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), 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. WCTR Rio - July 20132

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? 3WCTR Rio - July 2013

4. 1. The Swiss railway reform (1) 4 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 ; b ut 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) WCTR Rio - July 2013

5. 1. The Swiss railway reform (2) 5 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 debts 3.Activities have been divided into four distinct branches: Passenger Traffic, Cargo, Infrastructure and Real Estate 4. Sovereignty tasks have been transferred to the FOT WCTR Rio - July 2013

6. 1. The Swiss railway reform (3) 6 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

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

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

9. 2. Significant performance gains 9 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. WCTR Rio - July 2013 1994200020052010Var % Distances per day in km Car21.323.623.723.811.7 Train4.24.75.67.169.0 All31.33535.236.717.3 Travel times per day in minutes Car3235.334.633.23.8 Train4.64.95.26.439.1 All77.584.588.483.47.6 Speeds in km/hour Car3735.536.238.64.3 Train49.853.560.961.423.3

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

11. 3. The 3 keys of the Swiss rail reform success 11 Key 1. A very responsible public 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 reform success 12 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 reform success 13 1. La stratégie des pouvoirs publics – Un transfert de la responsabilité financière et de la commande de lEtat aux cantons (régionalisation) 20032010 Structure 2003 (%) Structure 2010 (%) Variation in million CHF Variation en % Confederation570.2545.465.151.4- 24.8-4.3 Cantons298.0513.734.048.4+ 215.772.4 Communes7.31.90.80.2- 5.4-74.0 Total of public contributions (millions CHF) 875.51 061.0100.0 + 185.521.2 Key 1. A very responsible public governance (3) C) A larger involvement of the regional authorities in decision-making and funding WCTR Rio - July 2013

14. 3. The keys of the Swiss rail reform success 14 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. Agreements Total amount (CHF million) Annual average (CHF million Index base 100 : annual average 1999-2002 1999-20025 8401 460100.0 2003-20076 020 (5 602) (a)1 505 (1 400) (a)103.1 2007-20105 8801 470100.7 2011-20123 3221 661113.8 2013-20166 6241 656113.4 WCTR Rio - July 2013

15. 3. The keys of the Swiss rail reform success 15 Key 2. An historical operator capable of great increasing productivity and managerial innovations (1) A) To obtain significant labor productivity gains (1) 198019952000200520102011 Variation en % 1980- 1995 1995- 2011 Passenger-kilometres in million (1) 9 16711 71212 83513 83017 51317 749+27.8+51.6 Tonne-kilometre in million (2) 7 2208 15610 6588 57113 11112 346+13.0+51.4 Staff (3)38 36733 52928 27225 94325 35625 840-12.6-22.9 Labor productivity in traffic unit million (1 + 2) / (3) 0.430.590.830.861.211.16+38.7+96.6 Our calculations from Historical statistics of railways (UIC). WCTR Rio - July 2013

16. 3. The keys of the Swiss rail reform success 16 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). Train-Km / emlpoyee (* 1000) WCTR Rio - July 2013

17. 3. The keys of the Swiss rail reform success 17 Key 2. An historical operator capable of great increasing productivity and managerial innovations (3 ) B) To increase the railway company earnings (CHF million)2002200320042005200620082011 Passengers113.793.4152.278.6193.7276.8213.9 Freight-96.1-33.1-2.8-165.7-37.3-29.9-45.9 Infrastructure106.50.343.717.491.830.472.4 Real Estate--4.615.221.027.83.32.4 (a) Real Estate before internal balances -152.1184.6219.6229.8291.6182.5 Group-level units-136.4-34.3-164.2-123.2-20.568.896 Eliminations-3.2-1.45.64.0-4.60 Total SBB-12.024.942.6-166.3259.4345.0338.7 WCTR Rio - July 2013

18. 3. The keys of the Swiss rail reform success 18 Key 3. More numerous and more satisfied passengers (1) A) A constant strong growth in the Swiss passenger traffic 198019952011 Variation (%) 1980-1995 (a) Variation (%) 1995-2011 (a) Passenger- kilometres (in billion) 9.211.717.7+27.2 (+1.5)+51.3 (+2.6) Passengers (in million) 216.3253.2356.6+17.1 (+1.0)+40.8 (+2.2) Trains-km (in billion) 66.990.4136.0+35.1 (+1.9)+50.4 (+2.6) (a) In parentheses average annual variation WCTR Rio - July 2013

19. 3. The keys of the Swiss rail reform success 19 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 reform success 20 Key 3. More numerous and more satisfied passengers (4) C) Indicators of overall traveler satisfaction for the SBB clients WCTR Rio - July 2013 SBB Management Report 2011 (2012), p. 21.

21. 4. Three lessons and propositions for the French Railway Policy (1) LET – CNRS - Université de Lyon21 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 (Prudhomme, 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).

22. 4. Three lessons and propositions for the French Railway Policy (3) LET – CNRS - Université de Lyon22 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.

23. 4. Three lessons and propositions for the French Railway Policy (2) LET – CNRS - Université de Lyon23 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.

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. – 2 nd 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? 24WCTR Rio - July 2013

25. As conclusion: Transferability to other countries to study. Probably very difficult… WCTR Rio - July 201325 A strike can hide another strike…

26. Bibliography LET – CNRS - Université de Lyon26 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 dapprentissage. 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. Prudhomme R. (2009), "Du modèle ferroviaire suisse", Transports, 457, 304-306.