A rail strike in October 2007 highlighted opposition to President Nicholas Sarkozy’s reform programme,
aimed among other things at rolling back costly pension privileges. While the struggle over reforms was
expected to continue being a key factor in the future of state rail company SNCF, it was also true that the
government has not stinted on the investment front. In June 2007, a new high-speed train service was
opened linking Paris and the southern German city of Stuttgart. The service reduced travelling time
between the two cities to just under four hours, compared to six hours previously. The cost of opening the
new service was put at EUR5.5bn (US$7.4bn), with a further EUR1.7bn expected to be spent on
upgrading a final 106km section of the track by 2015.
In July, Italy and France agreed to request EUR725mn of partial funding from the European Union to
build the first section of a high-speed rail link between Turin and Lyon. The EU contribution to the
project would represent around 30% of the total costs in the period running to 2013. The total cost of the
project was estimated at EUR15bn, with completion expected in 2020. In BMI’s newly released France
Freight Transport Report we forecast that rail freight traffic, measured in million-tonne kilometres
(mntkm), will rise by an annual average of 2.1% over the next five years (2007-2011). Overall freight
traffic, across all modes, will grow by 1.8% per annum over the next five years. This is faster than the
1.5% registered in the preceding five-year period. By 2011, we calculate that the value of the transport
and communications sector will have reached US$193bn, or 7.2% of GDP.
Successive French governments have favoured public investment in big infrastructure projects,
particularly in airports, railways and highways. While arguably the ongoing fiscal squeeze means this will
not be sustainable, some of the benefits, in terms of increased capacity, are making themselves felt within
our forecast period. The emphasis on building key private sector companies up into ‘national champions’,
while heavily criticised for its anti-competitive overtones, may also deliver some advantages. Air
France-KLM is a good example: supported by the government, the merged airline is now the largest
European carrier, and with a recent code-sharing agreement with Delta Airlines of the US, is poised to
enjoy further growth. The other side of the coin, however, is that France has been slow to welcome (and
indeed, in some cases seems to actively block) the advent of the budget airlines which have swept across
much of Europe.
Our forecasts for the French industry show airfreight leading the way with average annual growth of
3.0%, followed by rail (2.1%), sea cargo (2.1%) and road haulage (1.8%). Supporting our positive view of
projected French freight traffic is a perhaps surprisingly favourable assessment of the operating
environment. BMI’s freight industry business environment rating gives France a score of 38 (out of a
theoretical maximum of 70), placing it a short distance behind Anglo-Saxon markets such as the US and
UK (each of which score 43).
On the downside, and putting Air France-KLM to one side for a moment, the French freight industry has
not yet developed its full international potential. BMI’s conclusion is that the industry as a whole has
solid foundations in the domestic market, and may yet be able to build on these to support a bigger global
role.
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