Deutsche Bahn (DB) has just outlined its investment plans for the year. As the next stage in its “New Network for Germany” programme it intends that “around €13.6bn from DB, the federal government and the states will flow into the infrastructure in 2022”. This represents a €900m increase over 2021.
At DB, as is so often the case with railway systems in Europe, there is a struggle between the needs of freight and passenger services, with passenger services usually winning. Most of the 175 projects starting in 2022 are concerned with improving services for passengers, not least renovating the German railways ageing stations. However, there is to be significant investment in new freight capacity, with expansion and electrification of the lines out of the port of Wilhelmshaven, the Berlin to Szczecin line and Karlsruhe to Basel line. Deutsche Bahn is also creating a capacity to handle 740 metre-long freight trains.
Overall, DB states that it is in process of replacing or building 1,800 kilometres of track, 2,000 railway points, 140 bridges and 800 stations.
One of the problems is that Deutsche Bahn does not really have the money for this investment. Its indebtedness is substantial at over €38bn and the state-owned company has taken a severe hit to its finances with revenue down sharply in 2020 and 2021 and profits measured in terms of EBIT (Earnings Before Interest and Tax) negative at €975m. The situation was serious enough before the pandemic to justify asset sales, notably the UK rail subsidiary Arriva. However, both Deutsche Bahn’s management and the German Government are asserting that they will not sell their leading asset, Schenker.
To make things worse the EU has just announced that they have commenced an investigation into DB Cargo, suggesting that Deutsche Bahn Group has been illegally propping-up its rail-freight subsidiary. In a brutal assessment, the EU Competition authorities asserted that “DB Cargo has been persistently loss-making” with the subsidiary only being viable due to “an open-ended profit and loss transfer agreement concluded between DB AG and DB Cargo”.
The financial situation at Deutsche Bahn is not an emergency as the railway has credit and can turn to the German State for subsidy. However, the organisation is financially stressed and needs to restructure dramatically. It is not merely a matter of selling Schenker, as its freight businesses are apparently not viable and must be draining cash the organisation does not have. The implications for Germany’s freight transport market are concerning.
Source: Transport Intelligence, 03 February 2022
Author: Thomas Cullen