air-France, a successful rehab until…

Air France has been saved by a 7 billion euro lifeline, and more is expected, which does not mean that it will be better. 7 billion is the price of survival in the medium term. There remains the price of social breakage for which the State will bear part of the responsibility for its present decisions, as well as former leaders and unions for their past actions (or lack thereof). As we said at the time, it is obvious that the airline will not be able to repay, and that it will be necessary to convert debt into capital and/or to recapitalize, because from there to private investors coming to help an airline, it will take some time (although there are some good moves to try).

Remember that this loan is mainly private, this will matter later:

  • For Air France: 4 billion in private funds with a 90% government guarantee. This means that the State will only pay if Air France does not repay and not higher than 3.6 billion. Even if in the end we know that Air France will not pay and not everything and that a sleight of hand will transform the debt into capital.
  • For Air France-KLM: 3 billion shareholder loan that comes directly from the pocket of the State and is supposed to be repayable even if it will surely have the same fate as the previous 4 billion.

But even if we are afraid to know how it will end, technically it is a sum that the State can recover by selling its shares when the company will do better (given the current prices it can even make a nice capital gain) and not money squandered to cover uncontrolled operating costs.

For one thing is true, if Air France has long benefited from the understanding and largesse of the State to compensate for its misfortunes or its mismanagement, it is now over. Europe has logically intervened to stop this type of anti-competitive practice and the last time the State put its hand in its pocket. The last time, if we remember correctly, was in 1994 when 20 billion francs (4.3 billion euros today, taking inflation into account) saved the airline from bankruptcy.

Since then it has been on its own, the question of whether it could have made more money or been more profitable being interesting but irrelevant here. It also received public money within the framework of its public service obligations (to serve unprofitable routes) which is logical unless one considers that certain parts of the territory do not deserve to be served under suitable conditions.

So much for the Air France situation. Unfortunately, for the moment, the other “French flag” airlines are on their own.

But transport on the French mainland is first and foremost the train and the SNCF as long as it has not been opened to competition.

SNCF: heritage in danger

France would not function without the SNCF. So yes, we can talk about an absent service when compared to its foreign competitors, about its inability to serve the transverse lines and some territories in a decent way, but without it the country would be blocked. Moreover, we can clearly see the impact of each of its strikes, for which it has acquired an international reputation that is only contested by Air France and its TGV (and we would rather talk about the pride of the TGV than the strikes).

And if we were afraid for Air France, we can be just as worried for the SNCF.

The company has indeed started 2020 after a year 2019 marked by strikes that have hurt it very much. 801 million net loss in 2019 and an operating loss of 614 million.

That’s for the operations and the loss of revenue, fortunately the net result is “less bad”: “only” -301 million of net result.

2020 starts again with strikes and then comes the Coronavirus. We are talking about a loss of almost 4 billion euros in sales! Please note: we are not talking about financial losses (or not yet) but more about a loss of opportunity to sell tickets. But at the end of the year the hole will still be abysmal without any possible criticism of the company’s management. As for Air France, it is “the fault of bad luck” in this case and it is necessary at all costs to avoid that the carrier does not sink.

But this has not always been the case: profitability has never been the strong point of the company, COVID or not.

I find this partly logical: when two airports exist it costs nothing to create a route between them and fly planes. And it costs nothing to maintain. In railroading once you have two stations you can’t run anything without rails, electrification and maintenance. It is inherent to the activity. Afterwards, you can use tricks to place the cost of this investment in this or that structure to make the accounts of another more presentable, the result is the same.

And when, on top of that, one is not used to having to be profitable on pain of dying, it makes abysmal holes.

In 2018 the debt of the SNCF was 50 billion euros. For an average service, legendary delays and prices that customers find too high for the service provided (on this point I just think that the customer does not realize all the structural costs that are hidden behind the train and that air travel avoids in part even if the airport taxes are anything but neutral).

But fortunately the state is there. And not only for a special occasion like COVID. 35 billion of this debt has been assumed by the State: 25 in 2020 and 10 in 2022. Extreme measures decided in 2018, before the strikes, before COVID. An amount that corresponds more or less precisely to the investment of the State in the network, which is so vital that it is not so criticizable, but which shows above all that until today the economic model of the railways does not exist, unlike that of the airlines, which is self-sufficient.

Maybe tomorrow the network will be made profitable with higher tolls and by taking advantage of the opening of the market to competition. But we hardly believe in it: first because it would be reflected in the price of the ticket, which would be unacceptable for the passenger and all the more so since there will no longer be any competition from planes on certain routes, and secondly, because of infrastructure issues. You can’t stack trains on rails the way you stack planes in the air. For example, 520,000 passengers fly from Lyon to Paris every year. Is it possible to run enough trains to absorb this traffic? Tricky.

In addition to this, the SNCF also receives 15 billion in public funds each year. Two Air France saved each year! Again for good and bad reasons, but speaking of public money, we must be aware of it.

The question is not so much to look at the amounts but to ask what we get for that price. Anyone can refuse to fly on Air France and not give them money. The SNCF even when you don’t travel by train is 208 euros per French citizen.

But whatever the case, we must be aware of one thing: there will be no “exceptional” rescue of the SNCF because for the SNCF the rescue is all the time. Indispensable for the functioning of the country in substance, but at a cost that deserves to be questioned about its management, operating costs and bureaucratic burden.

Now what do we do?

It is essential to have all these figures in mind but especially to understand where they come from. Not everything is black and white, there are things that must be profitable, others that are not because they are in the best interest of the community. The question is for what and to what extent.

What all this also tells us is that although we have a Minister of Transport who we like to call historically the Minister of the SNCF for reasons that are easy to understand, there is no global, concerted and organized transport policy in France. We are left with a comparison of two means of transport, to to oppose them without exploiting their complementarities.

How to organize better eco-environmental synergies between the “vertical” and the “transversal”? If this is done, it is by chance.

TGVs go to Roissy. But not enough. It’s poorly organized for a provincial. And there are only high-speed trains. Too bad for those who live in Limoges or Clermont.

Let’s talk about long-haul routes from Orly. As Marc Rochet, President of Air Caraïbes and French Bee, saidWe are in a system, Air Caraïbes and French Bee, which is called the TGV Air, we connect with all of France at Massy-Palaiseau, but between Orly and Massy, we are the ones who pay for the bus, and our bus is parked more than 500 meters from the station, which shows the lack of preparation, structuring, ecology is fundamental, but it must be prepared, without doing stupid things

France needs trains and planes. High-speed trains and planes that consume less fuel. To connect the local and the global (whatever they say today, talk about it to the underserved SMEs in the French provinces…). But this must be done through global logics that will grow, articulate and strengthen air and rail together where each is needed.

In fact of global logic, the State sprays on the right and on the left as one would urinate randomly on a wall hoping to draw a Picasso.

It will never work, it will cost more and more and it will not solve anything in environmental terms. We are talking about planes and trains. Of train stations, of the rail network and of airports. No one is talking about transporting people from where they are going to where they want to go in the most economically, environmentally and time-efficient way possible.

The only certainty is that the train will always be saved. At this point it’s enough but it won’t be enough in the long run.

Photo : TGV by Leonid Andronov via Shutterstock

Bertrand Duperrin
Bertrand Duperrin
Compulsive traveler, present in the French #avgeek community since the late 2000s and passionate about (long) travel since his youth, Bertrand Duperrin co-founded Travel Guys with Olivier Delestre in March 2015.

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