Frédéric Delorme, the President of Rail Logistics Europe (RLE), the structure which groups all of SNCF rail freight subsidiaries, showed some optimism when it comes to the future of the two entities replacing Fret SNCF. For example, Delorme believes the Hexafret, the company taking rail freight operations, is starting off in a better position than Fret SNCF when it was formed in 2020.
Delorme underlined that he did not view Fret SNCF’s fate as neither “a liquidation” nor a “dismantling” of the company or a “dismantling” of rail freight at SNCF. “It is rather a ‘transformation’, admittedly not of our choosing, but neither one marked by mass redundancies. The 500 employees who are leaving Fret SNCF will all be redeployed within the SNCF group”, he said in an interview with French media.
Getting finances back on track
“For years, (Fret SNCF) accumulated losses of 150 to 200 million euros a year, as well as building up a debt of 5 billion euros, made up of aid granted by the French government, which the European Union suspected of being illegal”, Delorme pointed out. The ‘transformation’ wipes out such (debt) liabilities and in addition, the cost of employer’s contributions for the 80 per cent of the workforce who have railway worker status.
This initiative represented outgoings for Fret SNCF of 18 million euros annually, but will now be paid by parent company, SNCF. “This will result in a more level playing field as SNCF’s rail freight counterparts in Germany and Belgium, for example, already benefit from such an arrangement,” he explained. Delorme is confident Hexafret can be a going concern and be profitable and highlighted what he believes are its real strengths.
Given the feedback received from many of its customers on making greater use of rail freight going forward, RLE estimates that the combined turnover of Hexafret and Technis will be equivalent, in 2025, to that of Fret SNCF in 2023 – 700 million euros. “Our operating margin will be positive, as it was in 2021 and 2022, but at a level we have never achieved in the past.”
Positive market outlook
As to the outlook for the rail freight market in France, Delorme pointed to the recovery plan lobbied for by the 4F alliance of French rail freight operators in 2021 which has created “a favourable climate” for business. An aid of 200 million euros is earmarked each year for the sector, including 100 million euros for the single wagon segment, which will account for 70 per cent of Hexafret’s activity.
A State-EU investment programme totalling 4 billion euros dedicated to rail freight infrastructure, will go a long way towards improving service reliability, he observed. “There is a real appetite among shippers for rail freight at a time when they must all play their part in decarbonising transport. Rail freight emits nine times less CO2 than road freight, while solving some of the problems of road infrastructure congestion.”
Tackling the strikes
One of Delorme’s biggest tasks will be to bring some stability to labour relations. Some union representatives view the creation of Hexafret and Technis and the arrival of an external investor as ‘gradual privatisation’ which has been one of the reasons behind recent industrial action.
“It is true that we have been penalized by strikes that I would describe as political and that go beyond SNCF, such as the strike in protest to pension reform. As far as labour relations are concerned, I want to achieve a high level of dialogue which is the key to keeping and attracting staff and providing a good service to our customers. I am reaching out to the unions so that we can reach good agreements.The good news is that we are operating under excellent service quality conditions. Our order fulfilment rate is at 97 per cent.”
Looking for investors
The framework of the agreement between France and the European Commission on the discontinuity of Fret SNCF stipulates that RLE must find an investor to take a minority stake in its capital. “What is important to note is that such a move is in line with our development strategy for RLE. Whether the investor be public or private is not the issue as long as it has the development of rail freight at heart,” Delorme added.