Jeff Apter

Despite the ERA’s furious protest against what it regards as anticompetitive government subsidies to rail operators, the darlings of the powerful European environmental lobby continue to draw traffic away from ERA members and regional airlines in general. Through it all, public perception continues to defy scientific data: According to the German Aerospace Research Establishment, air transport accounts for 2 percent of global carbon-dioxide emissions, while rail and ship transport together account for 4 percent. Automobiles produce 10 percent. 
Nevertheless, airlines must learn to cope with the ever-increasing popularity of high-speed trains, which many now consider complimentary rather than competitive service. Perhaps more so than anywhere, the phenomenon has turned France’s domestic transport industry on its ear, as the highly subsidized railroad company SNCF undercuts prices on regional routes throughout the country, leaving airlines with little choice but to shave fares dramatically or abandon markets.
The severe difficulties encountered by Switzerland’s SAirGroup in forging its three French regional subsidiary airlines into France’s second major airline group might just have confirmed what many transport analysts have long believed: The main domestic service competitor to Air France and its regional affiliates is not another airline at all, but France’s burgeoning Trains à Grande Vitesse (TGV) high-speed rail network. In fact, one of the main facets of the restructuring plan devised for AOM and Air Liberté, which with Air Littoral comprised SAirGroup’s French regional business, centered on abandoning several domestic routes out of Paris, all of which get service from the TGVs, including Paris-Bordeaux, Paris-Marseille and Paris-Montpellier.
Over the last 20 years, the TGV has linked major French cities such as Lyon, Lille, Nantes and Bordeaux to the French capital. More recently, high-speed rail links with London and Brussels have opened. Finally, the opening in May of a TGV route from Paris to the Mediterranean port of Marseille has posed a new threat to the viability of French regional airline routes. 
Capable of top speeds of 187 mph, the Paris-Marseille TGV cuts 1 hr 30 min from the previous train service, putting the two cities only three hours from each other. It also makes Marseille and Lyon, respectively France’s second and third biggest cities, just 1 hr 30 min apart on the ground. By comparison the Paris-Marseille flight takes 1 hr 15 min. Taking into account time to get to and from the airports to the city center, the new TGV trip matches the airlines’ journey duration from the Gare de Lyon in downtown Paris to the newly refurbished Saint Charles railway station in central Marseille.
The second-class round-trip fare for the Paris-Marseille TGV runs FFr 812 ($110) at off-peak times and FFr 992 ($134) in busy periods. This is no more than $4 higher than rail fares before addition of the express link. Fares are substantially lower for tickets booked well ahead of the trip, and discounts are also available for senior citizens, young people and two people traveling together.
But even the regular fares make the train competitive with the airlines. Air France’s Paris-Marseille return fare, without reductions or special conditions, is FFr2,317 ($313), not counting the costs of getting to and from the airport. However, to meet the Paris-Marseille TGV challenge, Air France launched a FFr518 ($70) promotional return fare on the route for trips made between July 6 and August 29.
French national railway company SNCF says it aims to win 60 percent of the total Paris-Marseille transport market–up from its current 40 percent market share. Its summer schedule provides 17 round-trip services each day, with departures every 30 minutes in peak periods and every hour off-peak. Meanwhile, the TGV’s punctuality record remains markedly better than that of the airlines, primarily because it avoids such factors as en route slot restrictions.
Air France admits that the TGV stands as its most formidable rival on direct routes. A spokesman said that passengers clearly prefer the train for journeys of less than two hours, but for trips of two to three hours 40 percent prefer the airplane and for journeys of more than three hours, most prefer to fly. Considering most regional airlines fly legs that rarely extend beyond two hours, such estimates might seem particularly alarming to ERA members. Meanwhile, Air France estimates that Paris-Marseille air traffic will “drop by approximately 25 percent,” but anticipates somewhat less impact on other southeastern destinations such as Avignon, Montpellier and Nimes. Air France, which operates 23 daily round-trip flights with its Paris Orly to Marseille shuttle service–down from 25–and seven regular return flights from Paris Charles de Gaulle Airport, last year carried nearly 2.5 million passengers on this route, an increase of 3.9 percent.
While airlines can adjust fares and schedules to meet demand fluctuations resulting from rail competition, airports enjoy no such luxury. After years of record growth that enabled Marseille-Provence Airport to draw one million passengers annually since 1998, the small international facility now recognizes it will probably lose 25 percent of air travelers–or about 250,000 passengers in a full year–to the new TGV line. 
However, airport managing director Pierre Régis said that it has anticipated the opening of the TGV for a long time and has sought to diversify its route network. This strategy has bore fruit, with a 16-percent increase in passengers to European destinations and a 17-percent hike to and from North Africa. Three years ago more than half of the airport’s passengers traveled to Paris airports, a figure that has fallen to 46.9 percent, or 6.46 million passengers.
According to Régis, the increase in traffic and frequencies to Europe and French cities other than Paris should “enable us to limit the loss in total traffic to only two percent.” But how well placed is such optimism? All indications point to a severe blow to Air France, its domestic franchise partners and Marseille airport, all of which are sharpening their strategy to keep the nearly 3 million passengers who last year took Air France or Air Liberté/AOM/Air Littoral flights to and from Paris. Their main weapon was to be 44 daily flights between the two cities, compared with the TGV’s 17 links with Marseille and five with nearby Aix-en-Provence. But Air Liberté’s decision to withdraw from the Marseille route at the end of May left Air France as the sole operator, with 23 daily links. 
Marseille Airport and the airlines can draw lessons from the experience of Bordeaux, where inconsistent air service to Paris–magnified by the departure of the troubled Air Liberté–helped spur the TGV’s growing popularity there. The SNCF last year again increased its market share between Paris and the major southwestern city by 5.3 percent. As a result, the number of passengers surpassed 2.5 million and the SNCF’s revenues from the route grew by 11 percent. At the same time, the number of passengers handled between Paris and Bordeaux-Merignac airport increased by only 0.8 percent. The railway company now claims a 60.7-percent market share of Paris-Bordeaux passengers.

Airlines face stiffer railroad competition

Despite the ERA’s furious protest against what it regards as anticompetitive government subsidies to rail operators, the darlings of the powerful European 

2024 Corporate Aviation Leadership Summit

AIN Products

SUBSCRIPTIONS

RESOURCES

ABOUT AIN