Earlier this week came reports that Deutsche Bahn (DB) could be poised to significantly reduce or axe completely its single wagonload (SWL) business. This prompts the question of why this segment of the rail freight market is loss-making and economically unviable. The head of DB Cargo France, Alexandre Gallo, tackled the issue in an interview with RailFreight.com.
Basically, an SWL offering is one that collects individual freight wagons directly from customers and assembles them into trains for transport. But why is it described by one market analyst as “a diffuse market, complex to operate, volatile and subject to various hazards”?
Costly but necessary
“SWL systems are ones with high fixed costs, requiring the same structure for several hundred or several thousand wagons. There are multiple traction breaks, transit times are difficult to meet, and the high price that customers have to pay make the product uncompetitive compared to road transport,”, Gallo said.
“However, some manufacturers, particularly those in the chemical industry, need SWLs because of the significant restrictions on the road transport of some of their goods.” He went on to explain that SWLs not only require more manpower, compared to other segments of the rail freight market, but also take up a large amount of track space in marshalling yards.
Dependant on public funds
A crucial factor is that the SWL segment is heavily-dependent on public aid. “The State cannot require operators to maintain SWL systems without providing subsidies for them, especially if they are considered a service of general/public interest,” Gallo underlined. And if DB Cargo, Europe’s biggest rail operator, can’t make a go of SWLs, then who can?
“Perhaps lighter, more agile, smaller companies with lower overheads can manage to break even, but undoubtedly thanks to public subsidies,” he observed. Gallo revealed that for DB Cargo France specifically, its SWL activity had been heavily loss-making and that taking into account the high risk of cuts in public subsidies it agreed with its parent to considerably reduce its presence in the French market.
“We sub-contracted a significant part of our SWL activity to Hexafret (SNCF’s new rail freight subsidiary borne out of the discontinuity of Fret SNCF) which has integrated it into its overall operations, increasing its volumes. We had to close three hubs (Vaires-sur-Marne, Gevrey and Saint-Pierre-des-Corps) and cut 32 jobs. We redeployed two-thirds of the employees to other positions within the company.”
‘Only time will tell’
At the end of last year as the official dismantling of Fret SNCF approached, a study by management consultancy, Secafi, highlighted that with its focus on SWLs Hexafret would have a costly business model and likely rely on State subsidies to be a going concern. It concluded, somewhat ironically, given Fret SNCF’s fate, that without public financial support, there would be serious doubts over Hexafret’s long-term viability. “I can’t comment on Hexafret as I am not familiar with their strategy but it is clear that they benefit greatly from subsidies given their overwhelming market share of the SWL segment in France. Will Hexafret be able to survive without state aid? Only time will tell,” Gallo added.
