Realist, not conformist analysis of the latest financial, business and political news

French Railways – Costs And Not Costs For Free Workers’ Tickets

It’s important to distinguish between what is a cost and what isn’t a cost. Something can, easily enough, be a benefit to the workers without being a cost to the business. For example, if the workers get dibbsies on stuff the company was going to throw away anyway then that’s a benefit without it being a cost.

Which is where we find ourselves with this story about French Railways and the costs of free tickets:

France’s cash-strapped national rail operator SNCF spends €220 million (£188m) per year on free or cut-price tickets for staff and their extended families, according to the country’s state auditor.

In a scathing critique, the Cour des Comptes said the costly perk, which extends beyond workers to parents and grandparents, placed an unacceptable burden on the company and taxpayers and was depriving fare-paying passengers seats on full trains.

Current and retired French rail workers are entitled to a so-called “ease of movement” advantage, meaning they and their partners and children have access to free or 90 per cent-reduced train tickets.

The parents and grandparents of rail workers and their partners also have a limited number of free or reduced seats.

Despite regular calls for the advantage to be scaled back, its cost had risen by 20 per cent since 2011, found the auditor. Current SNCF employees only accounted for 35 per cent of the total cost, it said.

The number of passengers “evicted” due to lack of seats was costing the company €30 million a year, it added.

The 220 million number isn’t in fact the cost to the company, it’s the benefit to the workers. The trains run on scheduled timetables. They run full or empty, they run whether the workers get freebies or not. The marginal cost of filling an otherwise empty seat is, roughly you understand, zero.

The 30 million is the actual cost. That’s what is lost as workers fill seats that could be sold instead.

It’s important to identify costs. Other wise, if you don’t, you’ll end up in that fantasy land where council housing isn’t subsidised and the like.

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John B
John B
4 years ago

Are you sure?

Isn’t the revenue the company would receive from those passengers with free tickets who would otherwise pay, a loss?

Is it not the case that it would only not be a cost, if those passengers with the free tickets would not have travelled by train if they had had to pay?

Therefore the true cost is: displaced fare-paying passengers plus those with free tickets who otherwise would have paid, thus more than the 30€ million. Not so?

4 years ago
Reply to  Tim Worstall

Used to have a free transit work pass, take them off people and they typically stop using or cut back on using transit, wife also used to have free rail pass as her father worked for railways. Anecdotal but I’d agree that the ‘lost’ sales is a small %
Similar to now where if I purchase a monthly pass I’d effectively have ‘free’ weekend transit, doesn’t make me use transit more on the weekend than when I don’t buy a monthly pass (e.g. on vacation for part of the month)

Would love your thoughts, please comment.x