French SNCF Fret in Trouble

There are strong indications that Fret SNCF, the cargo division of the French state railway company Société nationale des chemins de fer français (SNCF) will be privatized. Corresponding schemes have officially been denied by the SNCF management, admitting however, that a “strategic plan for the recovery of the company’s freight activities will be presented before the year is over." However, up to now nothing has been tabled.

Fret SNCF is truly not a source of pride for the French railway company and the country as a whole, losing each year market shares and much money. Faced with competition from private railway companies, Fret SNCF recorded a net loss of 314 million euros in 2016 and accumulated debts amounting to 4 billion euros. In general, French rail freight companies are struggling heavily losing market shares year after year despite the liberalization policy for rail transports implemented by the Paris government back in 2006.

On track to becoming irrelevant
Heavily hit is particularly Fret SNCF. According to 2016 data, Fret SNCF accounts for meagre 6 percent of all goods transported within France compared to more than 87 percent attributable to trucking. In 2014, it was still 10 percent. How dramatic the situation has developed is shown by reference figures, stemming from the end of the 1980s. At that time, two thirds of all goods were transported by rail in France.
In view of this desperate situation, which has worsened year after year, the SNCF management seems to be willing to pull the emergency brake. At least, this is what the unions suspect. They argue that they have been informed by the Fret SNCG management that a strategic plan will be tabled in the coming weeks targeting the merger of SNCF’s freight arm with the privately organized SNCF cargo subsidiary VFLI (Voies ferrées locales et industrieles). If so, 3,000 jobs would be at stake, argue the unions.

Structurally uncompetitive
Confronted with mounting protests, the management of Fret SNCF has meanwhile denied any such intentions at least for being executed next year, but refrained from abandoning alike plans altogether.
For market observers, the Fret SNCF bosses’ anxiety is hard to understand. Fact is that the railroad company’s freight division is structurally not competitive. It’s transport offers do not correspond to the expectations of the clients, the quality is poor and does not meet modern requirements. 
Should there not be fundamental changes Fret SNCF might suffer the fate of break bulk specialist Sernam. The 1970 founded former SNCF subsidiary filed for insolvency in 2012 after becoming economically irrelevant.

Heiner Siegmund

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