From low-cost airlines to low-cost high-speed trains: the French case

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18th ATRS World Conference – From low-cost airlines to low-cost high-speed trains: the French case

From low-cost airlines to low-cost high-speed trains: the French case

18th ATRS World Conference (July 2014)

Marie Delaplace1, Frédéric Dobruszkes2,*

1 Full-time Professor

Université de Paris-Est Marne-la-Vallée, IFU, Lab'Urba

5 boulevard Descartes

77454 Champs-sur-Marne, France

Tel. +33 1 60 95 79 08

[email protected]

2 Lecturer

Brussels Free University (ULB)

Avenue F. D. Roosevelt, 50, CP 130/03

1050 Brussels, Belgium

Tel +32 2 650 68 24

[email protected]

* Presenter and corresponding author

Abstract

This paper explores OUIGO (pronounced ‘we go’), the low-cost high-speed rail (HSR) ser-vice launched by the French state-owned railways in April 2013. In this exploration, we: (1) compare OUIGO with the traditional French HSR and the low-cost airlines (LCAs), and (2) analyse fares proposed by OUIGO and its competitors. We thus analyse the new service in terms of production conditions, communication, marketing, booking, network geography, at-terminal and on-board experience and fares. We find that the railway industry’s constraints (including market regulations, technical rigidities and incumbent employment relations) affect the OUIGO business model, which appears as a hybrid between LCAs and traditional French HSR carriers, although fares can be very attractive indeed.

Keywords

Low-cost airlines, High-speed rail, Low-cost high-speed rail, Intermodal competition, France.

“You’d think you were with Easyjet.” (« On se croirait chez Easyjet ici »).

A OUIGO passenger boarding at Marne-la-Vallée Chessy station, January 15, 2014.

Delaplace and Dobruszkes 2


1. Introduction

The low-cost wave has changed sectors as diverse as furniture, banking, supermarkets, clothes and transport (Valls Giménez, 2013). In the transport sector, air and coach services have been principally affected by this wave. Rail transport has mostly been excluded from this trend, notwithstanding the fact that in many countries travelling by train remains cheap thanks to state grants in the name of public services. However, high-speed rail (HSR) services tend to be expensive, especially if one compares fares with incomes. In France, for example, a HSR Paris-Marseille return ticket can cost between EUR134-226 for late bookings, a sum that accounts for 10-18% of the 2013 per capita median net salary (EUR1,290 per month)1. As a result, upper social and occupational groups are over-represented in high-speed trains (HSTs) (see, e.g., Klein and Claisse, 1997; Delaplace, 2012; RFF and SNCF, 2007; Minn, 2012; Pagliara et al., 2012).

Of course, HSR operators offer some deals following yield-management principles, including advance booking, off-peak travel, no flexibility, etc. For example, French National Railways (SNCF) schedule some HSR services at discount fares for all seats (so-called TGV 100% Prem's). But all these deals are rather on the fringe and involve less choice, more constraints and less flexibility. In addition, attempts to supply lower-cost HSR services (see Sauter-Servaes and Nash, 2007) either failed (e.g., the Trenitalia’s TrenOK product in Italy, using old tilting trains between Rome and Milan) or are cheaper than traditional HSRs but not neces-sarily cheap (e.g., SNCF’s so-called iDTGV services). This has induced recurrent criticisms of HSR services, which are often supported by the elites but are not accessible to everyone. In a context in which regional services are often perceived as neglected, this goes against the former SNCF slogan, “Progress is worth nothing unless it shared”.2

In addition, HSR operators, usually incumbent, state-owned rail companies, have become increasingly concerned with competition. The first wave of competition came from European aviation liberalisation between 1987 and 1997 (O’Reilly and Stone Sweet, 1998). This espe-cially led to the dramatic development of low-cost airline (LCA) networks (Dobruszkes, 2013). Whether LCAs have induced inter-modal competition with HSR is subject to debate, the results depending on authors' hypotheses and/or on the markets considered. For example, Friederiszick et al. (2009) and Friebel and Niffka (2009) found a low-cost effect on air/HSR competition, while Dobruszkes et al. (2013) found a very small effect and Behrens and Pels (2009) did not find any effect. Anyway, LCAs are still growing and could constitute a poten-tial threat for HSR operators. Second, intra-modal competition is emerging following EU liberalisation of international passenger services since January 1, 2010 (Holvad, 2009; Nash, 2010). This includes domestic segments (cabotage) of these international routes, although they are subject to conditions. Depending on negotiations between Member States, the next steps could affect domestic regulations, with options ranging from competition for the market to full liberalisation (competition on the tracks). In the meantime, some intercity domestic services have been open to competition (either for the market, as in the UK, or on the tracks, as in Italy) (Knowles, 1998; Cascetta and Coppola, 2014).

In this context, the national state-owned railways, SNCF, made the news in February 2013 when it announced the forthcoming launch of HSR services in France. Named ‘OUIGO’ (pronounced ‘we go’), the service started early in April 2013.

The aim of this paper is to explore this new HSR service. This is done by (1) comparing it to two well-established models, namely the traditional French HSR (named TGV, for Train à

1 Estimation based on the 2013 median gross salary (EUR1,675). Sources: INSEE and http://www.salairemoyen.com. 2 "Le progrès ne vaut que s'il est partagé par tous".



grande vitesse) and the LCAs, which are spread widely throughout Europe in various forms; and (2) analysing fares proposed by OUIGO and its competitors. More specifically, we intend to investigate the extent to which the SNCF copied the LCA model or, by contrast, would be a prisoner of the rail industry’s constraints. Our hypothesis is that the railway industry’s con-straints (including market regulations, technical rigidities and incumbent employment rela-tions) significantly affect the OUIGO business model.

Our research is based on various sources. The existing literature is used mainly for its exten-sive description of the well-known LCA model (see Dobruszkes, 2006; Vasigh et al., 2008; Button and Ison, 2008; Williams, 2011). We investigate the OUIGO model through inter-views with SNCF executives and union representatives (from March to May 2014), one field trip (return journey in January 2014) and observing OUIGO communication. Finally, fares were analysed by simulating Internet-based bookings.

The rest of this paper is organised as follows. Section 2 exhaustively compares the three models (LCAs, OUIGO and traditional French HSR). Section 3 shows some fare comparisons that enable us to make some conclusions about the low-fare profile of OUIGO. The paper ends with a discussion and conclusions in Section 4.

2. Comparing the low-cost airline model with the low-cost high-speed rail one

This section offers an extensive comparison of the LCA model and the low-cost high-speed rail (LCHSR) one. We also consider the traditional French HSR (the so-called TGV) model to broaden our perspectives. In case of convergence between OUIGO and LCA or the traditional French HSR, attributes will appear in green, while red will be used to highlight divergences. Blue highlights intermediate cases, and black is used for non-relevant comparisons.

2.1. Production conditions

Table 1 details the LCA, OUIGO and traditional French HSR models.

In contrast to most LCAs launched from scratch or as separate firms, OUIGO has been devel-oped within the incumbent state-owned French railway company (SNCF). SNCF established a dedicated business unit to develop and manage the new product, though with a specific brand name and no apparent link to SNCF (see 3.2). SNCF did not follow the same course taken in 2004 when the first discount HSR service, iDTGV, was launched through a subsidiary (an option which at the time induced protests by the unions and a strike) (Dreyer et al., 2006).

Because OUIGO is fully part of the SNCF, the workforce shares the SNCF railway workers’ specific status and thus enjoys the same legal working conditions and employment relations as its other colleagues. This contrasts with the LCAs, which are well known for their hard work-ing conditions, restrictions on the role unions may play and employment contracts that may be signed under the laws of third countries (Hunter, 2006; Curley and Royle, 2013). However, OUIGO balances this apparent disadvantage through specific recruitment and labour man-agement. Indeed, OUIGO hires young cabin crew based on their letters of application, while traditional HSR cabin crews get the position through age and experience. As a result, despite the same salary table, OUIGO’s labour costs are lower. Moreover, OUIGO has adopted more flexible labour management. Many workers are multitasking (as the LCAs do), performing ticket inspections at stations, managing boarding and possibly travelling with passengers as cabin crew. Working days are more variable than for traditional HSR, are possibly longer and can involve more days away from home (although all this is still compatible with SNCF working rules). Due to an on-board resting room, statutory resting times can be planned on board. Finally, there is a significant gap between LCAs and OUIGO in labour management and conditions, which are clearly more favourable in OUIGO. Several hypotheses could



explain this gap. First, being fully part of the SNCF, OUIGO shares the same corporate cul-ture that has clearly been inherited from the traditional public services. In addition, the influ-ence of unions remains quite significant and arguably restricts the potential deterioration of working conditions.

Amongst the LCAs, Ryanair is well known for its ability to secure direct or indirect state aid that shapes its network geography (Barbot, 2006). Traditional HSR services are sometimes supported by local or regional authorities that pay to be served (e.g., co-funding new HSLs and stations, station upgrades, operational costs and advertising actions) (Troin, 1995; Richer and Bérion, 2010; Albalate and Bel, 2012). Such funding also contributes to shape the HSR network to some extent. By contrast, according to SNCF, OUIGO has not enjoyed state incen-tives until now and set up its network alone, considering only market and technical factors (see infra).

Low-cost airlines OUIGO Trad. French HSR

Company origin Launched from scratch; trad. airline’s subsidiary; regional or charter airline converting itself

Launched by the French National Railways (SNCF)

Incumbent national, state-owned railway company (SNCF)

Company’s legal form (including carrier licence)

Independent airline or traditional/charter; airline’s subsidiary

Business unit within the French National Railways (SNCF)

Trains operated under the SNCF’s operator licence

Business unit within the French National Rail-ways (SNCF)

Trains operated under the SNCF’s operator licence

Workforce origin Hired by the LCA SNCF workers moved to OUIGO on a voluntary basis

Younger on-board workers except the drivers

Ticket inspectors: older because they work in HSTs after promotion

Workforce use Intensive and flexible Same weekly working hours but more variable per day and more frequently up to 10.5 hours

Dedicated on-board work-ers except the drivers; also affected by trad. HSTs (around 30% of their working time)

Rather constant working hours

Wages Lower SNCF’s salary scale but younger workers mean lower fixed salary costs

Higher variable bonus related to on-board work-ing time

SNCF’s salary scale

Working conditions Hard Simpler ticket inspection given basic fare table

Cooler, less demanding travellers

Main task on-board is care instead of ticket inspec-tions

Alleged care for workers’ environment (e.g., lighter

Good



satchel)

Controversial on-board resting room

Workforce’s tasks Multitasking Multitasking: same work-ers welcome and inspect tickets at the station then possibly go with the train

Single task

On-board crew (with-out pilots/drivers)

Limited Basically 6 per single train; may vary along the route depending on needs

No apparent hierarchical distinction between on-board staff members

Double-deck single train: 2

Relationship with unions

Banned as much as possible

No clash but most unions did not support OUIGO at the launch

Regular, institutional relationship

Night spent At home Depends on timetables and working hours

Same SNCF regulation but up to three days without sleeping at home (accord-ing to the unions)

Depends on timetables and working hours

Up to two days without sleeping at home (ac-cording to the unions)

Outsourcing Intensive Cleaning only Cleaning only

State aids and incen-tives (operations)

For specific airlines including Ryanair

None Local or regional author-ities may contribute to operational costs

Load factor Higher than for tradi-tional airlines

Around 60% in 2013 then 80% early 2014

Significant no shows (around 12%) because of people buying several EUR10 tickets, then deciding later which service to be used

Around 70%

Infrastructure charges Often lower (secondary airports or dedicated terminals)

Lower because services not starting or terminating at one Paris central station

Higher

Planes/trains use Intensive More intensive Not intensive

Planes/trains3 Single aircraft type

Single class but extra fee for best seats

Updated double-deck rolling stock:

Single class layout, no buffet car

634 seats (8 carriages)

Traditional double-deck rolling stock:

Two classes and buffet car

510 seats (8 carriages)

Seat density High

Less space for legs

More seats per train (single class, no bar) and per carriage (no luggage rack). Nevertheless, more space between seats

Average

Schedules Long operational times Long operational times Subject to routes

Table 1. Comparing production conditions.

3 For HSTs, foldaway seats have not been counted.



OUIGO also deals with infrastructure charges, as the LCAs do use secondary airports or dedicated terminals within main airports. In France, rail infrastructure charges (ICs) are made up of several components, including reservation charges (RC), traffic charges (TC), access to the network charge (ANC) and basic services (BS). ANC only concerns utilities operated following an agreement with a public transport authority, and thus does not concern the HSR services discussed here. BS cover the use of stations, electric traction facilities, a contribution for the transport and supply of electric traction and some potential extras. Appendix 1 gives formulas and details and Table 2 summarises the results. The main gap in infrastructure charges relates to so-called reservation charges. This gap is due to discounted charges for any HSR service not departing from or terminating at central Paris stations (coefficient of 0.68 instead of 1.1 from/to a Paris central station). By comparison, the lower rail station costs for calling at Marne-la-Vallée Chessy (compared with a Paris central station) has much less impact.4

It is worth noting that in France, running single- and double-length HSTs5 (8 and 16 carriages, respectively) does not impact infrastructure charges due to the network company. This de facto encourages train companies to operate longer trains, since the infrastructure charge per seat is thus halved. In the case of OUIGO, operating a single-unit train would involve an infrastructure charge per seat of almost EUR11, namely more than the lowest adult single fare, which is EUR10.

Costs in Euros TGV calling at central station

at both ends (a) OUIGO calling at peripheral station

at both ends (b)

Reservation charges 7,661.89 71% 4,559.08 61%

Traffic charges 2,008.70 19% 2,085.93 28%

Basic services:

Of which stations 655.48 6% 353.10 5%

Of which others 492.66 5% 504.18 7%

TOTAL 10,818.72 100% 7,502.29 100%

PER SEAT (c) 10.61 5.92 (a) From Paris Gare de Lyon to Lyon Part-Dieu (b) From Marne-la-Vallée Chessy to Lyon Satolas (airport) (c) Considering 16-carriage trains with 1,020 seats for (a) and 1,268 seats for (b) Source: authors’ computations based on RFF (2013)

Table 2. Comparing infrastructure charges between Paris and Lyon (EUR, off-peak service, 2014).

In addition, OUIGO follows the LCA model in the way that it uses rolling stock more inten-sively than traditional HSR in order to counterbalance fixed costs. First, the two train sets are run during a large time range. They start their service around 6; one terminates after 21 and the other after midnight. This schedule is in place to allow for basic maintenance and main cleaning overnight. The trains also perform more services per day thanks to reduced time at both ends. OUIGO trains spend between 31 and 52 minutes at terminuses, against much di-verse but usually longer times (between 40 minutes and several hours) for the traditional French HSTs. In addition, unlike the traditional HSR model, SNCF does not have additional

4 Conversely, the fare for using Lyon central station (TGV) is cheaper than Lyon peripheral stations (OUIGO) (respectively, EUR108.56 and EUR337.84, tax included). However, these costs are nearly insignificant com-pared with reservation and traffic charges. 5 Cross-Channel Eurostar HSTs not considered, all French HSTs are made up of eight or 10 carriages framed by two locomotives. Two trains can be coupled to form double-length train sets.



OUIGO trains in the event of failure. During times of heavy maintenance, the service thus needs to be reduced.

It has been estimated that OUIGO trains ride twice the yearly distance of conventional French HSTs (Ciry, 2014). As a result, SNCF opted for last-generation rolling stock, which is re-nowned for its reliability and equipped with an on-board system that monitors the train and transmits data to the maintenance centre (Ciry, 2014).

Finally, OUIGO has followed the LCA in performing economies of density, typically operat-ing planes with more seats than those of the same planes in conventional airlines (Doganis, 2006). To achieve such economies, OUIGO uses double-deck, double-length HSTs. Further-more, seat density has been increased, and second-class coaches have replaced first- class ones. This has been accomplished partly by replacing the bar with seats6 and reusing luggage rack space for seats. Now, with more space between the seats, a OUIGO single train (eight carriages) offers 634 seats (thus 1,268 seats for the double-length train set) instead of the 530 seats in the same series used by conventional HSR services (thus 23% more seats).

2.2. Network geography

Table 2 details LCA, OUIGO and traditional French HSR network geographies.


Routes operated Mix of trunk routes and niche routes (subject to airlines)

Trunk route to the Mediter-ranean, avoiding central stations at Paris & Lyons

Limited use of convention-al lines

Mix of trunk routes (often extended beyond HSLs) and of inter-regional services bypass-ing central Paris

Air-ports/stations served

Ryanair: only regional or secondary airports, or dedicated terminals within large airports

Easyjet: trends to serve main, large airports (dedi-cated terminals if any)

Paris: no central station; only Marne-la-Vallée Chessy’s peripheral station served

Lyon: most trains avoid central station and call at the airport instead

Other cities: no distinction

In Paris and Lyon: peripheral stations served only if it makes sense (e.g. inter-regional services)

Out of HSLs (Marseille, Montpellier, Nîmes): central station

Other en-route cities: peripher-al HSR station

Tracks Not relevant Limited use of traditional lines to guarantee the robustness given higher turnarounds

Mix of high-speed and con-ventional lines

Connections None None Yes: integrated tickets (multi-ple-leg journeys) and timeta-bles optimised to some extent. In several cases, intermodal connections with air services

Table 3. Comparing network geographies.

6 The remaining space being used for the workers' resting room.



Figure 1. Comparing OUIGO and TGV networks.



At the network level, LCAs are known to operate a mix of conventional/trunk routes (e.g., Milan-Rome) and low-density, niche routes (e.g., Bristol-Bergerac) (Dobruszkes, 2013). Some LCAs operate the former (e.g., Easyjet); others the latter (e.g., Ryanair) or a mix (e.g., Germanwings). By contrast, OUIGO operates a basic network focused on the trunk French HSL, namely the Paris-Lyon-Marseille/Montpellier route (Figure 1). Nearly the whole OUIGO service is operated on HSLs (Figure 1). This contrasts significantly with the tradi-tional French HSR network, which is made up of many more routes with lots of services going beyond the HSLs, thanks to the compatibility of French HSTs with conventional lines (Figure 1).

The OUIGO network was designed to serve a large number of potential passengers, so it serves some of France’s largest cities. It also corresponds with travel times such that HSR services can significantly compete with air travel, all other things being equal (Dobruszkes and Givoni, 2013). OUIGO’s geography is also shaped to serve personal-, leisure- and tour-ism-oriented markets. Previous surveys show that these travel purposes correspond to 52% of the 2003 Paris-Marseille HSR route, against 26% on the Northern HSR towards Lille and its region (in 1994/5) (RFF and SNCF, 2007). OUIGO also avoids shorter routes, arguably be-cause of the compulsory 30-minute check-in time, which would make a one-hour journey unattractive (cf. infra).

According to an SNCF executive, OUIGO is also restricted mostly to HSLs in order to guar-antee its network robustness. Shorter turnarounds at terminuses allow less time to balance potential delays, which would occur more frequently when HSTs ride on traditional lines (according to a OUIGO executive). On such lines, saturation and/or being mixed with other trains are sources of uncertainty that are not compatible with tight flows.

In sum, a rail network’s specificities, the need for lower costs and the need to test such new services shape OUIGO’s network geography at the national level, preventing it from operat-ing a dense network with many branches, as well as routes that are too short (given the board-ing time) or too long (to avoid riding on conventional lines). However, according to a OUIGO executive, these first services are a test before extending the network. In May 2014, OUIGO announced subsequent developments but with no more information, especially in terms of routes.

At the terminal level, some LCAs, especially Ryanair, are also known to serve secondary airports or dedicated terminals within large conventional airports. Secondary airports are made up of regional airports (e.g., Bergerac, Kerry and Saragosse) and of metropolitan, dedi-cated airports (e.g. Rome Ciampino and London Stansted). The rationale for serving such airports includes lower airport costs, a wider window for negotiating airport taxes, less or no congestion, making it easier to plan short turnarounds and serve niche markets. OUIGO fol-lows this strategy, although the rationale differs somewhat. On the Paris metropolitan regional side, not scheduling services from/to central Paris decreases infrastructure charges significant-ly (see above). It should also be noted that the Paris Gare-de-Lyon (central station) area raises critical capacity and operational issues (Commission Mobilité 21, 2013). As a result, it is likely difficult to plan timetables according to imperatives related to the lower cost model. Especially, the higher rate of rolling stock in daily use structures the schedules, and OUIGO will not schedule longer times at Marseille or Montpellier terminus in order to arrive at Paris central station when slots are available there.

From Lyon to Aix-en-Provence, serving peripheral stations all located on the HSL guarantees robustness and attractive travel times from/towards the large southern cities (Marseille and Montpellier). In Lyon, this contrasts with traditional HSR services, which mostly call at Lyon



Part-Dieu central station. In the smaller cities (Valence, Avignon and Aix-en-Provence), OUIGO and traditional HSR share the principle that leaving the HSL to serve urban rail ter-minals would penalise travel times between the larger cities (Paris, Marseille, etc.).

Of course, serving a peripheral terminal raises the common question of access and egress time. For sure, such terminals are usually poorly served by public transport and badly located, especially for travellers living in an opposite suburb or even in a city centre. Transfer costs may also be dissuasive, especially compared with OUIGO’s low fares. The case is especially critical in Lyon, where the only public transport link with the city centre is a privately operat-ed tram (the so-called Rhônexpress link). The cost of an adult return ticket is EUR27.50, compared with EUR20 for the cheapest OUIGO returns. However, as for airports, it should be noted that not everyone lives, works or visits friends and relatives in city centres. For exam-ple, people living or working in an eastern suburb of Paris may have similar (or even faster or easier) access to Marne-la-Vallée Chessy peripheral station than to Paris Gare-de-Lyon cen-tral station.

In addition, OUIGO shares with LCAs a ban on connections (with other OUIGO services and any other rail service). For instance, if passengers want to connect between two services, they have to buy two separate tickets and assume all risks in case of delays. This restricts the spa-tial scale of the OUIGO network even more.

Finally, OUIGO does not compete directly with LCAs, since no LCAs operate flights between Paris and Marseille, Montpellier or intermediate cities. Actually, LCAs serve longer routes where HSR services are less attractive in terms of travel times (examples include Marseille-Lille, Montpellier-Brussels, etc.). Considering regional airports, the closest competitor is Ryanair's Beauvais – Béziers route, which could be seen to some extent as a competitor for the Marne-la-Vallée Chessy – Montpellier OUIGO route, depending on access/egress condi-tions to/from the terminal, amongst others. Of course, one needs to consider that competition also occurs between routes serving alternative markets for travellers who freely choose their destination – namely, tourists not travelling to a specific destination for a given reason. The near absence of direct competition between LCAs and OUIGO nevertheless raises the ques-tion of the rationale for setting such a lower fare supply. This will be discussed in the last section.

2.3. Before travelling: marketing, communication and booking

Moving to marketing and communication (Table 4), OUIGO clearly aims to be perceived as friendly, as demonstrated by the young staff’s attitude and the easy-to-use website (Figure 2). The livery is designed to be ‘fresh’ (3) and helps promote OUIGO as a new brand name and product, exactly as the LCAs have done using uncommon colours (Budd, 2012). These ele-ments tend to make OUIGO closer to the LCAs, or at least some of them. But OUIGO also opted for clear and transparent information, which contrasts with many LCAs. OUIGO an-nounces the date it will open bookings for the next season. Potential extras are not a kind of secret discovered by customers at the end of the booking procedure. The website reveals the fare structure, which varies from EUR10 to 35 or EUR85, depending on journeys (adults), and both extras and discounts are clearly announced in a section named ‘inside info’, which is accessible from the main page. OUIGO also broadcasts a newsletter with news, tips, self-congratulations and promotion of its innovative nature.



Figure 2. Comparing Voyages SNCF and OUIGO websites.

Figure 3. Comparing traditional French TGV (left) and OUIGO (right) liveries.

Source: Wikimedia Commons



By contrast, the incumbent French HSR appears as a well-established product whose initial innovative nature came from the high speed itself. The TGV’s more established nature is reflected by the passengers’ profile. Indeed, the traditional HSR is overused by upper social and occupational groups and by mobile workers (Klein and Claisse, 1997; Delaplace, 2012; Delaplace et al., 2014). By contrast, OUIGO is used mostly by non-business passengers and families. According to a OUIGO executive, children account for about 20-25% of passengers aboard OUIGO, against 6% aboard French traditional HSTs. Furthermore, 25% of OUIGO ridership would be induced traffic (travellers who would have not travelled without OUIGO) and another 25% would have been transferred from other transport modes (Ciry, 2014).


Target audience Leisure Leisure All passengers but focus on high-yield ones

Staff attitude ‘Flying is fun’ (subject to airlines)

Friendly staff Neutral

Website Own website Dedicated website, no apparent relationship with the SNCF

Well-known website; numerous national variants; include OUIGO services

Livery (both planes/trains and staff)

Often uncommon colours

Standing-out bright blue Grey and dark blue or white and grey

Table 4. Comparing marketing and communication.

As for the booking (Table 5), OUIGO partially converges with LCAs in several ways. There is not a ticket office or sale agents and passengers must print their e-tickets or display their smartphones. Restrictions apply for free luggage. But it also differs with the traditional French HSR in that there are fewer discounts for specific groups. Actually, OUIGO shares only a few attributes with the traditional French HSR (no reservation fees, no extras for international or credit card use and discounts for travellers accompanying disabled passengers). In addition, some services may be more attractive either in OUIGO or in traditional HSRs (for example, in OUIGO an extra is due for the electrical socket, but pets travel for a cheaper extra or for free, according to their weight and other luggage brought).

In addition, OUIGO contrasts with LCAs and traditional HSR through children’s fares. In-deed, any passenger under 12 pays EUR5 for any single journey (anytime, even in the case of very late booking). On the one hand, this involves no free tickets for those under four years old. On the other hand, the anytime EUR5 fare for the under 12s makes the service very at-tractive for most families and leisure travel.

Finally, OUIGO has specific general terms and conditions of sale that are less favourable than the traditional French HSR ones (especially in the case of delays or cancellation). For exam-ple, passengers experiencing cancellation will be offered reimbursement or rescheduled on another OUIGO service. This involves no use of the much more frequent traditional HSR services and even much time lost. Furthermore, nothing is said about paid accommodation in case the next OUIGO service would be the following day. By contrast, SNCF offers TGV passengers the opportunity to be rescheduled on any other train and to be accommodated if needed.




Bookings Internet or by phone (premium fare)

Internet and smartphone only

Internet, (smart)phone, stations and travel agents

Ticket e-ticket

Compulsory self-printing

e-ticket

Compulsory self-printing or smartphone-based e-ticket

e-ticket, self-printing or printed

Overbooking Depending on the airlines No No, but extra seats explicitly sold over normal capacity (folda-way seats)

Compensation in case of delays or cancellation due to the transport com-pany

Airlines are supposed to follow EU regulations

Less favourable specific general terms and condi-tions of sale

Favourable scheme in case of delays or cancel-lation

Booking opening Ryanair: 8 months About 4-6 months 3 months

Booking fees Used to be quite common None None

Extra fees for international/credit card use

Quite common None None

Free luggage One hand luggage One hand luggage and one hand bag

Any

Extra luggage Extras.

E.g., Ryanair: from EUR15 to EUR45 online and from EUR30 to EUR75 at the airport

Any extra and/or larger luggage

EUR5 if booked in ad-vance or EUR40 at the station

None

At-home luggage pick up/delivery

None None Yes (extra fee)

Disabled No free ticket but discount may apply for the accom-panying traveller (subject to airlines)

Free ticket for one accom-panying traveller (depend-ing on the handicap)

50-100% discount including one accompa-nying traveller (depend-ing on the handicap)

Registered disabled ex-servicemen

No discount None* 50-75% discount and up to 100% discount for one accompanying traveller (depending on the handicap)

Discounts for younger people

Infants: EUR30 (Ryanair)

Discount under 16

EUR5 for any child under 12. No free travel on adult’s lap

Free under 4 (on adult’s lap)

Discounts for older people

None None 50% discount under 12 and 25% discount from 61

Other discounts based on the travel-ler

None Groups (4-8 adults)* Various discount cards depending on age and family’s size

Discount for groups and families

Discounts for SNCF’s workers and their rela-tives



Refundable/flexible tickets

Depending on fares or subject to administrative fees

No

Personal tickets

Depending on fares and on booking way

Booking and real-time information by SMS

EUR1.30 (Wizzair)

EUR1.69 (Ryanair)

EUR1 (return) Free

Pets None (except guide dogs) Less than 6 kg and put into a bag: counted as extra hand luggage, so extras may apply

More than 6 kg: EUR30

Less than 6 kg and put into a bag: EUR6

More than 6 kg: 50% discount based on second-class adult full fare

Electrical socket None EUR2 Free (when it exists)

All fees given per way, unless specified otherwise. * According to OUIGO, fares are always below the conventional HSR standard fee (so-called Loisir fee). Yet under unusual circumstances, travellers enjoying special fares could get a more expensive fare with OUIGO. In such a case, they can apply to get the difference back. This includes families with at least three children, regis-tered disabled ex-servicemen and working-class returns.

Table 5. Comparing bookings.

2.4. At-terminal and on-board experience

Serving mainly peripheral terminals, OUIGO diverges from the traditional HSR, calling at central stations and their lively neighbourhoods (Table 6). Waiting time can thus be turned into a leisure experience, including shopping, cafes, wellness, etc. or into working (Delaplace et al., 2014). In this way, central stations are more than a transport node and can be under-stood as a place to live (Bertolini and Spit, 1998). By contrast, peripheral stations are isolated in the countryside or beside an airport and often offer minimal facilities (typically one news-paper agent and a cafe). LCA passengers experience various contexts depending on the airport and/or the terminal. On the other hand, OUIGO diverges from conventional HSR in the way passengers must show up at the rail station at least 30 minutes in advance for check-in (ticket inspection, including extras for luggage and pets). This makes OUIGO closer to the airline model, although airline passengers must usually proceed to check-in more in advance. The 30-minute check-in time involved with OUIGO is less attractive in terms of door-to-door travel time. In relative terms, this lack of time has arguably less impact for longer journeys.

Finally, disabled travellers officially enjoy similar assistance at airports and OUIGO or tradi-tional HSR stations.


At terminal services and shops

Depends on terminal and airports served

No lounge, less shops and services, no lively station district

Lounge in main stations, various shops and services, lively neigh-bourhood

Boarding/checking in time

Depending on air-ports’/airlines’ policy

30 minutes in advance

Access to the platform up to 5 minutes before depar-ture (Marne-la-Vallée Chessy)

2 minutes in advance

Table 6. Comparing boarding experiences.



Turning to the on-board experience (Table 7), OUIGO diverges from the traditional HSR with regards to cabin crew presence. Basically, a TGV passenger would meet the crew for ticket inspection and could then ask for some information, if needed. By contrast, OUIGO has more cabin crew available for passengers’ on-board needs since tickets are mostly controlled before boarding. Friendly cabin crew thus goes through the train to check everything is running smoothly and to answer passengers’ questions. This also contrasts with the LCA case, where cabin crew members are visible, but more involved with safety and sales.

OUIGO passengers potentially enjoy more space in their seats than in a conventional HST (provided they have no luggage, given the lack of racks), and although there is an optional electrical socket, but no Wi-Fi or individual litter. As with the LCAs, a subcontractor's agent performs a light clean up during the journey. Finally, various posters match perfectly with OUIGO’s typical colours and apparently friendly messages. Examples include: “Yes to the community (…), the bin is here”, “Yes to solidarity; my neighbour needs assistance, I help him/her”, “I let the space free of any luggage” and “I turn down the sound”. These slogans thus encourage passengers in a polite and friendly way to contribute to smooth and efficient operations.


Contact cabin crew/passengers

Frequent (sales and safety oriented)

Frequent (care oriented) Limited (ticket inspec-tion and information)

Catering Drinks/snacks sold No bar, no vending ma-chines

Drinks/snacks sold (sometimes offered in first class)

On-board facilities (electrical sockets, Wi-Fi)

None Optional socket (dedicated carriages available for passengers not paying the extra cost only when other seats are all booked)

No Wi-Fi

Wi-Fi (extra applies) and free socket, depending on service

Seating Usually less space Some more space but need to be used for small lug-gage (if any)

Decent space

Newspapers Sold (if any) None None

Litter/cleaning En route and at the airport No individual litter but collective ones

Mr Proper (subcontracter Laser)

En-route/aboard permanent cleaning and main cleaning in evening

Mr Proper (subcontract-er Laser) not on board (main cleaning in even-ing)

* If booked in advance. More expensive if paid at boarding time. Table 7. Comparing on-board experiences.

3. Resulting fares

According to a OUIGO executive, unit costs would be halved compared with traditional French HSR. The ratio would thus be similar to aviation (Doganis, 2006; Dobruszkes, 2013). This section analyses how OUIGO’s lower operating costs result in lower fares, thanks to Internet-based bookings made week after week over several months. Fares cover OUIGO, traditional HSR (TGV and iDTGV), Air France (flag carrier) and Ryanair, which is the only



LCA operating a route close to OUIGO (see above). All routes with direct HSR/Air competi-tion have been considered.

Three scenarios are reported in this paper to cover various hypotheses of booking and travel-ling days. Fares are given all tax included. It is worth noting that Ryanair never satisfies sce-narios’ hypotheses because of the low frequency of their flights (less than one daily flight).

Scenario 1: late booking, off-peak travel date

This scenario corresponds with impulsive or unpredictable travel (for example for a job inter-view or a funeral); the journey is made in a working day and booked four days in advance. The traveller needs to leave in the morning, spend one night at his/her destination and is free to book the cheapest return train. S/he is an adult and only brings one piece of hand luggage. Under these conditions, Figure 4 reveals dramatic gaps in fares. OUIGO appears to be the cheapest option for all the routes considered, with returns ranging from EUR20 to EUR50. Conventional HSR services are twice to four times more expensive, Air France six to 21 times more expensive and Ryanair 2.5 to 2.8 times more expensive.

* Including iDTGV

** HOP! (Air France subsidiary) on Lyon–Marseille route

*** Beauvais–Béziers one day later than expected and with two compulsory nights at one's destination

Figure 4. Comparing fares I (late booking)

Scenario 2: last-minute booking, off-peak travel date

This scenario is similar to the previous one but relates to bookings made one day prior to travelling. All fares are slightly higher, but ratios between OUIGO and its competitors are similar (Figure 5). For both scenarios 1 and 2, it is worth noting that traditional HSR services would be up to twice as expensive without some iDTGV or ‘100% Prem’s’ late services. In other words, with less flexibility concerning journeys’ schedules, traditional HSR would appear to be significantly more expensive.



* Including iDTGV

** HOP! (Air France subsidiary) on Lyon–Marseille route

*** Beauvais–Béziers one day later than expected and with two compulsory nights at one's destination

Figure 5. Comparing fares II (last-minute booking)

Scenario 3: long weekend

This scenario relates to a Pentecost long weekend. An adult traveller departs on Saturday morning; not too early, but in time to arrive at the destination for lunch. Return journeys are made on Monday afternoon after lunch, to be back late afternoon or early evening. Only one hand luggage is carried and no flexibility is requested. Given the lack of space, only two selected routes are shown in this paper (Figure 6).

Fares are all significantly higher than in scenarios 1 and 2 and tend to converge much more than on off-peak days. This arguably reflects the high volume of passengers expected during this long weekend by companies all setting their price using yield-management techniques.7

Considering Paris-Marseille return, OUIGO is the cheapest option for all weeks of booking. Conventional HSR and Air France converge mainly. Within conventional HSRs, iDTGV starts with cheaper fares than TGV. But the week TGV bookings are open, iDTGV is sudden-ly more expensive. The fares then remain slightly cheaper than TGV, but cannot be consid-ered a low-cost option.

On the Paris-Lyon route, OUIGO starts cheaper than its competitors but converges with TGV when its booking opens. Air France is then the cheapest option and becomes the most expen-sive one only in the two weeks prior to travelling.

7 This does not prevent SNCF fares from being regulated to some extent (Perennes, 2014).



Figure 6. Comparing fares III (long weekend 7th-9th June 2014)

In conclusion, OUIGO clearly appears to be a low-cost/low-fare product for off-peak days. During peak days, its fares are much higher but can remain significantly lower than its com-petitors. In sum, OUIGO follows the basics of yield management, taking advantage of crowd-ed dates to increase its revenues.



Access/egress costs

Fare comparisons do not make sense without considering the cost of access and egress jour-neys. We acknowledge that there is a wide set of potential places people will depart from or need to reach before or after travelling by train or plane. Analysing all cases is of course not within the scope of this paper, so we will simply consider access to the inner city. Table 8 shows the results. The main (expected) conclusion is that accessing HSR peripheral stations from the inner city is time consuming and expensive. Depending on regional public transport, it could be really expensive to access peripheral terminals, and this could counterbalance OUIGO’s attractive fares. By contrast, peripheral terminals can be very time and cost efficient for people who commute to and from nearby suburbs, provided they do not have to pay for parking and/or that public transport is attractive.



Terminals Transport mode and service Location Public transport Travel time* Single ReturnParis Gare-de-Lyon station HSR (TGV only) Central, main station Underground/RER 6.5 €1.70 €3.40Marne-la-Vallée Chessy station HSR (OUIGO)** Peripheral HSR station RER 45.0 €7.50 €15.00Paris CDG airport Air** Largest Paris airport RER 41.5 €9.75 €19.50Paris Orly airport Air Second Paris airport RER+rail shuttle 39.5 €11.65 €23.30Marseille Saint-Charles station HSR (OUIGO+TGV) Central, main station Underground 5.0 €1.50 €3.00Marseille Provence airport Air Peripheral airport Shutlle bus + underground 46.5 €8.80 €13.20Montpellier Saint-Roch station HSR (OUIGO+TGV) Central, main station Tram 7.5 €1.40 €2.50Montpellier Méditerranée airport Air Peripheral airport Tram + bus 52.5 €2.60 €5.20Lyon Part-Dieu station HSR (TGV) Central, main station Underground 26.0 €1.70 €3.40Lyon Saint-Exupéry airport & station Air/HSR (OUIGO)*** Peripheral HSR station beside the airport Express tram + underground 55.0 €15.70 €27.20

TGV: traditional French HSRRER: Réseau Express Régional (regional express rail network linking the suburbs each other through Paris)* Minutes, off-peak. In-vehicle travel time + waiting time (half the frequency), excluding time to/from the platform** Also served by numerous TGV services bypassing Paris*** Also served by TGV services bypassing Lyon

Table 8. Access or egress public transport between inner city and transport terminals



4. Discussion and conclusions

No clear picture emerges from the previous comparisons. One cannot claim that OUIGO fully meets the usual LCA definition; and it is not a duplicate of the traditional French HSR. In terms of production conditions, OUIGO follows the French HSR model as far as institutional aspects and employment relations are involved. By contrast, as far as technical factors (infra-structure charges, trains uses, seat density, etc.) are concerned, OUIGO follows the LCA models. Between the two, OUIGO tends to generate incremental changes in employment and working conditions but without deeply calling into question the SNCF social model. Further-more, these changes are not necessarily negative for the workers. For example, multitasking can be seen as a less monotonous job for staff, although longer working days are not ideal.

In terms of network geography, OUIGO is clearly a hybrid too: the main attribute it shares with the LCA is the no-connections policy. On the other hand, OUIGO meets the LCAs’ marketing and communication techniques, and contrasts with the traditional HSR model. Regarding bookings and related options or at-terminal experiences, OUIGO appears to be a hybrid again. Finally, on-board experience diverges from both the LCA and traditional French HSR, and this is probably its most original attribute.

Finally, OUIGO contrasts with the LCAs in many ways, while not simply being a cheaper HSR service. Being hybrid is likely OUIGO’s most defining characteristic. One could inter-pret this as the result of two main factors. First, the institutional side clearly matters. Being launched by the SNCF, which remains a public enterprise still responsible for many public service obligations and dealing with powerful unions, OUIGO could certainly not follow neoliberal strategies as the successful LCAs did. Furthermore, the SNCF arguably remains characterised by a specific corporate culture, despite its increasingly commercial perspective. Ultimately, the fact SNCF operates without any competitor allows the company to implement its new model in a more flexible manner. Second, the OUIGO model is also shaped by the technical constraints peculiar to the railway industry. Linear infrastructures, various regula-tions, capacity issues, etc. do not make it easy to move away from the incumbent HSR model and to simply reproduce the LCA model. The result is a trend to position OUIGO as a low-fare product rather than a low-cost one, as reported by a OUIGO executive. This is perhaps because in French, "low-cost" seems a bit pejorative.

This raises the question about the real rationale supporting the launch of low-cost HSR ser-vices. According to OUIGO executives, the main goal is to broaden the HSR service cata-logue to attract new, price-sensitive customers without calling into question the TGV model. However, one could assume that OUIGO also helps SNCF with some other issues.

First, competition issues are expected to become increasingly critical. Until now, SNCF has operated a monopoly at the national level, and competition from LCAs is still restricted to longer routes where the HSR market share is smaller (Zembri, 2010). However, the next step in EU-induced rail liberalisation could open domestic main lines. Furthermore, LCAs tend to launch more and more routes, including some shorter ones. SNCF could (or should) thus consider increasing competition and be able to react.

In this context, OUIGO can be seen as an opportunity to test reasonable changes of its tradi-tional models regarding a new economic model, management, employment relations, relation-ship with customers, new corporate or brand image, ability to deal with segmented markets, etc.

Finally, launching OUIGO makes SNCF the first mover towards new business models, at a time when increasing numbers of people perceive HSR as an expensive and elite product. In these terms, it could contribute to a new image for French HSR.



Acknowledgements

The authors would like to thank SNCF executives, OUIGO station and cabin crew and un-ions’ representatives for their availability and time. Thanks to Pierre Zembri (University of Paris-Est) too for his help. This research was made possible via a grant from Université de Paris Est Marne through a visiting-professor scheme of which Frédéric Dobruszkes could take advantage.

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Appendix 1: 2014 rail infrastructure charges for passenger services in France

IC=RC+TC+ANC+BS

where ICs are infrastructure charges, RC are reservation charges, TC are traffic charges, ANC are network charges and BS are basic services.

RC = SUM (PKRi × C1 × C2 × C3 × C6 × disti) where:

▪ i = section

▪ PKR = fare per km before tax, depending on railway line type; it ranges from 3,166 to 15,418 EUR for HSLs and from 0,010 to 5,372 for conventional lines

▪ C1 is a time coefficient (0.5 at night, 1.0 off peak, 1.5 on peak and 1.3 in between)

▪ C2 is a origin/destination coefficient applied on HSL only (1.10 for trains from/to cen-tral Paris, 0.68 otherwise); C2 = 1 out of HSLs

▪ C3 is a coefficient for regional services using HSLs (not relevant here)

▪ C6 is a coefficient for HSR services from/to Switzerland (not relevant here)

▪ dist is the distance for section i

TC = PKC × C4 × disti where:

▪ PKC is the fare per train-km, depending on train type (for HSTs: 4.300 on HSL and 3.502 on conventional line)

▪ C4 is a coefficient not relevant here

▪ disti is the distance travelled on main lines

BS includes charge for stations’ use (SU) due for every station a train departs from (thus all the stations it calls at but the final arrival one) and is computed as follows:

SU = f + p x C1 x C2 where:

▪ f is a fixed charge due for any train

▪ p is a variable term

▪ C1 depends on train’s length (equals 2 for any HST)

▪ C2 depends on rail service type (equals 4 for long-distance services)

From low-cost airlines to low-cost high-speed trains: the French case

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