The liberalization of the Spanish high speed became a reality just two years ago, when the Ouigo trains began to circulate between Barcelona and Madrid. The long-discussed revolution in the rail sector has ended up being a reality, with an increase in supply and a drop in prices. Hélène Valenzuela, general director of the French company in Spain, reviews the situation of the company and the sector.
Have the expectations with which you arrived two years ago been met?
No, nobody expected the covid, the war in Ukraine, or inflation... But positive things have also happened: we created a market, new profiles have arrived on the train and we have a high occupancy rate.
They were the first to dispute the passenger with Renfe. After a year Iryo entered and put even more trains between Barcelona and Madrid. Have they suffered from increased competition?
The citizen has noticed it because now they have the possibility of choosing four products [Renfe's AVE, its low-cost option Avlo, Ouigo and Iryo]. Being able to choose is very positive. Together we have to ensure that the winners are the train and the citizen. We are not fighting to have a fixed cake, we are fighting to grow the train market and to establish itself as the cleanest mode of transport that exists.
For now, the numbers of high-speed travelers have reached levels never seen before.
The latest report from the CNMC explains that the lines where there was not yet liberalization, such as Madrid-Seville, are still 20% below the pre-pandemic level in terms of passenger numbers. Where we have entered, on the other hand, there has been enormous growth. Between Madrid and Barcelona, in the third quarter of 2022 there were 43% more travelers than in the same period of 2019. There is an induction towards the train, that's the good news!
Where do these travelers come from?
There is a modal shift and outright induction. People who took the car or the plane now decide to go by train. This is new, we are creating train culture. There are also people who did not travel and now do. More or less two thirds of our travelers do it for leisure and 15% travel as a family with the fixed rate of five euros for children under 14 years of age.
Ouigo's great asset compared to its competitors is the price. Can you continue selling tickets at nine euros in the long term or is it unsustainable?
Low prices are in our DNA. Since Ouigo's entry there has been a drop in prices and the entire sector has followed suit. Trainline data shows they are down 40% overall. Our low-cost model only works with few frequencies and many seats to achieve economies of scale, which is why we have double-decker trains that run in double composition, with 1,018 seats in the same groove. We have to reach a high occupancy rate for it to work.
Raising the price of a ticket from 25 to 35 euros, to give an example that is still attractive, would it be very noticeable in employment?
Very much, the department that manages prices dynamically knows that then the trains are not full. If he had wanted to pass on the increase in the price of energy, the price of the Madrid-Barcelona ticket had to rise by more than ten euros. We didn't, we kept the prices low because raising the price right now would slow down liberalization. Market sensitivity to price is very high in these times of economic uncertainty.
But the price of plane tickets has also risen...
We have a problem of competitiveness with the road, since the highways are free. It is something that happens in few countries. Some young people do numbers and if there are five it is cheaper for them by car. People are looking for value for money.
When do you expect the company to make a profit?
I hope that 2024 will be the year, at least, of positive results and reaching equilibrium, although the conditions are not yet met. It depends on how the price of energy evolves. And if the canons continue like this, we have it very complicated.
Adif has frozen them this year. Do you consider it insufficient?
It is not enough when energy multiplied by five in 2022. We expected a drop in fees as there was in Italy. There they were lowered by 30% and that allowed operators to lower prices in an economically sustainable manner over time. It is a virtuous circle: you attract more people, the operators can be maintained and Adif would collect more. We must find that balance because here Adif's collection through fees goes far beyond what the market can bear. All the operators complain and in the long term it is unsustainable.
One in five trains in each direction between Barcelona and Madrid stop in Tarragona. Do you plan to expand the service?
The framework agreement establishes three stops in Zaragoza, but not in Tarragona and the rest must be requested every year. The first time it was not very complicated and we added a second stop in Tarragona, but this year technically it has not been possible due to lack of capacity in the mesh as there are more trains. Tarragona is a market with a lot of potential but we are not going to be able to stop any more in the short term, although every year we will raise it again.
And Lleida?
No. I see it as very complicated, honestly, because it costs a lot of time having to leave the high-speed line.
Do you plan to extend the journey to Girona and Figueres either?
We do not consider it, our rolling stock is not approved to get there.
The SNCF, its parent company, has operated the Barcelona-Paris alone since last December. Will they market it jointly with Ouigo from Madrid?
No, we market a domestic product from point to point. We do not give correspondence, we do not ensure the connection with other trains and the client is notified in a very clear way. If you want to go from Madrid to Paris by high-speed train, that's fine and I'm in favor of it, of course, but we didn't develop this connection because it takes a long time to travel.
European governments such as the French are committed to prohibiting flights on routes that have a solid rail alternative. Do you share it?
I don't know if you have to legislate, what you have to do is drive the train and make it attractive. I am more inclined to respect the freedom of choice and that the citizen can choose. Rather than prohibiting, what we need is a policy that is consistent with the objectives of decarbonizing the economy.
The company's next steps are to extend the service to Andalusia, where the competition has already entered. Do you have an arrival date?
We are conditioning six trains and in June we will begin tests on the line. From there the administrative part begins, which will take us until the second quarter of next year. I hope that the CNMC shows how the before and after is marked by Ouigo. When you arrive in Andalusia, the Andalusians will notice. On the other hand, when the others arrive, an equilibrium is created and prices continue to be high.
