Britain’s continued membership of the European Union might be a thorny topic at the moment, but across the Channel it’s very much business as usual for the self-styled EU 27.
This includes the growing liberalisation of Member States’ domestic rail markets as part of the EU’s Fourth Railway Package, which is designed to increase competition and reduce state subsidy.
The legislation requires separation of the management of track and trains, and for state operators to give up their monopolies on operating services. But its implementation has often proved controversial – including in France, where President Macron’s bid to privatise SNCF was met by crippling nationwide strikes from March 22-June 28 2018 that cost the beleaguered operator some 21 million euros a day.
Despite the industrial action, the reforms are now being implemented. France’s regional market is scheduled to open up to competitive tendering at the end of this year, followed by the high-speed market a year later.
The same will happen over the border in Spain, where state-run Renfe is gearing up to compete with the private sector from December 2020.
Ironically, SNCF was among the first international operators to express an interest in competing with Renfe in its home market, after its head of long-distance rail Rachel Picard told members of the press last month that plans are currently being considered to launch a Spanish version of SNCF’s popular low-cost high-speed brand Ouigo.
In response, Renfe has strongly hinted that it will launch a low-cost high-speed service of its own to run alongside its existing AVE services.
With more than 3,100km (1,900 miles) of track, Renfe’s AVE services operate on the longest high-speed network in Europe, connecting cities across Spain at speeds of up to 310kph (192mph).
However, Renfe says that its cost base remains too high, and that reducing prices will be the key to not only protecting its market share from on-track competition, but also in tempting people away from other modes of transport in the long-distance market.
For example, rail’s modal share is only 39% of the Madrid-Barcelona market, with many people still choosing the cheaper option of either driving (33%) or using the Puente Aereo ‘air shuttle’ (23%) to make the 630km (391-mile) journey. The remaining 5% is attributed to buses and coaches.
Renfe is likely to use its existing high-speed fleet to offer these new services, and will therefore be reliant on sweating these assets and exploiting digital sales channels to push down overheads.
“The opening up of the market is a key part of the five-year strategic plan we launched in December, and an opportunity to transform the company,” General Manager of Strategy Manel Villalante tells RAIL.
“The three key enablers of the plan will be a change in corporate culture to become more diverse, the creation of new positions and upskilling so that we can digitally transform, and the transitioning from a classic operator to an integral mobility operator.
“We have to define new products, and the prospect of new competition has forced us to rethink new elements of our products, such as lower prices.
“In terms of efficiency and revenue this is a very good thing, because even if we lose market share the size of the market can still double. But we must reduce prices and not quality, for which we have good scores from passengers alongside safety. The passenger expectations might be different, but the general quality and punctuality must be the same.”
Renfe is also seeking to increase its competitiveness by embracing innovation. It has launched the two-year TrenLab scheme with Spanish telecoms giant Telefonica, to work with startup companies to accelerate new products in mobility, transport and logistics.
So far, four projects have been identified, including a hyperloop development by Zeleros, the IoMob open mobility platform, and the Travel ‘chatbot’ by nixi1 that enables users to book flights and hotel rooms by using SMS, WhatsApp and Telegram messages.
A cash prize of 50,000 euros (£43,226) is being offered to the winning project, in the hope that it will create new business models and opportunities for revenue growth.
Meanwhile, Renfe is also looking to tap into the global movement away from offering a single mode of transport to providing Mobility as a Service (MaaS) based on consumers’ individual travel needs.
As well as offering passengers contactless payment and a train/bus combination to reach their destination, other new mobility services are being considered – including car-sharing, ride-sharing and bike-sharing.
“If you don’t innovate you die, so we take a proactive approach instead of waiting to see where other operators go,” explains Villalante.
“We are interested in a multimodal approach like bicycles, and for me Transport for London is probably the best model of integrated planning. We need the best trains, but we want to be with the customer all the way from door-to-door. The train is the tool, but the product is a service.”
Last but not least, Renfe is also targeting growth in foreign markets, by exporting its expertise in both commuter and high-speed rail operations.
The company’s efforts have so far been limited to its operation since 2011 of the Haramain high-speed line from Medina to Mecca in Saudi Arabia (as part of the Saudi-Spanish Al-Shoula Group consortium), and its appointment as the shadow operator of the planned Texas Central high-speed line in the USA.
In the UK, Renfe had been expected to join the Virgin/Stagecoach joint bid for the flagship West Coast Partnership, which includes three to five years of operating Phase 1 of HS2 from its opening between London and Birmingham in 2026.
SNCF eventually signed up with Virgin and Stagecoach, but a delay in the tendering process for WCP (which had originally been due to start in April 2019) enabled Renfe to get in on the action anyway, and the company joined MTR’s West Coast Partnership bid as a sub-contractor in December 2018.
According to Secretary of State for Transport Chris Grayling, WCP is now due to be awarded next month. And following Stagecoach’s disqualification from three UK rail franchise bids (including WCP), due to alleged non-compliance with pension rules (RAIL 877), the MTR/Renfe bid will be fighting it out with the only other remaining bid from FirstGroup and Trenitalia.
However, Villalante is keen to stress that Renfe’s expansion plans will not be focused solely on high-speed rail, and that it will consider all opportunities across Europe and in the UK to operate train services.
“If we lose market share in Spain then we have to get it from outside, and so we want to compete in high-speed and commuter alliances worldwide. We want revenue from international operations to reach 10% in five years’ time.
“We don’t want to do this alone, but to establish strategic high-value alliances. Europe is our natural market, but that depends on the individual circumstances of countries. The UK was the first market to liberalise in Europe, so that is very interesting to us. And now there is a franchising review , we will need to keep an eye on that.
“It is a leading, powerful market that has a lot happening, and we are delighted to have the opportunity to bid to bring our high-speed knowledge to the UK to help deliver HS2. It shows Renfe’s ambition to remain a leader in high-speed rail.”