French Rail Giant SNCF Braced for German Threat to Iconic TGV

(Bloomberg) -- French train operator SNCF has 15 months to repair relations with staff and ready itself to meet the challenge of rival operators in a soon-to-be liberalized market, according to Chief Executive officer Guillaume Pepy.

Germany’s Deutsche Bahn AG and Trenitalia of Italy are among rivals that may threaten the dominance of SNCF’s iconic TGV service when the high-speed sector is opened up from 2020, with operators including Transdev likely to target the regional market from the end of 2019, Pepy said Wednesday.

“We should spend all our energy preparing the company for competition, win the tenders and gain new customers,” Pepy said in a briefing at the Innotrans rail fair in Berlin. That will mean operating as a “normal” company following a restructuring agreement that’s set to transform state-owned SNCF, and taking a “back to basics” approach to improving customer service and punctuality, he said.

SNCF is recovering from a summer of strikes that cost it at least 780 million euros ($909 million), buoyed by the overwhelming approval of President Emmanuel Macron’s controversial blueprint for the company from French lawmakers. Pepy said he expected staff to accept the political verdict as they return from their summer break, ending the period of labor unrest.

“We have no time, we have to go fast,” Pepy said in the Berlin briefing. “All the usual players could be interested. It depends on their priorities -- domestic or international expansion.”

Budget Brand

France last week announced an expansion of the rail network as part of a 13.4 billion-euro transport investment program, with more emphasis on daily runs. SNCF is meanwhile rebranding its top-end services as InOui, while introducing a lower-cost operation, Ouigo, which uses TGV trainsets.

Pepy said he’s in favor of a tieup between Alstom SA and Siemens AG that’s currently being examined by regulators, arguing that it will bolster European train manufacturing against outside competition.

The CEO said he doesn’t think the Eurostar link between Britain and France, which is controlled by SNCF, will be disrupted by Britain leaving the European Union. His company’s bid to run trains on the U.K.’s future High Speed 2 line shows its confidence in growth there, he added.

©2018 Bloomberg L.P.