Christian Desmaris – University of Lyon – Laboratory of Transport Economics July 2013

1. 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

2. Why this paper ? • The regional passenger traffic in France has been strongly reshaped over the ten past (2002), butthis reform appears today as unfulfilled, both in a financial and institutional bind: • Institutional. French law does not actually open the possibility of biddingin 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? Manyreasons: • Institutional. The Swiss railway regionalization ended the monopoly of historical operator and provides good results for taxpayers and travelers. • A Similarregionalrailwayreformagenda: 1995/1996 vs 1995/1997-2002. But in France, unfinishedreform. • The Size. In France, the regions are PAT. Switzerland is similar with one of great French regions in terms of population and surface. WCTR Rio - July 2013

3. 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? WCTR Rio - July 2013

4. 1. The Swiss railway reform (1) • 1. First step in 1995/96: a regional traffic reform • Threeaxes: • Regionalisation : cantons as full responsible for the order of regional transport services ; but FOT co-signs the agreements. • Net-costcontract: Unplanned deficits will no longer be covered by the State.Veryincentive. Twoyearscontracts. • Liberalisationregionaltraffic. – No more SBB monopoly; Possibility of tendering for rail regional transport services. • Regionalisationparadox: more potentailcompetition and more need of traffic coordination (FOT) WCTR Rio - July 2013

5. 1. The Swiss railway reform (2) • 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) • Independence from the political and administrative powers, but special status of a public limited company - quadri-annual contract • Confederation has accepted to erase SBB debts • Activities have been divided into four distinct branches: Passenger Traffic, Cargo, Infrastructure and Real Estate • Sovereignty tasks have been transferred to the FOT WCTR Rio - July 2013

6. 1. The Swiss railway reform (3) • 3. Thirdstep 2009/…: a highlycontroversial and unfulfilledreform in 2013 • Threeparticularly controversial points: • The tendering procedures in regional passenger transport (train / bus) : optional or compulsary? • The respective share of the Confederation and the Cantons for the financing of infrastructure • 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 conflictualobjectifs: qualityvsproductivity and rentability ; more rail sharevsmore efficiency in using publics funds • Competition in the law. but specificpublic governancein fact ,WCTR Rio - July 2013

7. 2. Significant performance gains Grants allowed by the Confederation to the regional traffic operated by SBB • 1. An inverse of the public compensation trend (1) WCTR Rio - July 2013

8. 2. Significant performance gains Grants allowed by the Regional authorities for the regional traffic operated by SNCF • 1. An inverse of the public compensation trend (2) WCTR Rio - July 2013

9. 2. Significant performance gains OFS (2012). Mobility in Switzerland - Results of the micro-census Mobility and Transports 2010. • 2. More faster train and more distance in train – Rail 2000 WCTR Rio - July 2013

10. 2. Significant performance gains Statistics from UIC • 3. A large development of the total SBB supply – train-km WCTR Rio - July 2013

11. 3.The3 keys ofthe Swissrail reformsuccess • Key 1. A veryresponsiblepublic governance (1) • A) A collective choice in favor of a long-term rail infrastructure investment planning WCTR Rio - July 2013

12. 3. The keys of the Swiss rail reformsuccess • Key 1. A very responsible public governance (2) • B) A cap on public operating contributions in favor of infrastructure funding WCTR Rio - July 2013

13. 3. The keys of the Swiss rail reformsuccess • Key 1. A veryresponsiblepublic governance (3) • C) A larger involvement of the regional authorities in decision-making and funding • 1. La stratégie des pouvoirs publics • Un transfert de la responsabilité financière et de la commande de l’Etat aux cantons (régionalisation) WCTR Rio - July 2013

14. 3. The keys of the Swiss rail reformsuccess (a) After reduction due to savings programs. • Key 1. A veryresponsiblepublic governance (4) • D) A really incentive and empowering SBB corporate governance • An absolute financial constraint imposed to the Swiss Railways by the Confederation WCTR Rio - July 2013

15. 3. The keys of the Swiss rail reformsuccess • Key 2. An historical operator capable of greatincreasingproductivity and managerial innovations (1) • A) To obtain significant labor productivity gains (1) Our calculations from Historical statistics of railways (UIC). WCTR Rio - July 2013

16. 3. The keys of the Swiss rail reformsuccess Train-Km / emlpoyee (* 1000) Our calculations from Historical statistics of railways (UIC). • Key 2. An historical operator capable of great increasing productivity and managerial innovations (2) • A) To obtain significant labor productivity gains (2) WCTR Rio - July 2013

17. 3. The keys of the Swiss rail reformsuccess • Key 2. An historical operator capable of great increasing productivity and managerial innovations (3) • B) To increase the railway company earnings WCTR Rio - July 2013

18. 3. The keys of the Swiss rail reformsuccess (a) In parentheses average annual variation • Key 3. More numerous and more satisfied passengers (1) • A) A constant strong growth in the Swiss passenger traffic WCTR Rio - July 2013

19. 3. The keys of the Swiss rail reformsuccess • Key 3. More numerous and more satisfied passengers (3) • B) The country where the demand for rail remains the highest in the world WCTR Rio - July 2013

20. 3. The keys of the Swiss rail reformsuccess SBB Management Report 2011 (2012), p. 21. • Key 3. More numerous and more satisfied passengers (4) • C) Indicators of overall traveler satisfaction for the SBB clients WCTR Rio - July 2013

21. 4. Threelessons and propositions for the French Railway Policy (1) LET – CNRS - Université de Lyon • 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) • Veryhigh rail public subsidies per capita : €800 in Swissvs €170 in France (Prud’homme, 2009) • A political cost: • State as to be the "major assembler" of the all public transport system. • FOTkey 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).

22. 4. Threelessons and propositions for the French Railway Policy (3) LET – CNRS - Université de Lyon • 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 trafficversus 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.

23. 4. Threelessons and propositions for the French Railway Policy (2) LET – CNRS - Université de Lyon • Second lesson: performance gains without market competition - The secret of a successfulrailwaygovernance • 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. • Tenderingislegally 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.

24. 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? WCTR Rio - July 2013

25. As conclusion: Transferability to other countries to study. Probably very difficult… A strikecanhideanotherstrike… WCTR Rio - July 2013

26. Bibliography LET – CNRS - Université de Lyon • Bovy P.H. (1992), "Le modèle ferroviaire suisse : un modèle à suivre ?", CST, 25, 47-66. • Carron N. (2004), "La politique ferroviaire dans le cadre de la politique générale des transports en Suisse", Rail International, 17-29. • Crozet Y., Desmaris C. (2011). Le transport ferroviaire régional de voyageurs : un processus collectif d’apprentissage. Recherche Transports Sécurité, 27, 3. • Finger M., Rosa A. et al., 2012. Governance of competition in the Swiss and European railway sector, Final report for SBB, Florence School of Regulation. • Genoud C. (2000), La régionalisation des transports publics : implications de la nouvelle loi sur les chemins de fer à l'exemple des cantons de Berne, Zurich, Neuchâtel et Jura, Lausanne, Cahier 188, IDHEAP. • Maier-Gyomlay J., 2013. Learning lessons from Switzerland – A BLS perspective. Railway Gazette International, January, 36-40. • Meyer A., Meier B. (2011). Switzerland, pp. 127-135 in CER (2011), New Reforming Railways – Learning from Experience, Brussels. • Nahrath S., Rieder M. et alii. (2008), "Les impacts de la régionalisation et de la libéralisation sur la durabilité du secteur ferroviaire en Suisse", Flux, 72/73, 49-64. • OECD (2006), Regulatory reform in Switzerland - Regulatory authorities for air transport, railways, telecommunications and postal services, Paris, 143 p. • Prud’homme R. (2009), "Du modèle ferroviaire suisse", Transports, 457, 304-306.