Description of the German rail market
The German passenger rail market is split into Regional and Long Distance. The rail infrastructure in Germany is maintained by DB Netz, subsidiary of Deutsche Bahn (DB). Abellio Germany is currently active in the regional passenger rail market which is still dominated by the state-owned Deutsche Bahn (DB Regio). The German regional rail market has a revenue volume of about € 11.1 billion per year and a network covering roughly 673 million train-kilometres per year and has been deregulated since 2003, with responsibility for the organisation of the regional rail market assigned to the 16 federal states of Germany. Each state has its own way of managing its regional market. This has led to the creation of 27 regional passenger transport authorities (PTAs), each of which can adopt a different tendering regime, with a substantial flow of potential concessions.
The Federal Government aims to achieve the 2030 climate targets and will make rail travel more attractive. The goal is to double the number of rail passengers until 2030. An important prerequisite for this is the implementation of the “Deutschlandtakt”, a logistics plan that will see trains run between major cities every half hour. With the Deutschlandtakt, a new, transparent principle of expansion and capacity management for the rail network will be established. Therefore the German state and Deutsche Bahn will invest € 86 billion by 2030 to modernise the rail network. This will increase the performance capacity of rail infrastructure. That causes lots of construction works in the next years with massive impact on both passengers and train operating companies. To put Deutsche Bahn in a position to be able to modernise, expand and electrify the rail network and train system, the German state will increase its equity participation in Deutsche Bahn with an additional € 1 billion annually from 2020 to 2030 (€ 11 billion in total). According to Mofair - Alliance for fair competition in rail passenger transport the capital increase of Deutsche Bahn runs the risk of “massive competitive distortions “, because there can be no assurance that these funds will be exclusively directed towards infrastructure. Mofair expressed concerns to the Federal Government and the Commission of the European Union.
With the increase of the Government funding for local and regional passenger rail services ("regionalisation funds") from 2020, the Federal Government will support the financing of local transport and thus implement another project from the climate package. By means of this additionally provided by the federal government, the 16 federal states have the possibility to order more public transport, making rail services more attractive and thereby increase the number of passengers. It is not yet determined how much of the additional resources will be made available for the regional rail passenger services and how much for example for the infrastructure.
Challenges and projects in the German rail industry exist in the following areas:
Significant improvement of operational quality and punctuality,
Digitisation and automation of railway operations;
Evaluating and changing (existing) transport contracts and the services agreed therein;,
Implement a concept for infrastructure maintenance and renewal with a minimal disruption in timetables.
In Germany, Abellio only has gross contracts with the PTAs, which means that Abellio Germany is paid for its service per train kilometre. The revenue/ fare box risk is allocated to the PTA. On top, inflation risk of certain costs (e.g. employee costs and energy costs) is hedged by indexation formulas in the contracts with the PTAs. Thus, the risk profile of gross contracts is relatively low if operational performance is solid. However, reduction of working hours and additional restrictions for the employer in planning working hours as well as the option for the employee to choose for a wage raise or additional vacation days in new tariff agreements, is resulting in the need for more employees (mainly train drivers and conductors). The resulting cost increase is not properly hedged in the inflation and employee cost index. A workgroup within the PTA- association BAG/SPNV is discussing an adjusted index that properly compensates for the additional staff costs. Due to low unemployment rates in Germany it is difficult in many businesses to find sufficient skilled employees, which results in higher recruitment and training costs. Together with the high level of track works, the lack of frontline staff resulted in increased penalties (lower subsidies) from the PTAs for lower punctuality and train cancellations. It will be crucial for the future of Abellio Germany to solve the issues in the German rail industry regarding the index and non-influenceable reduction in punctuality together with the PTAs and the federal governments. If no solution will be found it will be difficult to realise a reasonable profitable result for the German operations. Based on the current conversations with PTAs we expect to achieve a satisfactory outcome.
Abellio Germany has finalised mobilisation and started operation of 3 new concessions in 2019, being the Ruhr-Sieg Netz 2 (RSN II) and S-Bahn-Rhein-Ruhr (SBRR) in North Rhine-Westphalia and the Stuttgarter Netz (STN) in Baden-Württemberg. Due to the delayed delivery of trains by the manufacturer Bombardier, replacement concepts had to be implemented at STN resulting in a high level of complexity in operations and low punctuality. Only when all trains have been delivered by Bombardier the target punctuality can be achieved.
Late 2018 the decision has been made to adjust our bidding strategy and bid only for opportunities that are well connected to our current operations with real synergy potential and preferably with cross-border opportunities to the Netherlands. However, before we will participate in new bids we will need clarity whether the conversations with our PTAs will indeed lead to a satisfactory outcome with an outlook of a sustainable operation.
Abellio Germany rail concessions
In Germany, Abellio now operates in 4 regions, together operating 9 concessions. In North Rhine-Westphalia (NRW) it operates with Abellio Rail Nordrhein-Westfalen GmbH 5 rail concessions, being S-Bahn Rhein-Ruhr, Ruhr- Sieg-Netz, Der Müngstener, Niederrhein-Netz (NRN) and the Rhein-Ruhr-Express (RRX). In North Rhine-Westphalia and Lower Saxony it operates with WestfalenBahn GmbH the Emsland- und Mittelland-Netz concession. In Mitteldeutschland it runs with Abellio Rail Mitteldeutschland GmbH the Saale-Thüringen-Südharz Netz (STS ) and the Dieselnetz Sachsen-Anhalt (DISA). In southern Germany (Abellio Rail Baden-Württemberg GmbH) lot 1 of the Stuttgarter Netz (STN) started in June with the first operating level and realised level 2 in December 2019. The concessions that are currently being operated are:
Passengers per day (approx.)
Punctuality up to 5 min.
Ruhr-Sieg-Netz 2 (RSN II)
Der Müngstener (S7)
Rhein-Ruhr Express (RRX)
S Bahn Rhein-Ruhr (SBRR)
Emsland- und Mittelland-Netz (EMIL)
Saale-Thüringen-Südhartz Netz (STS)
Dieselnetz Sachsen-Anhalt (DISA)
Stuttgarter Netz (STN)
Total (excl. RSN; expires in 2019)
The concessions in the mobilisation phase are:
Stuttgarter Netz (STN phase 3)