Ouigo Celebrates Two Years in Spain: Low Cost Policy, Challenges, and Future Plans

With the experience of these two years, is it sustainable for Ouigo keep the low cost policy?

It is sustainable if the associated costs are normal and if the price of electricity does not skyrocket, as happened last year, something that took us all by surprise. We never included the cost of electricity in the price of the tickets, although our plans included a price of electricity that was multiplied by 10.

Was it part of your two-year plans or is the balance negative?

We have been in line with what we expected regarding the number of travelers and the response of the market. We knew that Spanish high speed was a very elitist market until our arrival because price was a limiting factor. Now the paradigm has been broken and thousands of people who could not do so before have begun to travel.

They have a dispute with ADIF over the cost of using the railway lines.

We have a challenge with the fees that we pay to Adif for the use of the line, which are exaggeratedly high and do not exist on any high-speed line in Europe. To the extent that these fees are lowered, we can also lower the prices. We have never considered stopping providing our services because we see the photo in the medium and long term, but one of our lines is not profitable: the Madrid-Barcelona with a stop in Zaragoza.

Why is it not profitable?

In this line we pay for the capacity of seats that we have, something that is not standard in other services. We pay the same for taking the train full or empty and that is not usual. We have trains with two heights with which we inject more passenger volume without the passengers giving up space inside the train and with which we save costs. The agreement that we now have with ADIF is not sustainable for us and today we do not have profitability in the line despite the large investment that was made to enter.

If it is not resolved, will it imply a future price increase?

We never propose to raise prices. We believe that what needs to be done is to lower costs or at least change that payment method in which capacity is penalized. We already pay for the weight of the rolling stock that we put on the tracks. What does not make sense is paying more for the number of places: it creates unnecessary stress in the market. We keep prices low to fight our true competitor: the car. We all have to make a transfer from the road to the train.

After the landing of Iryo, by offer it will not be…

Anything that is competition is good for the market and an incentive for us, but the offer has skyrocketed in recent months with the arrival of the third operator [la hispanoitaliana Iryo, que comenzó a transportar pasajeros en noviembre de 2022]. He has done it suddenly, with many frequencies per day and without a smooth ramp to match the demand. We have not noticed a marked drop in the number of passengers, we continue to have our trains full with an occupancy of around 95%, but filling the trains today is done at a much lower price than a year ago. That, together with the high costs that we now have, calls into question the benefit of Ouigo. If the costs were to come down, we could maintain the prices perfectly. If costs do not fall, the market will react and prices will rise: it is the law of supply and demand.

Is the permanence of Ughor on the Spanish network?

We do not contemplate any scenario other than being here. I repeat: you have to see the photo in the medium and long term. There is plenty of market for all competitors.

What percentage of passengers does it carry? Ugho compared to the total?

Ouigo has transported almost 6 million passengers in just two years, of which five million have done so on the Madrid-Barcelona line. Along these lines, between 25 and 30% have their origin or destination in Zaragoza. There has always been more demand for Madrid, but now it is almost on a par with Zaragoza-Barcelona. Regarding the total, the CNMC will release the data for the first quarter of 2023 in the coming days and it will be the first full period in which the traffic assumed by the third operator can be quantified.

what about Ughhear the incidents?

I think there has been a very interesting campaign against the new entrant. It definitely had something to do with it. We maintain the same ratio as other operators and there are the data that Adif controls. It is not that the Ouigo trains have more or less incidents, but shortly after starting to operate we had a serious one that was much more widely reported in the media than it really deserved. It was said that an Ouigo had knocked down the catenary [el suceso del pasado verano a la altura de Calatayud, cuando la línea de alta velocidad permaneció cortada durante tres horas con 8.000 viajeros afectados] It has already been shown that this was not the case. It was something random because there are problems in the lines. She touched us as she could have touched anyone.

Was it just bad press?

There has been an association between our ‘low fare’ model and the ‘low cost’ of the airlines, traditionally much maligned because the user gives up quality. We have not done so despite the fact that our low rates are associated with everything that the collective imagination believes to be low cost. Time has proven that our travelers come back and are delighted.

Would having a larger train fleet help speed up the resolution of incidents?

It doesn’t have to do. We always have trains stopped to resolve any incident that may arise. It is not so much the number of trains as the frequency. We have a train running every three hours, we don’t have one that goes 30 or 40 minutes from behind that could help passengers in a convoy with incidents. But that would worry us if we had repetitive incidents. This is not the case: we have had three incidents in two years of operation.

What’s next?

The future of the company depends on opening the corridors that we have pending. We have already opened the line with Valencia and Alicante with a stop in Albacete. All our efforts are focused on getting to the south as soon as possible. Regarding the Madrid and Barcelona line, the framework agreement with Adif only allows us five round trips a day with three stops in Zaragoza. If Adif awarded us more frequencies, we would probably do so. But it’s not up to us.

Is it on the tablee YesDo you have intermediate stops like Calatayud or Tarragona?

It is not on the table because they are Public Service Obligations. We cannot stop at those stations because the incumbent could demand money from us by occupying a share of the public service market. What we have done in favor of Aragon above all is to improve and adapt the schedules during the day to Madrid and Barcelona. We have some schedules that today work very well for the Aragonese who have to travel to meetings there. The third operator has positioned itself a lot with the business public, but Spain is a country of small and medium-sized companies. This profile is very much looking for the price and the best answer that exists today is stillo Yesgo.

possiblyand goI have captured this business sector by incorporating high-speed travel passes. Do they think about it andn Yesgo?

There are several proposals from the central government to create subscriptions and price reductions. For our part, we have not considered it yet because our prices are low enough to compensate for a subscription.

What about the connections to the south? When will they be a reality?

We have not yet inaugurated the lines due to a technical issue of the security systems. We will not go to the south until 2024. Once we are operating there, Zaragoza will be able to connect with Andalusia after passing through Madrid. Which it will be very complicated is the direct connection because there are no through stations in Madrid and getting high-capacity trains like ours to fill up is very complicated. Without stopping in Madrid, I find it very difficult to fill those trains.