Air France rail plans put on hold

19.1.2010   (Financial Times)

by Robert Wright in London

Plans by France’s national airline to run high-speed trains have been put on
hold after the French government introduced legislation widely viewed as restricting
new operators’ freedom.

Air France said the plans, whose details were first revealed in the Financial
Times in July 2008 , were “not an urgent dossier” because the company did not
have “any visibility on the rail transport deregulation rules”.

The company, part of Air France-KLM, planned to start running high-speed international
trains following the introduction of European Union rules opening up operation
of international rail passenger services from January 1, 2010. However, France’s
rules appear set to be more restrictive on the proportion of revenue and passengers
on each train that can be picked up within one country.

The EU rules say international trains can pick up passengers and carry them within
one country but allow regulators to restrict services where they damage existing
subsidised services. The French legislation, which became law last month, allows
regulators to ban services that are seen as harmful to publicly subsidised services.

It also looks likely that France will introduce guidelines setting maximum proportions
of revenue that can be earned through carrying passengers within France on the
new liberalised international services.

It could also have proved difficult for Air France to raise the finance necessary
to buy or lease the large numbers of trains involved.

Although details of Air France’s planned services were never made public, most
would probably have operated from points within France, via a hub airport such
as Paris Charles de Gaulle, to points outside France.

The European legislation was introduced as the latest stage of the EU’s efforts
to improve Europe’s rail services by increasing competition for the state-owned
monopolies that have dominated the sector.

France has frequently angered private-sector would-be competitors for SNCF, its
state-owned train operator, by introducing rules widely seen as restricting the
rights of private train-operating companies.

Brian Simpson, chairman of the European Parliament’s transport committee, last
month asked the European Commission to investigate French proposals to tax any
railway rolling stock used in the country.

Private operators claim the tax will hit them harder than SNCF.