The cheap train from Ouigo stands up to Renfe

The cheap train from Ouigo stands up to Renfe

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The cheap train from Ouigo stands up to Renfe

Hélène Valenzuela, CEO of Ouigo, in her Madrid offices.Victor Sainz

The French Hélène Valenzuela picks up her mobile to show the journalist that she is wrong, because Ouigo offers places of nine euros each way between Madrid and Barcelona (indeed, although since November). In a very correct Spanish, the director in Spain of the company belonging to the SNCF state group of the neighboring country tells that they have already exceeded 400,000 travelers since they began to operate, breaking the historic monopoly of Renfe, “the day after the lifting of the state of alarm ”, on May 10th. Every day 95% of its Alstom Euroduplex double-decker trains fill up (in July the average was 98%). A business proposition that insists on calling low fare (low rate) and no low cost (low cost) due to the negative connotations, and that it puts 500 seats in circulation daily on each of its five routes between the first two cities in Spain, three of them with a stop in Zaragoza and the other with a stop in Tarragona.

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At the end of this year or the beginning of next, the Ouigo trains will circulate between Madrid and Valencia (three frequencies), along with two comings and goings from Madrid to Alicante and perhaps with a stop in Albacete that is pending approval. Further, they trust their service in the Madrid-Seville (with stops in Córdoba) because that high-speed line, the first that was inaugurated in Spain for the distant Universal Exposition of 92, has an outdated braking system (called LZB) to which they will have to adapt their rolling stock, and that requires tests, approvals and investment.

“Our arrival has been a milestone for the sector and Spanish travelers”, describes Valenzuela. “We have changed the landscape. An elitist pricing policy is over… that’s how high speed was historically conceived, but liberalization has taken a turn. When you take the Ouigo train you see many families, couples with babies, young people … it is an image that did not exist ”. Indeed, the liberalization that Spain has launched has come to increase the capacity of the network by 65%, which in turn will add revenue to the railway operator Adif and will eliminate vehicles in circulation. In fact, the current Secretary of State for Transport and former president of the railway operator, Isabel Pardo de Vera, acknowledged that later they hope to extend the model to other axes such as Madrid-Galicia, Madrid-León-Asturias or the Mediterranean Corridor.

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In Ouigo they do not give expected billing figures for this year due to “commercial policy”, nor do they know very well how the market will evolve when those families that pack their trains in the summer come back on vacation. But they are very optimistic about their business model, which includes the ramp up (take off) of their accounts in two years, when they have added new routes. Until that balance arrives, they will focus on maintaining those occupancy levels “without giving up anything”, which means, according to the company, having services such as a bar attended by real people, XL seats (for a fee), Wi-Fi good quality (for a fee) or a very flexible cancellation policy. “We have the net promoter score (customer satisfaction level) highest of all SNCF subsidiaries ”, Valenzuela highlights from his bright offices near the Atocha station in Madrid, where part of his 135 employees work as if they were one start-up and where she does not have her own office.

His goal this year is to transport a million travelers and he recognizes that his fight is not so much focused on competing with Renfe or with the operators that come (ILSA, Air Nostrum and Trenitalia company will soon join) as focusing on modal competition. “The volume of travelers who leave the car, the bus and the plane, and go to the train, has to grow a lot. To achieve this we join the effort of Spain, with a network [de alta velocidad] incredible, where there are more than 55,000 million euros invested. You have to use it well ”. It is not mere rhetoric: Europe is betting, with France as a leading player, to boost the rail sector in response to climate change. Initiatives such as those to ban flights of less than two and a half hours announced in the neighboring country and studied in Spain go in that direction.

Although for Ouigo the most immediate fight has to do with money: on the one hand, they complain about how fees are calculated and, on the other, they fear changes in the panorama when the new law of the railway sector is approved, which could have the parliamentary go-ahead this fall. Adif is in favor of decoupling its revenue model from the General State Budgets and wants to have the freedom to set the rates paid by operators in accordance with objectives in line with the market and not with political ups and downs. And Ouigo wants predictability. “There are two paradoxes: we have trains with 509 seats. At the end of the year we will go with a multiple unit, so each row will offer more than 1,000 seats, something that will facilitate that we have a very low carbon footprint. However, tolls, fees, are calculated per place offered. In other words, they punish the operators for putting many places in the same row when it is a way of optimizing the system ”.

Second, Valenzuela fears that fees will be set that will stress his accounts. “When we submitted to the award, we invested at a very difficult time, but the group did not change its mind despite the coronavirus crisis. We are going to invest 600 million in ten years ”he recalls. “But we see that the rates are going up. What we now have on the table with the bill and the fee that Adif presented to us is an increase of 7% compared to what we had when the contest was held. I hope that the State is committed to a system that supports the operators ”.

And where is the business risk then? “We are talking about a pricing system that is not based on high margins, but on high volumes. To maintain this policy we need to know how costs will evolve. If every year there is a change in this amount… this forces us to adapt our plans ”. The commitment of the French company, he clarifies, goes beyond the contest they won. “A train pays for itself in 30 years. In ten years we are not going to leave Spain, because the trains that we have adapted could not circulate in other places (the Spanish versions of the braking systems such as the aforementioned LZB or ERTMS will be adapted) we need that predictability ”.