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[quote user="blue streak 1"] 52, France  --  At the international HSR conference in PHL SNCF has announced that they need a second HSR line from Paris to Lyon. This even though they operate 280 trains a day on the route. any of the trains are 2 coupled TGV train sets running together. Do not know if the 280 figure counts these coupled trains as one or 2. Most double trains split at Lyon to different destinations. here is link to IRJ article  <a href="http://www.railjournal.com/index.php/high-speed/sncf-calls-for-second-paris-lyon-hs-line.html?channel=542">http://www.railjournal.com/index.php/high-speed/sncf-calls-for-second-paris-lyon-hs-line.html?channel=542</a>  load factor is 83%   claim makes all operating expenses and almost all capitalized costs. This is one of the first TGV lines so ridership has grown steady over 30 years.  can we expect the same any where in the USA ? [/quote] According to the article, the Paris to Lyon line covers its operating costs and 70 per cent of the capital costs. If the President of SNCF believes that this is a profitable operation, hopefully he won't attain a similar position in a competitive business that is required to cover all of its costs.  The line is not profitable if it does not cover its capital costs. The article addresses the Paris to Lyon line. Whether the presenter meant to claim that all the high speed lines in France cover their operating costs or just the Paris to Lyon line is unclear.   Several years ago I reviewed the SNCF financial statements. Three things jumped off them that caught my attention. First, the French use International Accounting Standards whereas in the U.S. we use GAAP. There are significant differences, although they can be reconciled within reason. Nevertheless, an apples to apples comparison is difficult. Second, the statements show a large transfer from the French Government to SCNF without making it clear the purpose of the transfer or for what aspect of the operation it is intended. Third, the SNCF appears to include the profits from station restaurants as well as other vendor rents in train operations. This would not be permissible under U.S. accounting protocols.   EBIT is earnings before interest and taxes. In the U.S. EBITDA means earnings before interest, taxes, and depreciation, although most accounting statements show depreciation before taxes. EBIT of 12 per cent means that there is little left over to pay the substantial interest associated with a capital intensive business such as a high speed railway. Moreover, if I remember correctly, SNCF does not pay any taxes. If this is true, then it is not really in the same ballpark as a private, competitive business, which must pay taxes in most countries.   In addition to the claim that the Paris to Lyon line is profitable, which it is not inasmuch as it does not cover its fully allocated depreciation, the Japanese claim that the Tokyo to Osaka line is profitable. Based on my read of the financial statements for both operations, both governments appear to have set-up a separate company to manage the capital intensive infrastructure. Thus, one company runs the trains whilst the other manages the infrastructure. This is not a bad idea, because once the infrastructure is separated from operations, it opens up the possibility of multiple operators using the infrastructure and thereby introducing competition to the operations.   Government in both countries used taxpayer monies to build and capitalize the infrastructure. Then they used accelerated depreciation to write down the capitalized or fixed assets. When it reached a cost level that would be manageable for the operator, the French at least set up a separate company to manage the infrastructure. It charges the operator rents to run high speed trains over it. The same applies to local and non-high speed intercity trains. Here is how creative accountants might have set  it up. Keep the numbers simple. Lets say the infrastructure cost $100 billion. Use accelerated depreciation to write down the $100 billion at a rate two to three times the average depreciation rate. When the book value gets to $49 billion, sell the asset, which has been paid for by the taxpayers, for $50 billion to an independent operator, i.e. third party, quasi government, etc., thereby showing a gain of $1 billion on the sale for the taxpayers. The facilities operator charges the trains operator(s) $35 billion in rents to cover 70 per cent of the $50 billion in the capital investment that is on the books. Voila, the operator (SNCF) is covering its operating expenses and covering 70 per cent of the cost of the capital or fixed assets.   I don't have access to the detailed numbers for France and Japan. I am not sure anyone outside of the government(s) and perhaps the railway operators have them. To fully understand the accounting, one would need access to the property accounting records to know exactly what transpired. If the U.S. continues to improve its passenger rail system where it makes sense, i.e. relatively short, high density corridors, with an investment model that makes sense for the United States, we should see better results as has been the case in Europe and Japan. If an average speed of 110 mph, with a top speed of 160 mph, will do the trick, this should be our target. Paying the incremental costs to achieve a top speed of 220 mph just because some other guy is doing it makes no financial sense.
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