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Competition Report 2008 Foreword "Partial privatisation of DB strengthens competition" For more than ten years, the private passenger and freight railways have been in- creasing their market shares from year to year. Overall performance in rail passenger and freight transport has been growing for years as well. This has resulted in rail be- ing able to regain some of the traffic that it had lost to road transport. That was the central mandate given to the railway undertakings in the Rail Reform. The opening of Deutsche Bahn AG for private shareholders, which was also pro- vided for in the Rail Reform, has now come within reach following the Federal gov- ernment's recent decision. Private capital can now be acquired in order to strengthen DB's position in international competition and DB can make the necessary invest- ments – in rolling stock for example – to continue its internationalisation strategy. The recently announced now complete takeover of Geodis – the leading transport and logistics group in France – by the French state railway SNCF for some EUR 600 million shows that there is a continuing trend towards concentration. If DB wants to Hartmut Mehdorn, survive in these markets, it will be vital in the future for it to be able to invest flexibly Chairman of the Board of Management and CEO in growth markets in the same way as its major European competitors. Partial privati- Deutsche Bahn AG sation opens up this opportunity and thus strengthens competition as well. Deutsche Bahn once again demonstrated its ability to stand up to competition last year: It increased both its revenue and profit – in spite of the strike by the GDL (German Train Drivers' Union) without which development would have been even more positive. Since the staff employment conditions and their pay – not only of the train drivers – are so decisive for the success of the company in competition, this seventh DB Competition Report deals with them in great depth. Apart from a compar- ison with other railways, the focus is on our intermodal competitors – that is trucks in particular. The possibility used by many DB customers to shift their transports to other modes at short notice during the strike underlined the dimension of competi- tion among different traffic modes. The existence of this competition had previously been challenged by some advocates of a narrow market definition. The railway undertakings are all pulling together in this competition of the transport modes. They oppose the far more severe regulations compared with road traffic and call for adequate financing of their infrastructure. Eliminating capacity bottlenecks in the railway system – especially in port hinterland traffic – will be one of the decisive factors as to whether the successes of rail can be continued in the future. Sincerely, Impressum Published by: Deutsche Bahn AG, Potsdamer Platz , 0785 Berlin · Oliver Schumacher, Group Spokesman/Head of Corporate Communications (responsible for the contents) Editorial board: Joachim Fried, Group Representative for European Affairs, Competition and Regulatory Affairs Coordination: Helge Sanner, Competition and Regulatory Affairs Consulting/Copy Editing: Alexandra Weiß, Head of Corporate Print Media Photos: Deutsche Bahn AG, except: Kuehne + Nagel (p. 8), EWS (p. ), Hector Rail AB/K. Dudzik (p. 4), R. Eisele/Project Photos (p. 6), Arriva Deutschland GmbH (p. 0), PanBus (p. ), Bilderbox (p. 30), Allianz pro Schiene/Kraufmann (p. 4), R. Woelk/Freelens Pool (p. 45), Usedomer Bäderbahn GmbH (p. 47), Bayerische Oberlandbahn GmbH (p. 48), Flashfilm/Getty Images (p. 51), SBB AG (pp. 52, 57, 59), ÖBB-Personen- verkehr AG, CI & M/H. Eisenberger (p. 55), Veolia Verkehr GmbH (p. 64) Publishing Company: corps. Corporate Publishing Services GmbH, P.O. Box 00, 4000 Düsseldorf Printers: Koelblin-Fortuna-Druck GmbH & Co. KG, Baden-Baden Please submit any suggestions and comments on this report to: email@example.com · All information correct at March 008 Contents Market and Competition Dynamic logistics industry 5 Ongoing strong growth for rail freight 9 New prospects for passenger transport 5 DB Stadtverkehr faces up to the competition No conflicts in working timetable compilation 24 Focus on the workforce 7 Interview Joachim Fried in scientific dialogue with Lars-Hendrik Röller 32 Regulatory Policies Ongoing development of European legislation 37 Regulatory framework defined in court 45 Special Areas of Discussion A look at the Alpine regions 53 Regulation practice not yet settled 60 Discussion of regulatory framework 65 Annex 66 3 The transport and logistics market remains particularly dynamic. Coop- erative ventures and takeovers facilitate access to new markets and generate synergies. In the passenger transport market, the purchase of stakes in foreign companies makes up for restricted growth opportunities in the home market. Cooperation in the high-speed sector leads to numerous benefits for the custom- ers and improves the competitiveness of rail in comparison to air travel. 4 Market and Competition Dynamic logistics industry Encouraged by the ongoing upswing of the global economy, international trade flows have continued to develop positively and the logistics markets have achieved substantial growth due to this environment. Expanding international transport and logistics networks remain a key trend. Despite high oil prices, the global economy continued to flourish. In 2007, growth Driven by expanding goods reached a rate of 3.4 per cent, although it slowed down slightly over the course of the production, the global trade year, especially in the US, where the effects of the property and financial market crisis flows increased by seven became apparent. The pronounced rise in the value of the euro adversely affected per cent, according to the exports in the Eurozone. Once again, Asia was the region with the best performance, OECD. There was a particu- with economic growth rate in China reaching a good eleven per cent, surpassing the larly strong increase in trade already high level of the previous year. According to the OECD, global trade flows between Europe and Asia. increased by seven per cent, driven by expanding goods production. There was a par- ticularly strong increase in trade between Europe and Asia. For 2008, experts again identified the greatest exchange of goods between Asia and Europe, forecasting a total figure of EUR 913 billion. Logistics companies are set- ting up new transhipment terminals to profit from the steadily growing trade flows. Strong growth in trade between Asia and Europe In particular the exchange of goods between Asia and Europe and within both regions continued to grow. BRIC states (Brazil, Russia, India and China) enjoy above-average growth. + 11.5 ³ Europe ¹ + 17.0 ³ + 13.5 ² North America + 13.5 ² Asia ¹ + 18.0 ² + 16.5 ³ 1) Europe excl. CIS countries, Asia excl. Middle East 2) Increase in exports from 2005 to 2006 in per cent (basis: US dollar) 3) Increase in exports between the regions from 2005 to 2006 in per cent (total individual exports, basis: US dollar) Source: WTO World Trade Organization "Time Series" database 5 Container terminals, for example in Singapore, benefit from the growing trade volume. Together with other logistics partners, Deutsche Bahn AG is therefore participating in a Chinese joint venture, based in Beijing, with the key objective of planning, con- structing and operating 8 transhipment terminals and marketing container trains. Other companies are also exploiting the market opportunities in Asia by expanding their service portfolios – FedEx Express, for example, launched a fixed-day collection and delivery service, including customs clearance, specifically for the Asian region in January 008. The world's largest free trade area, planned in Dubai, will also affect the global flow of goods. The Middle East countries are gradually becoming major sales markets for European and American companies. DB Schenker, the transport and logistics subsidi- ary of Deutsche Bahn, also offers transport services between Europe and the Middle East. In June 2007, the first Boeing 747-400F deployed by DB Schenker landed at Frankfurt-Hahn airport en route from Dubai to Ohio, USA. Despite ongoing market The German and European market also harbour further growth potential for logis- concentration, the logistics tics companies. Growth of around eight per cent is predicted for the German market sector is still highly frag- alone in 008. With a revenue volume of more than EUR 00 billion, it is already by mented. far the largest in Europe to date. Vigorous competition between logistics providers The segment of contract logistics in particular – that is the provision of complete services for key accounts on a long-term basis – will continue to expand. The Fraun- hofer Society estimates potential revenues, including warehouse management and transport, at EUR 33 billion in Europe. Contract logistics is particularly attractive for transport companies owing to a high growth potential and intensive customer rela- tions. Nevertheless, competition remains fierce. Shorter product life cycles, shorter contract terms and invitations to tender for services have led to keen competition between the providers. For example, the logistics manager of Braun in Melsungen, a leading manufacturer of appliances and products for the health care industry, states: "We do not wish to become dependent on one service provider, which is why we in- vite international tenders every one to two years." 6 Market and Competition The DB rail freight operators have a Thanks to their international transport networks, global logistics service providers pronounced European focus. More than are in a better position to exploit new market opportunities. According to the market half of all transports are cross-border. analysis conducted by the Fraunhofer Society, the logistics subsidiaries of DB AG rank amongst the five leading providers in the global logistics market, hold third place in the European logistics market and actually rank first in the German market. As in the previous year, Deutsche Post (incl. DHL and Exel) heads the worldwide ranking of the top ten logistics providers with revenues of almost EUR 40 billion. In 006, the revenues of its most important European competitor, Maersk, amounted to just EUR 8.5 billion, in other words less than half of Deutsche Post's revenues. Only the American logistics companies FedEx and UPS, with revenues of more than EUR 30 bil- lion, come anywhere near the world market leader. Wide range of suppliers, with SMEs alongside global players The expanding logistics market has triggered enormous demand which benefits not only global players, but also SMEs. These frequently concentrate on special market segments, such as pharmaceuticals. Some service providers, which are linked to a Top ten global parent company but operate independently in the market, such as VW Logistics or logistics players incl. the Metro company MGL, compete with the largest names in the industry. A further mail and express 60,000 firms are active in the German logistics sector, which is meanwhile the third Logistics sales worldwide 2006 largest industry in the country. Despite a strong market consolidation process with (EUR billion) a high number of shareholdings, takeovers and joint ventures, the logistics sector as a whole remains highly fragmented. The logistics business units of DB AG, although Deutsche Post 1) 39.9 they lead the German market according to the Fraunhofer Society, account for a Germany market share of less than three per cent in terms of the total market for outsourced UPS 34.9 logistics services. In the air and sea freight sector, concentration is more pronounced. USA Deutsche Post holds a market share of 5 per cent of air freight, while Maersk accounts FedEx 32.3 USA for an impressive share of 29 per cent of sea freight. Maersk 18.5 Ongoing globalisation also leads to a steady increase in demand for transport. In Denmark addition to the transport distances, the worldwide transport volumes have been grow- Deutsche Bahn 2) 17.0 ing since 005, which has led to capacity bottlenecks and waiting times at terminals Germany and depots before cargo can be handled and distributed onwards from the major Chinese Railway 13.0 China European ports. This also affects the hinterland transport operations by road, rail and RZD 12.4 inland waterway. Russia NYK Line 12.3 Competitive pressure makes higher efficiency a must Japan Union Pacific 11.8 USA Increasing labour and energy expenses in 007 have raised the cost of surface trans- Nippon Express 11.4 port substantially. Productivity improvements alone are unable to compensate for Japan these increases, as diesel already accounts for roughly a quarter of the total transport Total top 10 203.5 costs. Surface transport prices will therefore continue to rise. Hugo Fiege, co-owner of the Fiege Group, predicts an average price increase of between four and six per cent 1) Including DHL and Exel; 2) Rail Freight for the industry as a whole. Transport and Logistics business fields At the same time, competitive pressure is forcing logistics companies to operate Source: "TOP 100 in European Transport and Logistics Services 2007", Fraunhofer Centre more efficiently in order to offer their customers worldwide transport services at for Applied Research on Technologies for the Logistics Service Industries (ATL) 7 The Swiss logistics group Kühne + Nagel attractive prices. Many logistics specialists are relying on organic growth as well as increased its surface transport activi- mergers. Expansion into upstream and downstream markets also continued in 007, ties in 2007. which allows the companies to distribute the costs of transport and infrastructure more evenly and thus generates vital competitive advantages. Customers benefit from lower unit costs and shorter journey times. Tapping into new markets and creating synergies Mergers can also help companies to penetrate new markets and exploit synergies resulting from complementary business units. In addition to maritime transport, the Maersk shipping company meanwhile also offers seaport hinterland rail services Competitive pressure forces through its subsidiary European Rail Shuttle. Forwarders who previously ordered logistics companies to operate services from external transport companies are now systematically buying transport more efficiently. operators. The Swiss logistics group Kühne + Nagel expanded its surface transport activities in 2007 by taking over G. L. Kayser and the Cordes and Simon Group. The company has budgeted a sum of between EUR 400 and 500 million for takeovers in the surface transport market up to the year 2009. Lufthansa and Deutsche Post have set up a joint airline for the transport of CEP consignments (courier, express and parcels) and air freight. Smaller logistics providers are also keeping the market in movement: with the takeover of the Interspe Hamann Group in 006, Rhenus boosted its revenues by 90 per cent and was thus able to secure a position among the top ten logistics services providers in Germany. Integration processes along the value chain Terminal Contract CEP 1) Air Sea Rail Road (port) logistics DHL Deutsche Bahn RZD Kühne + Nagel SNCF Maersk own transport activities activities as forwarder no activities planned or already executed expansion of activities 1) Courier, express and parcels Source: DB data 8 Market and Competition Ongoing strong growth for rail freight The freight transport market again enjoyed strong growth of around seven per cent in 2007. Rail profited from this dynamic trend. As in 2006, competitors managed to sharply increase their traffic performance. In 007, the freight transport market in Germany (rail, After two years of relatively weak growth, inland ship- road, inland shipping and pipelines) achieved strong ping increased its traffic performance by 1.4 per cent in growth of around seven per cent. The dynamic trend of 2007. Traffic performance was initially strong but gradu- the previous year continued, despite the curbing effects ally slowed down over the course of the year. The posi- of a strong euro exchange rate, marked increases in en- tive effects of the economic upswing were counteracted ergy prices and capacity bottlenecks across all transport by negative effects due to strong dependence on natural modes. factors such as water levels. The sector also suffered In the road haulage market, which comprises both from dispatching problems at the ports and the sharp German and foreign trucks inclusive of cabotage trans- rise in gas oil prices. Due to the strong increase in traffic ports in Germany, traffic performance in 2007 increased performance by road and rail, inland shipping was unable by approximately eight per cent year-on-year. Foreign to maintain its market share, which fell below the ten per trucks, which dominate the cross-border segment, again cent mark for the first time. achieved higher growth than their German competitors. On the whole, rail freight enjoyed satisfactory growth, Whereas the impetus from the economic environment had with an increase of 7. per cent to 4.6 billion tonne- an overall positive effect, this trend was impaired by rising kilometres (tkm). Domestic transports were up by 6.5 costs (especially diesel prices and labour costs owing to per cent, cross-border transports by 7.7 per cent, while new rules governing driving hours and rest periods). Road the increase in transit traffic was even double-digit (12.8 transport increased its market share to 70.5 per cent. per cent). With growth of more than five billion tkm 9 Economic environment The upturn of the German economy continued in 2007, although growth was at a slightly lower level than in the previous year. Following slower expansion of the global economy and the strong euro, growth rates for exports also tailed off. As a result of the significant increase in VAT, do- mestic consumer demand slowed down. Domestic and foreign demand, however, remained at a high level. Good sales and earnings prospects for the companies combined with good capacity utilisation also led to a sharp increase in investments in equipment. Investments in construc- tion projects also continued, although at a slower pace. (+19.1 per cent), the "special freight" segment, which the fourth quarter of 007 and the consequences of the includes containers, again proved to be a central growth strikes. DB's competitors succeeded in raising their traf- driver. Following its impressive increase of 0.8 percent- fic performance by 28.7 per cent year-on-year. In 2007, age points in the previous year, rail's market share re- their share of total rail freight transport in Germany mained constant in 007. amounted to almost 0 per cent. In addition to domestic transports, DB's competitors achieved particularly high Competitors continue to expand their market shares growth in cross-border transport, a result of the ongoing expansion of their international business activities. DB's The DB subsidiaries which operate in the rail freight mar- competitors hold a particularly strong market position ket in Germany continued their positive performance in in sectors such as combined transport, chemical and 2007 with an increase of 2.9 per cent. This upward trend mineral oil products and construction materials. They are was curbed by the downturn in crude steel production in increasingly also improving their market shares for goods such as agricultural products, animal feed and the auto- motive segment. This trend once again underlines the fact that competition is working well in Germany. Modal split: rail defends its market position In its 007 Market Observation Report, the Federal (per cent, basis: traffic performance, values rounded) Freight Transport Office (BAG) further confirms this as- sessment, stating that increasing competition is reflected 2.9 2.8 2.9 2.6 2.4 in unrelenting downward pressure on prices, despite in- 10.9 11.2 11.1 10.3 9.8 creasing demand and the resulting capacity bottlenecks. The incentive for private railway undertakings to gain a foothold on the market by offering low prices is particu- larly high. The BAG confirmed the incumbent's reaction to this challenge: "While private railway undertakings 70.2 69.9 69.6 69.8 70.5 (RU) were able to respond more flexibly and quickly to customer requirements in many cases in recent years and therefore win business from the former monopolists, the latter are now increasingly trying […] to regain lost ground." 16.0 16.1 16.5 17.3 17.3 Trend: establishing international networks 2003 2004 2005 2006 2007 1) rail road 2) inland shipping long-distance pipelines The liberalisation of the cabotage segment on January 2007 removed the final legal obstacle for a truly Euro- 1) Estimate; 2) German and foreign trucks (incl. cabotage transports in Germany) pean rail freight transport market. In actual practice, Sources: Federal Statistical Office, DB data foreign RUs have had access to the German rail network 0 Market and Competition Competitors increase their traffic performance by almost 30 per cent Deutsche Bahn also achieves good growth. Traffic performance in rail freight transport since 1994 – for example by establishing a subsidiary in (billion tonne-kilometres, figures in brackets show Germany. However, the extent to which competitors are year-on-year change in per cent) participating in international transport flows and com- 22.5 peting in each other's home markets has reached a new 120 17.5 (+28.7) (+27.9) dimension. For example, the Swedish RU Hector Rail, 13.7 8.8 subsidiary of Samskip shipping company, is currently 100 5.9 (+49.2) (+55.9) (+52.6) planning through services from Sweden to Germany via 89.5 92.1 (+2.9) Denmark, which include the transport of intermodal car- 80 79.2 83.1 81.7 (+9.5) (+4.9) (-1.7) riers such as containers between these countries. The (+2.6) private railway company ITL Benelux BV operates on 60 the Dutch rail network since September 007, providing services from Rotterdam to Prague three times a week. 40 In October 007, Rurtalbahn also received a licence to offer rail transport in the Netherlands. The company 20 transports magnesium lime between Veedam and Co- logne. TX Logistik, in which the Italian national railway 2003 2004 2005 2006 2007 Trenitalia holds a 5 per cent share, is planning to in- crease service frequency and capacity on the Italy–Ros- Market share of DB and its competitors tock–Trelleborg route to up to five pairs of trains per (per cent) week. Together with Maersk shipping company and the terminal operator Eurogate, the company also holds a 6.9 9.6 14.4 16.4 19.7 share in boxXpress, which has expanded its market share 100 93.1 90.4 in the seaport hinterland transport market over the past 85.6 80 83.6 few years. Rail Cargo Austria (RCA) intends to increase 80.3 its services on the Graz–Neuss route to six departures 60 per week. All of these examples illustrate the success of newcomers, particularly in international transport mar- 40 kets. The trend of establishing international networks con- 20 tinued in 007. A consortium led by RCA acquired the freight transport division of the Hungarian state railway 2003 2004 2005 2006 2007 MAV. In June 007, DB AG took over the largest British freight company English Welsh & Scottish Railway Lim- DB 1) other railway undertakings ited (EWS), as well as the Spanish transport and logistics 1) Railion Deutschland and RBH Logistics as from 2006 service provider Transfesa. As a consequence, DB AG can Source: Federal Statistical Office and DB data now offer its customers a direct link to the transport and In June 2007 DB AG took over EWS, the largest British rail freight company. logistics markets in western Europe and on the south- Deutschland AG to intensify its existing cooperation west corridor. Moreover, EWS is also active – and highly agreements and enter into new ones. Eurasia Rail Logis- successfully so – in the French market through its sub- tics, for instance, the multilateral cooperation project sidiary Euro Cargo Rail. Since January 008, EWS has set up by Railion with the Russian, Polish and Belarusian tripled the number of combined transport trains it offers state railways, is aimed at facilitating access to the mar- through the Channel Tunnel. kets in Poland and Russia. On 1 January 2008 Dillen & Le Jeune (Belgium) and The positive trends in the procurement market have Crossrail AG (Switzerland) merged, thus forming one of also contributed to competition in rail freight. Virtually the largest private providers of pan-European transport all the services required can meanwhile be obtained in capacities, with currently 37 main-line locomotives in the market and it is apparent that the RUs are making operation. The train drivers of the new company are the most of the offers available: VTG AG, the leading trained and licensed to operate in the Netherlands, Bel- freight wagon lease company, generated EBITDA of gium, Germany, Switzerland and Italy. In February 008, EUR 137.1 million in 2007 from the lease of its fleet of the French transport group Veolia Cargo announced the 47,800 wagons, had a capacity utilisation in the leased takeover of the freight railway Rail4Chem. Veolia is also wagons sector of almost 94 per cent in the year 2007. one of the main competitors of DB AG in the German pas- In addition to rolling stock, the services offered include senger market. The transaction is subject to approval by specialist personnel as well as technical support and the antitrust authorities. The purchase will enable Veolia management of third-party wagon fleets. Cooperative to double its activities in the German rail freight market. ventures and mergers further facilitate the provision of Rail4Chem also handles transports between Poland and necessary equipment. France, Italy and the Netherlands and will therefore pro- In 007, several freight wagon manufacturers, ship- vide Veolia with growth potential in important European pers and repair depots joined forces in the "Cargo Rail markets. Service Center" (CRSC) project. The cooperation ensures that defective parts such as wheel-sets and brake com- Market barriers despite liberalisation ponents can be replaced at the next available location at fixed prices. Such services also reduce the investment Takeovers and cooperative ventures are also an option expenditures of private freight railway companies. for overcoming market barriers, which continue to exist despite official liberalisation of the markets (cf. Annex, Customers power aggravates pressure on prices page 68). Cross-border rail freight transports, for exam- ple, are still hampered by change of driver, formalities at Finally, the bargaining power of some of the RUs' cus- the border and different safety systems and regulations. tomers implies that there is extreme pressure on prices Cooperation enables companies to offer certain services in the rail freight market, a situation which is aggravated at a lower cost. Customers also benefit from integrated by the high fixed costs in this sector: a stable level of transports in the form of lower prices, shorter trans- demand is necessary to guarantee sufficient capacity port times and better quality, reason enough for Railion utilisation and thus economic viability. This power on Market and Competition Increase in rail transport, particularly on the main corridors The increase in rail transport volumes concentrates on the main north-southbound corridors as well as the hinterland of the major European western and northern ports. The transport forecast until 2015 predicts a volume of up to 150 billion tonne-kilometres per annum for freight transport. In the infrastructure sector, train-path kilometres showed an underproportional growth of 1 billion per annum, owing to increased capacity utilisation by the transport companies. Infrastructure utilisation in 2004 Infrastructure utilisation in 2015 (Forecast) Flensburg Flensburg Kiel Kiel Rostock Rostock Lübeck Lübeck Emden Schwerin Emden Schwerin Hamburg Hamburg Neustrelitz Neustrelitz Bremen Bremen Stendal Berlin Stendal Berlin Hanover Hanover Osnabrück Osnabrück Magdeburg Frankfurt/O. Magdeburg Frankfurt/O. Emmerich Brunswick Emmerich Brunswick Münster Münster Duisburg Halle Duisburg Halle Dortmund Dortmund Düsseldorf Kassel Leipzig Düsseldorf Kassel Leipzig Erfurt Erfurt Cologne Dresden Cologne Dresden Aachen Aachen Fulda Zwickau Fulda Zwickau Gießen Gießen Koblenz Koblenz Frankfurt/M. Frankfurt/M. Trier Mainz Würzburg Trier Mainz Würzburg Mannheim Mannheim Nuremberg Nuremberg Saarbrücken Karlsruhe Regensburg Saarbrücken Karlsruhe Regensburg Stuttgart Stuttgart Passau assa u Ulm lm Augsburg Augsburg Munich Salzburg Munich Salzburg Freiburg Freiburg Basel Basel Routes with particularly high capacity utilisation Examples: Forecast 1 Hamburg–Hanover +26 % 2 Bebra–Fulda–Frankfurt +22 % 3 Frankfurt–Mannheim +20 % 4 Karlsruhe–Basel +20 % Source: DB data 3 Hector Rail is planning through transports from Sweden to Germany. the part of the customers results from their option of tors. The required infrastructure capacity will have to in- choosing alternatives, not only between intramodal com- crease as a result of the growth in demand for rail freight petitors, but also between the different transport modes. transport (cf. map on page 3). Capacity utilisation is Furthermore, not only do customers integrate forwards particularly high on the north-southbound corridor, into the transportation market, but they are also increas- with emerging bottlenecks on the Hamburg–Hanover, ingly putting transactions up for tender. The strike in the Bebra–Fulda–Frankfurt and Frankfurt–Mannheim lines, rail freight market once again clearly showed that cus- although other lines – e.g. for trans-Alpine transports – tomers in the automobile sector and its supply industry are also running almost at full capacity. This situation are capable of switching their chosen form of transport is aggravated by the fact that other transport modes from rail to road at short notice. The sharp increase in also face infrastructure bottlenecks, which could thus traffic performance by competitors, which were able to become a limiting factor for the entire logistics industry. take over large proportions of the traffic volume dur- Infrastructure that can cope with high demand is vital ing the strikes, proved that customers are prepared to for the success of RUs. If the railways are to handle the switch providers. forecasted transport increases until the year 05 on the The Federal Government assumes that long-distance major corridors, the most severe bottlenecks will have to freight traffic performance will increase by 74 per cent be eliminated. Both national and European initiatives are between 004 and 05. An increase in transport vol- currently being planned to remedy this situation. In view umes equivalent to 300 freight trains daily is predicted of the forecasted growth in transport volumes, however, for the ports of Hamburg, Bremen and Wilhelmshaven it is not certain whether the measures and instruments alone by the year 05, according to Detthold Aden, which have been adopted to date will be sufficient to President of the Association of German Sea Port Opera- raise capacities to the extent necessary. 4 Market and Competition New prospects for passenger transport 2007 saw slight growth in traffic performance by rail passenger transport. While the increasing share of cross- border long-distance transports could not quite match the previous year's performance, regional transport reported a moderate increase. According to estimates by Deutsche Bahn, demand in strike threats, rail passenger transport by the DB group the German passenger transport market in 007 almost managed to maintain the year-on-year traffic perform- matched the previous year's level. This market includes ance level in the second half of 007. private motorised traffic, rail, public road transport and DB assumes that non-DB RUs, which operate primarily domestic air traffic. The stabilisation is attributable pri- in the regional market, enjoyed a strong increase in de- marily to the motorised traffic segment, which was not mand. That growth was slightly lower than 006, as the affected by the sharp increase in fuel prices until the competitors launched fewer new services after winning final third of 2007. That segment suffered a decrease in tenders. The estimated share of competitors in the local traffic performance (in passenger-kilometres, pkm) of ap- rail passenger market in terms of traffic performance was proximately minus 0.5 per cent, which was lower than in 9.5 per cent in 2007, compared with just 8.9 per cent the the previous year, and its market share also fell slightly. year before. Despite the positive economic climate, growth impe- Of the other transport modes, domestic air traffic tus for rail passenger transport was limited, especially reported the strongest increase, with growth of 7.7 per as private consumption was slightly down. Nevertheless, cent. That improvement was based primarily on the rail succeeded in raising traffic performance by approxi- wider range of products offered in the low-cost air mar- mately 0.4 per cent in 007 and slightly improved its ket. Threatened and actual strikes at Deutsche Bahn market share. Despite the negative effects of strikes and led to uncertainty for many customers, who opted to 5 Economic environment Private consumption was stagnant, amongst other things because of the VAT increase, the higher rate of inflation and the increased share of private savings. There was a noticeable increase in the number of gainfully employed, in particu- lar employees paying compulsory social security contributions, while unemployment was down by approximately 1.6 percentage points to an aver- age of 8.7 per cent for the year. Declining growth in rail passenger transport fly instead, so that demand for flights was up in the last quarter of the year. (Year-on-year change in per cent; basis: passenger-kilometres) Public road transport, on the other hand, remained 2006 2007 virtually constant in 007. A slight decline in occasional traffic was compensated by a slight increase in scheduled Total rail 3.8 0.4 bus, tram and underground services. Traffic performance DB 3.1 0.0 by the DB bus companies was substantially up year-on- year owing to the re-inclusion of a bus company in the Competitors 25.0 8.2 DB Group's consolidated accounts. Source: DB data European prospects for long-distance transport Although DB Fernverkehr AG was unable to fully match the previous year's performance in 007, it has set itself clear targets: in conjunction with other European rail- ways, DB Fernverkehr plans to achieve future growth in Slight increase in rail's market share the cross-border sector. (Share of modal split in per cent; basis: traffic performance, figures rounded) Last year, Deutsche Bahn reported a decrease of 0.9 per cent to 34.1 billion passenger-kilometres in the 1.1 1.1 1.1 1.2 1.3 long-distance sector (inclusive of motorail and night 8.9 9.0 9.0 9.2 9.2 services), despite positive effects of special campaign fares, ongoing optimisation of the timetable, the launch of faster connections to Paris and the fact that the ef- fects of new infrastructure inaugurated in 006 (north- south tunnel in Berlin, Nuremberg–Ingolstadt–Munich 81.7 81.3 80.9 80.2 80.0 high speed line) were now apparent for the whole year. There were also increasing passenger figures for the high- speed lines inaugurated the year before (Cologne–Rhine/ Main and Berlin–Hamburg). However, that good impetus was overshadowed by negative effects, such as hurri- 8.3 8.6 8.9 9.4 9.5 cane "Kyrill", which put many railway lines in Germany temporarily out of operation, and the uncertainty for 2003 2004 2005 2006 2007 1) the customers caused by the industrial action of the Ger- rail private motorised traffic public road transport air man Train Drivers' Union (GDL). Accordingly, it failed to match the traffic performance of the preceding year, also 1) Estimate; Sources: Federal Statistical Office and DB data because 2006 had benefited from one-off effects result- 6 Market and Competition Deutsche Bahn and SNCF: high-speed traffic between Paris and southern Germany. ing from the FIFA World Cup. There was a particularly one pair of trains per day running between Hof and Ber- sharp slump in traffic performance by the night and mo- lin, and the seasonal trains operated by Georg Verkehrs- torail services run by DB Fernverkehr, not least because organisation between Berlin and the Swedish city of these product portfolios had been streamlined. Malmö. The products offered by competitors of DB Fern- According to a provisional assessment based on the verkehr totalled 745,000 train-kilometres in 007, which data of the Federal Statistical Office, traffic performance was also a slight downturn. This could be attributed to by competitors in the long-distance sector almost dou- restrictions of InterConnex services on the Leipzig–Ber- bled, to a total of approximately 60 million passenger-kil- lin–Rostock line owing to construction work. There was ometres. Nevertheless, the market share of competitors no change in the services offered by Vogtlandbahn, with is still negligible. No growth in long-distance sector Railways wish to improve their modal share In 2007, DB Fernverkehr was unable to beat the previous year's performance After launching high-speed services between Paris and southern Germany, (traffic performance in billion passenger-kilometres) Deutsche Bahn and SNCF plan to gain additional market shares over the medium term (modal split; basis: passengers carried; per cent) 35 33.6 34.5 34.1 Frankfurt–Paris Munich–Paris Stuttgart–Paris 31.6 32.3 30 30.0 26.6 23.5 25 33.6 43.8 50.7 20 15 41.7 50.2 226 52.2 27.4 61.4 224 223 10 210 37.0 204 5 28.3 28.8 26.4 14.2 12.2 11.9 2003 2004 2005 2006 2007 1998 2010 1998 2010 1998 2010 Forecast Forecast Forecast traffic performance by DB Fernverkehr traffic performance per operating unit in (pkm/t-pkm) rail road air Source: DB data Source: SNCF/DB market survey 7 Railteam Railteam was formed at the beginning of 2007 by seven Euro- pean high-speed traffic providers, including DB Fernverkehr. The joint venture provides a common marketing and sales platform for the high-speed services offered by the member railways. The first stage defined a Railteam high-speed network with 60 calling points. Railteam standardises tickets and fare structures, defines comfort and service standards, harmonises compensation regulations and grants special customer benefits. Railteam would welcome other rail companies to its ranks. Deutsche Bahn and its French partner company Société ICE 3MF (multi-system France), which also reduced the nationale des chemins de fer français (SNCF) hope that journey time between Paris and Frankfurt am Main by the new high-speed services between Paris and south- more than two hours, to three hours 48 minutes. These ern Germany inaugurated in June 007 will lead to in- noticeably reduced journey times are possible because creasing passenger numbers and market shares. On the both these high-speed lines use the LGV Est européenne southern route from Paris to Stuttgart via Strasbourg, high-speed line between Paris and Beaudrecourt which the French high-speed train TGV POS has reduced the was inaugurated in spring 007, enabling them to run at journey time by more than two hours, to just 3 hours 39 speeds of up to 320 kilometres per hour. Line upgrading minutes. The northern route between Paris and Frank- projects in Germany have also contributed to the shorter furt am Main via Saarbrücken is operated by the German journey times. Railteam – the new European way to travel The harmonisation of high-speed railways creates genuine added value for the customer. The joint objective of the Hamburg Railteam member railways is to make international travel as simple and comfortable as possible for the customer. Hanover Berlin Amsterdam Schiphol London Dortmund Rotterdam Antwerp Duisburg Essen Brussels Cologne Lille Liege Frankfurt Airport Frankfurt Luxembourg Roissy Mannheim CDG Reims Metz Karlsruhe Nuremberg Paris Stuttgart Le Mans Strasbourg Rennes Marne- Massy la-Vallée Nancy Munich Linz Angers Tours Freiburg Vienna Nantes Salzburg Dijon Basel Poitiers Zurich Innsbruck Berne Lausanne Angoulême Geneva Lyon Valence Bordeaux Railteam route/station Nimes Avignon Line opening soon Montpellier Aix-en-Provence Marseille Brussels Railteam hub Source: DB data 8 Market and Competition Local rail traffic performance increased to 44.9 billion pkm in 2007. A study commissioned by SNCF and DB forecasts sub- (cf. chart on page 0). The market share of competitors stantial increases for the railways in long-distance pas- in 006 was therefore . percentage points higher than senger transport between Paris and Frankfurt am Main, previously stated. Stuttgart and Munich, predicting that their market shares in terms of intermodal competition will increase from 5 Higher performance despite lower volume ordered per cent of passengers in 1998 to as much as 28 per cent in 2010. It is meanwhile apparent that the joint efforts An essential factor for assessing competition in local rail of the railway undertakings are enabling them to suc- transport is the trend for train services ordered by the ceed against the airlines in this market, as the number of Federal Laender and the ordering authorities. Cutbacks daily flight connections from Stuttgart to Paris has been in the regionalisation funds in 006 and 007 led to a reduced by a third, from twelve to eight. Reliable framework for local transport Although the Federal Laender cancelled train services Competitors continue to expand their market shares to compensate for cutbacks in regionalisation funds, de- There was a sharp drop in the train services ordered from Deutsche Bahn owing to cancellations by the Federal Laender and lost tenders, leading to a mand for regional transport was nevertheless up in 007. further increase in the market share of competitors (train services in Moreover, the amendments to the Regionalisation Act, in million train-kilometres). which the legislator specified the financial framework for local rail passenger transport until 04, were adopted 700 at the end of last year. With 44.9 billion passenger-kilometres, traffic per- 61 75 84 97 103 600 formance by local rail in 007 was approximately ,4 per 558 553 549 540 500 530 cent up year-on-year. DB achieved traffic performance of 40.6 billion pkm, which is 0.8 per cent more than in 400 006. Competitors accounted for approximately 4. bil- lion pkm in 2007 as against 3.9 in 2006. The share of 300 non-DB companies in total local rail traffic performance 16.3 15.2 rose from 8.9 per cent in 2006 to 9.5 per cent in 2007. 200 11.9 13.2 9.9 At the end of last year, the Federal Statistical Office is- 100 sued a statement that its figures for traffic performance by competitors had to be corrected as from 006. This 2003 2004 2005 2006 2007 subsequent report of transport handled by other compa- nies which had not previously been taken into account DB competitors market share of competitors (per cent) led to a far higher figure for the traffic performance by Source: DB data competitors and consequently to a higher market share 19 Arriva with its subsidiaries is one of the major competitors of DB in the local rail transport market. decline of 0.6 per cent in train services and the 637 mil- 29.0 million train-kilometres in 2007. 27.3 million train- lion train-kilometres performed in 006 fell to 633. The kilometres of that figure were awarded in the form of train services provided by DB were actually down by .8 tenders, of which Deutsche Bahn won 19.9 million train- per cent, from 540 to 530.5 million train-kilometres. kilometres, which is equivalent to almost 70 per cent. Although the ordering public authorities also cancelled At the end of 007, the Federal government and the train services from DB's competitors, these companies Laender governments agreed on a financial framework nevertheless raised their performance from 97 to 103 for regional transport until the year 04. The amended million train-kilometres because they took over train Regionalisation Act will still uphold the previous distri- services from DB. In 007, competitors held a market bution key between the Federal Laender. From the initial share of 6.3 per cent of the total train-kilometres com- figure of EUR 6.675 billion in 2008, regionalisation funds pared with 5. per cent the previous year. are to increase in a straight line by .5 per cent per an- The Federal Laender and their ordering authorities num as from 2009 and the requirements will be reviewed awarded new transportation contracts for approximately again in 04. Secure financial framework until 2014 Local rail transport continues to grow At the end of 2007, the Federal government and the Laender governments Both Deutsche Bahn and its competitors increased their traffic performance agreed on the amendment of the Regionalisation Act. The funds will rise by in 2007. The competitors accounted for a share of almost ten per cent of local 1.5 per cent per annum as from 2009 (in EUR billion). rail transport in 2007 (traffic performance in billion passenger-kilometres). 8 45 7.30 2.2 2.3 3.9 4.2 7 7.05 7.08 7.19 40 1.7 6.88 6.98 6.71 6.68 6.78 40.3 40.6 37.9 37.9 38.9 6 35 5 30 4 25 8.9 9.5 3 20 5.6 5.7 4.3 2 15 1 2003 2004 2005 2006 2007 2006 2007 2008 2009 2010 2011 2012 2013 2014 DB competitors market share of competitors (per cent) Source: DB data Source: Federal Statistical Office (inclusive of amended figures as from 2006) 0 Market and Competition DB Stadtverkehr faces up to the competition The takeover of the Danish company Pan Bus in 2007 was an important milestone for the international expan- sion of the urban transport business unit. Its activities in foreign markets are also a consequence of the legal situation in its home market. Ongoing liberalisation and harmonisation are leading to the increasing integration Now that numerous foreign of the European local transport markets. While numerous foreign companies have companies have gained a gained a foothold in the German market and are expanding powerfully, access to the foothold in Germany, foreign markets of other Member States is becoming an increasingly attractive option for DB markets are becoming an Stadtverkehr. In autumn 007, the idea of internationalising the bus activities of the increasingly attractive option urban transport business unit bore the first fruit, with the purchase of the Danish bus for DB Stadtverkehr. company Pan Bus in Viborg. Pan Bus is one of the oldest urban transport companies in Denmark and runs urban and regional services in Jutland, urban transport in Viborg and regional services in the Limfjord region with a workforce of 120 and a fleet of 58 buses. The combination of Pan Bus and DB Stadtverkehr has created a powerful entity which will not only be able to perform successfully in the tender market of the Jut- land region, but which also plans further expansion from that basis. The concept has already proved successful, as the company won the Silkeborg tender for urban and regional transport, involving 8 vehicles and approximately 60 employees, just a few weeks after the takeover and had Silkeborg urban services already up and running smoothly by December. Foreign local transport markets are now an increasingly important element in the portfolio of the urban transport business unit. In a European comparison, liberalisation of the Danish market has already made good progress. After ten years of volatile competition, the transport experts now anticipate a phase of consolidation and stable market prices. This trend will be promoted by a government reform which has led to much larger local authorities. This will mean that the lots up for tender will be larger, a situation which creates great potential espe- cially for powerful and efficient companies. The conurbation areas of Copenhagen and Aarhus are characterised by high growth rates and are therefore interesting for both light rail projects as well as bus services. As the competitive situation in Sweden is similarly dynamic, the Scandinavian local transport market as a whole offers attractive opportunities. In addition to its commitment in northern Europe, the urban transport business unit's international focus also includes cross-border services to France, Benelux, the Czech Republic, Austria and Switzerland. In 007, these services generated revenues of more than EUR 3 million for the Group. By focussing on the Danish market and simultaneously pursuing activities in other European markets, the urban transport business unit continues to pursue its strate- gic objective of ranking amongst the top three international providers in Europe. Its good economic performance abroad gives DB Stadtverkehr a more independent and stronger competitive position in its home market, which still remains the major venue for its business activities. National antitrust legislation encourages new entrants The company's commitments outside the German market are also a consequence of the legal situation in Germany. The ruling of the Federal High Court of Justice on the joint venture intalliance founded by DB AG and üstra Hannover has recently made it far more difficult for DB AG and municipal transport companies to achieve growth in the local public transport market (cf. 007 Competition Report, page 0). European competitors profit from the weakened market position of German companies, as many of them have recourse to backing from financial investors or state-owned companies to fund their operations in new markets. This is confirmed by transactions during 2007, such as the purchase of a stake in BENEX by Babcock & Brown, the takeover of SMEs by FirstGroup and further acquisitions by Veolia and Arriva. Municipal transport companies and SMEs are poorly equipped to counter such moves. The urban transport business unit endeavours to remedy that situation by means of cooperative models, integration projects and joint ventures, working to- gether with both municipal as well as private small and medium-sized transport com- panies. The models range from joint operations planning to repair depot cooperatives right through to drawing up joint plans for transport services. For SMEs in particular, this form of cooperation is a promising alternative. Market and Competition However, that type of partnership appears to be at risk again owing to the new EU Regulation 370/07/EC on local public transport (cf. chapter "Ongoing development of European legislation"). The regulation prescribes "self-provision quotas", in that a "significant part" of the transport volume put up for tender has to be provided by the actual transport company to which the contract is awarded, which will then be per- mitted to commission subcontractors only up to a limited "significant" extent, which however is not specifically defined. This means a substantial limitation of the scope for cooperation, so that the orders available for small and medium-sized transport companies can be expected to fall. As a result, an increase in costs for the provision of traffic performance can be anticipated, contrary to the actual objective of the Regulation. This will apply particularly in those areas where small and medium-sized enterprises have in the past provided transport services at low costs and without any loss of quality. Increasing competition for public road transport outside the cities Owing to the above developments, the competitive situation continued to change in 007, with market trends determined primarily by the local transport policies of the individual Federal Laender. Hesse is still the Land which makes most use of tenders as an instrument to promote competition. In the meantime, Schleswig-Holstein also makes increasing use of competitive tenders to award transportation contracts, and Laender such as Saxony-Anhalt and some local authorities in North-Rhine Westphalia have also opted for that procedure. In 007 alone, DB Stadtverkehr participated in around 40 tenders, most of which were placed in Hesse. The DB Stadtverkehr subsidi- ary Autokraft successfully took part in the tender and won the contract for transport services in the rural district of Dithmarschen in Schleswig-Holstein. In comparison, no tenders are held for services ordered by the municipal authori- Municipal authorities can ties, most of which award the contracts directly to their own transport undertakings. still award transportation That option is still expressly permitted under the new local transport regulation, contracts directly to their which means that approximately 80 per cent of public road transport is exempt from own transport companies. competition. At the same time, however, there is increasing competition for services outside urban areas, the core business segment of DB Stadtverkehr. Overall, it can be seen that cutbacks in public spending combined with increasing competition outside the cities will shape the future of public road transport in Ger- many. Although the market players are faced with new challenges, these also pose new opportunities. Foreign investors in particular can take over SMEs which come under more and more pressure as a result of the new market conditions. Despite the limited opportunities for profiting from this market trend, performance by the DB ur- ban transport business unit improved yet again last year. Serious consequences are meanwhile emerging as a result of the contract awarding process implemented in Hesse, where responsibility for essential business processes such as compiling timetables and fare configuration, customer information and qual- ity management is increasingly being shifted from the transport undertakings to the public authorities. Most of the contracts for the remaining actual transport services are awarded in the form of tenders, which are regularly won by companies which pay the lowest wages and have the most optimistic expectations – in some cases, with fatal consequences: in some tender procedures, the revenues did not even cover the costs of the services to be provided and several companies – especially SMEs – have meanwhile actually gone bankrupt. As the companies will no longer be able to submit such bids in future, the prices tendered for these services will increase again over the medium term. 3 No conflicts in working timetable compilation In 2008 the working timetable could again be compiled without the need for conflict resolution procedures, al- though increasing demand for train paths made compilation a real challenge. Operational train scheduling and planning construction work on the tracks, which are essential criteria for smooth train operations, were also more complicated owing to the rise in demand. The total number and structure of train path applica- regionalisation funds resolved by the Federal govern- tions for the 008 working timetable are in line with the ment in 006. key transport trends of the preceding years. On the one In terms of competition and access aspects, the time- hand, the overall demand for rail transport services in- table compilation phase in 2008 confirmed two unbro- creased: 46,60 train path applications were up . per ken trends. The successful coordination of all train path cent ) year-on-year (45,636 applications). On the other applications was once again a positive achievement with hand, there was a marked increase in the number of benefits for all market players. Approximately 100,000 applications for rail freight, which were up by 3. per train path applications which had originally overlapped cent, a sign of the continuing upswing in that sector. De- in terms of time and route could be integrated in a joint mand for passenger train paths was up by 1.9 per cent, timetable by mutual agreement within the scope of the with local rail transport reporting the lowest growth of coordination procedure. There was no need to resort to 0.9 per cent. This can be attributed to the cutbacks in the instruments of prioritisation according to type of 1) 2008 was the first time that the working timetable was handled entirely through the electronic train path portal of DB Netz (TPN), which allows all customers to submit applications, cancellations and alterations of train paths online. Whereas applications which were processed in parallel by two regional organisations used to be recorded separately, the system now consolidates them and shows them as one application. Applied retroactively, this means that there were 45,636 train path applications for the 2007 working timetable, as against the figure of 47,275 train path applications calculated using the former method. 4 Market and Competition transport specified in § 9 (4) and (5) of the Railway In- in December 2006 identifies the party which caused the frastructure Usage Regulations, nor the provisions relat- delay (RU or DB Netz) and imposes a penalty, which ing to standard and maximum infrastructure charging. currently amounts to ten cents for each minute of delay. A second consistent feature is the ongoing growth in Both the infrastructure manager and the railway under- market shares of railway undertakings which do not be- takings are potential originators of delays, so the penalty long to the DB Group. Train path applications by these system encourages the two parties alike to avoid disrup- customers increased by 8.4 per cent in the local pas- tions. However, it is hardly surprising that although this senger sector and a striking .7 per cent for rail freight, system appears simple at first glance, designing its exact which is high above the overall average. In relation to the structure and applying it in practice is extremely compli- total number of applications for the annual timetable, cated and frequently controversial. One example is the competitors thus now account for a fifth of local passen- problem of allocating consequential delays. Following ger and a quarter of rail freight transports. Long-distance complaints by the Federal Network Agency and legal passenger transport was the only sector where train action filed by a group of market players, the Perform- path applications showed no significant differences in ance Regime is currently the subject of two court cases intramodal competition. (cf. also the chapter "Regulatory framework defined in In addition to the working timetable, which is speci- court"). Further progress is also affected by endeavours fied well in advance, applications for occasional serv- to achieve Europe-wide harmonisation. ices – some of which are submitted at extremely short Even if optimum provisions are defined, it will never notice – play an important part in train path formation be possible to rule out disruptions in daily operations and substantial increases are anticipated in 008. The completely. Delays caused by the weather, for instance, booming freight transport market is highly dependent on are simply beyond the control of the parties involved. flexibility, so that the option of ordering train paths for non-regular services at short notice is essential. Train controllers have to cope with growing demand Growing overall demand, and in particular the increasing demand for occasional train paths which are not included Reliable access to infrastructure in the working timetable, make train path construction Despite a higher number of train path applications, demand from all applicants could be satisfied without exception. a very challenging task. As a result, planning construc- tion work and operations handling, to ensure that the timetable can be implemented as smoothly as possible 50,000 10,164 10,251 in day-to-day operations, are equally sophisticated tasks. 40,000 This is particularly so in the extremely dense German 35,472 36,369 rail network, where trains follow each other at extremely 30,000 short intervals. Every day, the network is used by ap- proximately 36,000 trains and even minor disruptions in 20,000 0.1 0.0 operating procedures can trigger a domino effect which 10,000 is noticeable throughout the entire network. To prevent potential retroactive effects for other mar- 2007 2008 ket players who are not directly involved, such disrup- working timetable working timetable tions – regardless of who causes them – should ideally applications by DB applications by non-DB RUs be avoided right from the start. The Performance Regime share of unsuccessful non-DB train path applications envisaged in the Railway Infrastructure Usage Regula- (per cent) tions is intended to act as an incentive for smooth opera- Source: DB data tions. The Performance Regime introduced by DB Netz 5 Apart from clarification of the question of who is respon- tages from physical proximity to the system: only five of sible for a disruption, it is vital to restore implementa- the total 350 customers in the survey expressed a funda- tion of the timetable as soon as possible. That is the task mental interest in working at an operations centre. of the traffic controllers, who permanently monitor and Regardless of the lack of any good reason for the au- control train operations at the DB Netz network control thority's reservations and the absence of any legal basis centre in Frankfurt am Main and the seven regional for the investigation by the EBA, in December 007 DB operations centres. Efficient traffic control should keep Netz offered to set up work stations at the operations the effects of delays on any other trains to a minimum centres within the scope of the capacity available as an and restore scheduled operations as soon as possible. additional product. Negotiations about the actual imple- Scheduling regulations have been drawn up for that pur- mentation and other questions are currently in progress pose and serve as the basis for decisions which the traffic with the Federal Railway Authority. controllers at the operations centres often have to make within just a few seconds regarding train sequences, di- versions, overtaking and connecting trains. Authorities investigate operations centres In other words, the operations centres do not decide on the allocation of train paths, that is the services provided Sharp increase in operating performance once again there are not covered by the unbundling provisions of The freight sector in particular ensured that demand for train paths from Section 9a General Railway Act (AEG). Nevertheless, DB Netz AG increased yet again. In contrast, transport performance by the as the regulatory authority responsible for unbundling passenger sector was stagnant (million train-path kilometres). matters, the EBA investigated an allegation that traf- fic contol could conceivably be in breach of Section 9a 146.0 1,000 128.0 AEG. In addition, the Federal Network Agency expressed 70.3 87.8 109.8 reservations concerning non-discrimination in respect of 900 915.7 905.1 890.4 train control and instituted a parallel investigation pro- 879.6 877.7 cedure concerning operations centres. Both these cases 800 were triggered by the fact that workplaces of DB RUs' 700 transport control centres are located in the same office spaces. 600 However, that certainly does not involve discrimina- tion against customers, or that third parties influence the 500 scheduling of operations by DB Netz. The RU employees 400 who work at the operations centres do not make any 12.7 14.1 decisions regarding the allocation of track capacity. They 300 11.1 7.1 8.8 only have access to a control system for network control (LeiDis) which provides them with real-time information 200 about the current operating status of their own trains, 100 and this in turn allows them to inform their customers about ongoing developments promptly. This does not 2003 2004 2005 2006 2007 entail any significant advantage over their competitors, as LeiDis is one of the ancillary services which DB Netz DB competitors offers to all its customers. Moreover, the system can be market share of competitors (per cent) used anywhere. A survey conducted by DB Netz proved Source: DB data that the market players do not seem to see any advan- 6 Market and Competition Focus on the workforce The prolonged wage disputes between the German Train Drivers' Union (GDL) and Deutsche Bahn put train drivers firmly in the public eye. However, they account for only a small proportion of the total employees of the integrated rail system. Whether or not DB succeeds in the face of competition depends on all its employees – their qualifications, their commitment and their remuneration. The economic focus of Deutsche Bahn was determined in the rail reform of 1994. In addition to the new strate- The Federal state – and thus the entire population – have since profited from savings gic focus of DB AG, it is above running into billions, which means a lower burden on the taxpayer. Since the reform, all the effort of its employees customers have enjoyed improvements in service as well as faster connections in both that has enabled the financial the local and long-distance sectors. Far-reaching consequences of the reform, how- recovery of the former loss- ever, also affected the Deutsche Bahn workforce in particular. ridden state-owned railway. Employees are vital for the success of Deutsche Bahn AG The financial recovery of the loss-ridden state-owned railway as a business enterprise with a private-economy structure can be attributed not only to the new strategic focus of Deutsche Bahn AG, but first and foremost to the effort of its employees. The employees in turn benefit from the success of the company in the form of job secu- rity and rising income: wage levels rose by a total of 4 per cent between 000 and 007. The wage increase in former West Germany amounted to ten per cent, com- pared with 24 per cent in the new Federal Laender, owing to the alignment process between east and west. Since September 006, there have no longer been any wage differences between the old and new Federal Laender at Deutsche Bahn. During the 7 above period, all employees enjoyed a growth in real terms of 3.5 per cent, according Only the interaction between many to weekly report 43/007 of the German Institute for Economic Research. Over the different occupational groups enables DB to offer its customers transport year 008, salaries and wages in companies that are covered by the group's collective services. agreement on payments will increase by eleven per cent on average. Wage agreements affect competitiveness This chapter will not argue whether or not wage levels are reasonable. Instead, it ex- amines the role of working conditions and wages in terms of their effect on competi- tion between the different RUs and the different transport modes. It is apparent that the disproportionately high wage agreements concluded be- tween DB and the unions during the last negotiations were based on wages which were already above average. Over the short and medium term, these wage levels will weaken Deutsche Bahn's intramodal competitive position. It will hardly be possible to compensate for an increase in personnel expenses of this level by means of cost There has been no difference reductions in other categories. This concerns especially the freight and regional trans- between the wage levels at port units, since numerous competitors with lower personnel expenses are already DB in the new and old Federal active in this sectors. Laender since 2006. According to the 006 Annual Report of Railion Deutschland AG, personnel ex- penses account for approximately a quarter of the total expenditure in this sector, in contrast to other cost categories where there are practically no differences between the companies. This is because charges for the use of tracks and other infrastructure, for instance, have to be the same for all competitors by law. Nor do the costs of roll- ing stock show any significant differences between the companies, since DB's major competitors, such as the companies in the Veolia Group or SBB and its subsidiaries, are also able to place orders on a large-scale basis. One option for offsetting these additional costs for the DB companies which are faced with this intramodal competi- tion is to increase efficiency. However, since these companies have already achieved substantial efficiency improvements in recent years, it is dubious whether sufficient efficiency reserves are still available. It remains unclear to what extent DB's competitors will be able to remain unaf- fected by the wage developments at the market leader. There will be a noticeable shortage of skilled employees in the labour market in future. DB's competitive posi- tion will improve in proportion to the extent to which its competitors align their wage rates with those of DB. However, this will inhibit the development of rail as a whole compared with the other transport modes, in particular road haulage. While it is, of course, the companies themselves which first have to bear the higher personnel expenses, they can make use of ongoing innovation progress to adapt to changing conditions and reorganise their cost structures. Moreover, DB is a special case as it is still wholly owned by the state. As there is already effective competition in the transport markets, higher costs can be passed on to the customers only to a limited extent. This means lower profits for Deutsche Bahn and its owner, the Federal state. Partial privatisation of the company would also not change this situation. The anticipation of lower profits is already hav- ing an adverse effect on the willingness of potential investors in the rail market. The question is – will the other railway undertakings profit from their better competitive position resulting from the higher wage levels at DB? In principle, DB's 8 Market and Competition competitors have two options: they can either leave their prices unchanged and try Customers benefit from the strong focus to gain more market shares than before, or they can also raise their prices and benefit on service since the rail reform. from a higher profit margin. Some competitors are already complaining about a scar- city of train drivers. In the past, some of these companies recruited drivers who had been trained by DB, enabling them to achieve substantial increases in traffic perform- ance. The capacities of capital-intensive rolling stock are already utilised to the full in many cases today. So assuming that numerous competitors are already operating at the limits of their capacities as a result of the growth they have achieved in recent years, it will be virtually impossible for them to grow at an even faster pace. Instead, they will raise their prices and consequently their profits. In that case, road transport would be one of the prime beneficiaries of the high wage agreements – the losers would be the rail freight customers who have to pay higher prices. Existing distortion will be aggravated Price increases and declining efficiency at the RUs would inevitably jeopardise the success that has been achieved in shifting transport from road to rail since the rail reform. This would benefit private motorised traffic, aviation, road haulage and inland shipping, and thus aggravate the existing distortion of competition between the dif- ferent transport modes. Outstanding examples of this are the exemption of aviation and inland shipping from mineral oil tax, and the lack of internalisation of the exter- nal environmental effects of road and air traffic. Legal and contractual regulations in the labour market further impair the competi- tiveness of railway undertakings: one example is the far stricter regulations that apply to train drivers compared with truck drivers regarding safety at work and rest periods. Pursuant to EU law, for example, train drivers are permitted to spend a maximum of Wages for DB train drivers already above average before collective wage agreement The table shows annual income pursuant to wage agreements (wage rates at October 2007) which were calculated on the basis of a comparable database. The figures include selected bonuses e.g. for Sunday and public holiday work, as well as night shifts. The table shows DB AG and five competitors. As the relevant data was not available for all competitors, the selection may not be representative. Company DB AG non-DB railway undertakings (RU) Gross annual salary RU 1 RU 2 RU 3 RU 4 RU 5 Minimum 1) 30,880 23,293 29,474 25,085 29,627 25,469 Difference to DB in per cent –24.6 –4.6 –18.8 –4.1 –17.5 Maximum 2) 33,401 30,035 33,293 34,389 30,239 27,064 Difference to DB in per cent –10.1 –0.3 +3.0 –9.5 –19.0 1) 27 years old, single, no children, 1 year of service with the company and in that job 2) 50 years old, married, 1 child, 26 years of service with the company and in that job Source: DB data 29 The rules on rest periods and occupational safety for truck drivers are not as strict as for train drivers. two nights abroad on any one trip. There are no such regulations at all for truck driv- ers. In a survey conducted by a German medical journal, truck drivers stated that they spend an average of 50,000 kilometres per annum at the wheel, which means that the distance driven by a truck driver is almost four times higher than that of a Truck drivers perform almost freight train driver, which is less than 40,000 kilometres. A reduction of red tape for four times as many kilometres the rail sector would also make the railway markets more attractive to new entrants. as a freight train driver. In the long run, a better position for rail in intermodal competition would lead to more competition on rail. Excessive regulatory provisions, on the other hand, weaken rail as a whole. Moreover, truck drivers earn far lower wages, and many professional drivers are not covered by any collective wage agreements whatsoever. Where collective agree- ments do exist, the wages amount to just over half the salary earned by a train driver. According to weekly report 43/007 of the German Institute for Economic Research, a train driver employed by Deutsche Bahn earns an hourly wage of between EUR 8.0 and EUR 0.03, compared with the average hourly wage of a truck driver of just EUR .05. Moreover, DB train drivers will receive a hefty pay rise following the record outcome of the last wage bargaining round. In May 007, the European Commission accepted a legislative package for the modernisation of the regulations in force in the road haulage market. One of the aims of that initiative is to harmonise the standards in that sector. The regulations in force to date led to a distortion of competition, not least because they were partially ambiguous and therefore not applied uniformly. The proposed regulation is therefore intended to ensure greater uniformity of the provisions in force in the EU. Amongst other things, each road haulage company will in future be obliged to employ a traf- fic manager with proven professional qualifications. As these regulations are still not nearly as stringent as those for the railway market, there can still be no question of equal treatment of the different modes. Trade unions for specific occupations and their economic consequences The wage dispute with the GDL revealed a further fundamental difference between the rail and road freight markets. While the road haulage market is defined by one dominant occupational group – the truck drivers – there are a whole number of dif- ferent occupations in the rail sector. Only the interaction of these different groups enables rail to offer its customers transport services. Without train drivers – but also 30 Market and Competition The DB average train driver earns more than EUR 33,000 per annum (wage levels at 2007). without signallers, schedulers and traffic controllers, shunters, the personel of roll- ing stock and rail maintenance depots, train crews or service staff at the stations to name just a few – it would not be possible to carry passengers or freight from A to B on rail. If a separate trade union existed for each of these occupational groups, and each represented solely the interests of its own members, each of these unions would be motivated to demand very high wage rates – at the expense of the other employees and the company as a whole.) The consequences of such behaviour would ultimately be disastrous for all sides. Economists refer to such a constellation as the "prisoner's dilemma": behaviour which is optimum from the viewpoint of the individual ulti- mately leads to a sub-optimal outcome for everyone – including the individual con- cerned. It is therefore vital for the future, not only for Deutsche Bahn, but for many other industries and in the final analysis also for Germany as a business location, to prevent any tendency towards fragmented unions from taking hold. Employee profit sharing strengthens the company Amongst other things, competition between railway undertakings is intended to raise the efficiency of rail transport. Severe discrepancies between the wages could, however, be counterproductive to that target. For instance, a company might prove successful in the market, despite its producing its services with obsolete and ineffi- cient technology, because its wages are so low that it can underbid other companies. The consequence would be a drop in productivity in this sector, instead of the desired increase. DB employees have already participated in the success of the company in the past. However, this is only possible if the companies which make up the DB are competitive not only on rail, but also with respect to other modes of transport. To ensure that this remains the case, the remuneration structures have to take competitive aspects into account. In other words, a part of the future wage increases has to be used to expand employee profit sharing and for company pension provisions. The objective is to raise efficiency whilst simultaneously increasing the attractiveness of DB as an employer. 1) Cf. also H.-W. Sinn: "Hart bleiben, Herr Mehdorn!", WirtschaftsWoche 32/2007. 3 Joachim Fried in scientific dialogue with Lars-Hendrik Röller Customers can benefit from alliances How cooperative ventures in the long-distance rail passenger sector are judged by the European Commission depends on their effect on the consumer. While better efficiency is an argument in their favour, as it also benefits the consumers, there could be reservations based on grounds of the competition. Joachim Fried: Deutsche Bahn's competitors now provide their cost and risk structures, or the extent of intermodal approximately 20 per cent of all rail freight transport and competition. Accordingly, there seems to be no good rea- nine per cent of local and regional passenger transport, son to demand more regulation solely on grounds of the but less than one per cent of long-distance passenger serv- low market shares of new entrants compared with other ices. Does this mean that the Federal Network Agency has segments. An appraisal of the different shares in the rail not done enough to promote competition in the long-dis- market can only be the first step in a reliable analysis of tance sector? competition. Rather, all the relevant alternatives from the point of view of demand must be taken into account Lars-Hendrik Röller: Although the intensity of regula- – and that naturally also includes the products offered tion is undoubtedly an important factor for the extent of by competitors in the road and aviation sectors. It is intramodal competition in the different segments, it has also important to consider the frequently disregarded to be remembered that these segments are subject to supply side: Can suppliers from neighbouring segments highly diverse market conditions, such as differences in or regions enter the market over the short or medium 3 Interview term? One example of this refers to the low-cost airlines, Fried: What are the results that competition is actually which can offer new routes and withdraw them again at intended to achieve – lower prices for the customers? relatively short notice. In such a situation, high market shares are not a good benchmark for the intensity of Röller: The Commission focuses primarily on the con- competition. sumer standard. The decisive factors in such an analysis, however, are the long-term effects for the consumer: for Consumers in the focus of European competition example, the consumer may profit for a short while when a company achieves a dominant position in the market Fried: So how is the actually relevant market defined by predatory pricing. Ultimately, however, the company in practice, for instance by the European competition will try to recoup its "investment" in the form of exces- authorities? sively high prices, so that the customer actually suffers a disadvantage in the long run. In addition to the long- Röller: As I said, rigid and legalist limits for the market term effects, it is also important to assess the efficiency shares which are considered tolerable tend to be less criteria. As a rule, the potentially negative effects that a important now than they were a few years ago. The trend cooperation or alliance could have on competition have is towards using the market performance which competi- to be weighted against positive effects on efficiency. Af- tion is supposed to enable as the basis. ter all, that is the reason why companies decide to coop- The aviation sector normally defines the market on erate in the first place. the basis of routes. It remains to be seen to what extent The consumers can also benefit from the improved ef- this can be applied one-to-one to the rail sector, where ficiency over the long term. The results of the review by the network effects are far more noticeable. The rel- the Commission therefore depend on which of the above evant question is whether different connection networks effects outweighs the other. In other words, competition compete with each other from the point of view of the is not an end in itself, but is seen as a way of raising con- customer, or whether the specific point-to-point con- sumer welfare. For example, if one company can produce nection is the only relevant criterion for the customer at lower costs than several, it may be better from the when planning his journey. Different answers to these consumers' point of view to dispense with competition in questions can have a significant effect on the definition part and to benefit from better efficiency. of the market and consequently on the market shares of rail as a whole or individual railway undertakings. Other Fried: I could imagine it must be very difficult to weigh important elements in an economically based market up the different effects. After all, even the companies definition in the rail sector mean considering the differ- themselves occasionally make errors of judgement when ent customer groups, such as differentiation between assessing the benefits of cooperation. business customers and leisure travellers, or taking into account a fare system with only limited flexibility, which Röller: That is totally correct. And this is also why the is necessary owing to the blanket coverage provided by Commission has specified three criteria for the efficiency rail services. analysis which have to be satisfied simultaneously. The The competition authorities still have to accumulate first criterion states that the efficiency gains are specific, experience in that respect in the course of the liberalisa- which means that they can only be achieved by means of tion process. But the corporate strategies will also be the planned merger or cooperation. The second criterion adapted in line with the new market circumstances, with demands that the efficiency gains are verifiable. And appropriate consequences for definition of the market finally, the third criterion demands that these efficiency and the analysis of competition. gains are passed on to the consumer. 33 Joachim Fried – Competition Officer of Deutsche Bahn AG Fried: To get back to the rail markets, how would you long-distance rail passenger market, owing to the ongoing judge the cooperation between Deutsche Bahn and SNCF rivalry between plane and train. in the high-speed traffic sector from the consumers' point of view? Fried: Last year, SNCF and Deutsche Bahn also set up Railteam, together with five other European providers of Röller: The efficiency gains of such a cooperation are high-speed rail services. This is aimed at making rail more undeniable – joint marketing, timetable coordination, attractive compared with air travel, for example by means harmonised quality standards are obvious advantages of joint marketing, transferable tickets and the reciprocal of such a cooperation. Given that market opening will use of lounges. You are currently preparing a study com- not be legally implemented until 00 and negative ef- missioned by Deutsche Bahn to analyse how this coopera- fects on competition are therefore ruled out de jure, any tion will be assessed in terms of competition policies. How assessment right now can only be positive. However, would a European Commission that is dedicated to the there are two questions which will be decisive for the welfare of the consumer judge Railteam? long-term assessment of this cooperation – and also of potentially more extensive forms in future – in terms of Röller: The Railteam alliance goes beyond a purely bi- competition law. Firstly, how would intramodal competi- lateral joint venture, such as the one between SNCF and tion develop in future without cooperative ventures of DB described above. To a certain extent, this alliance this kind? And secondly, the future competitive pressure is a sign of intermodal competition: the railways are from other transport modes is a central aspect. It is in- now catching up on a practice that has long since been teresting to note that the answers to these two questions implemented by the airlines. The assessments of such al- are inextricably linked. If the competitive pressure from liances in the aviation sector are mainly positive – most other transport modes is high, profit margins fall, and of the empirical studies establish positive price effects therefore so does the incentive for joining the rail mar- for the consumers, and corresponding effects can also be ket. The significance of this intermodal competition will assumed for the rail sector. Nonetheless, there are two undoubtedly increase in future. significant differences: firstly, there is less intramodal pressure on prices in the rail market, where network ef- Alliances are a sign of intermodal competition fects limit the appearance of "low-cost rail operators", like those in the aviation sector. Secondly, the stronger Fried: What are your reasons for that assessment? links between infrastructure and operations prevent the occurrence of competing rail alliances. As I already said, Röller: The example of Paris–Brussels, where scheduled the degree of intermodal competition will be the decisive flights were discontinued after high-speed rail services factor for assessment in terms of competition economics. went into operation, already clearly proves that rail We are currently analysing this issue on the basis of com- is definitely competitive. On the other hand, the low- prehensive data supplied by Deutsche Bahn, but it is too cost carriers are increasingly encroaching on the fare early to announce any results. segments of rail – air has evolved into a mass means of transport and is increasingly competing for leisure Fried: However, the development of competition in the travellers in the medium-haul segment. I believe that inner-German transport market could be an indication. Al- competitive pressure, which is decisive for the consumer, though we already have open markets, other railways are will continue to be generated after liberalisation of the nevertheless unwilling to take the risk of joining the market. 34 Interview Prof. Dr. Lars-Hendrik Röller – President European School of Management and Technology (ESMT), previously Chief Competition Economist of the European Commission Röller: As no intramodal competition has been able to limited. It therefore seems likely that the liberalisation of develop to date in the long-distance segment despite rail passenger transport will not lead to the pronounced the fact that market access is governed by the same intramodal competition anticipated by the European legal regulations in Germany as for instance rail freight Commission. transport, the reasons for this lack of competition have to be sought in the market environment. So I agree with Fried: After liberalisation of the rail passenger transport you in that respect. The greater distances to be covered markets in 2010, if there is still no competition which in the international transport market and the concentra- could be obstructed by alliances between railway under- tion on comparatively few point-to-point connections in takings, then cooperation between the major railways other countries could impair the comparison with the presumably could not be a problem in terms of competi- German long-distance rail market. But no matter whether tion policy? at national or international level, the high investment costs are a major barrier for newcomers. Moreover, there Röller: The European Commission has already approved are positive network effects which mean that individual similar alliances between the airlines, which are now routes cannot be operated profitably. In layman's terms, the railways' intermodal competitors. The crucial factor network effects mean that the whole is better than the will be what could develop once the markets have been sum of its parts. These effects mean that there is less opened if there were no such cooperative ventures. This competition "inside the market", than competition "for hypothetical situation will have to be compared with the market", as in the regional transport market where the actual developments. If there were no significant entire networks are put up for tender. Competition for intramodal competition in future, the alliances would not the market, by the way, is a convincing argument why impair the market structure. However, that analysis is market shares are not a good yardstick for measuring difficult and would require comprehensive data to enable the intensity of competitive relationships. Even if the any estimate of the probability of third parties joining transportation contracts for such networks have been the market. The potentially negative effects of coopera- awarded in transparent and competitive procedures, in tion on the market structure would however be offset by the end there is only one railway undertaking which actu- demonstrable positive effects on efficiency, which satisfy ally handles the transports. If the market were to be de- the above criteria of the European Commission relatively fined accordingly, that undertaking would have a market irrefutably. These positive effects can only be achieved share of 00 per cent. by cooperation, are verifiable and, owing to the strong competitive pressure from airlines and private car, they Intermodal competition limits profits would also be passed on to the consumer. Cooperation between the railways should therefore be permitted as Fried: The annual reports of the undertakings show that long as the positive effects from the consumer viewpoint they are not making excessive profits. That might also be outweigh the negative effects. a reason which makes other railway undertakings reluc- tant to join the market. Röller: Correct. The competition with the other trans- port modes imposes a ceiling on the prices that can be charged, so that the profits of the undertakings are also 35 In 2007, the European Union continued to pursue harmonisation of the rail markets. For commissioned bus and rail transport a new Regulation on public transport is of crucial importance. Court decisions in Germany have defined interpretation of the current regulatory legislation in more detail. A common denominator still has to be found with the regulatory authorities on many points. 36 Regulatory Policies Ongoing development of European legislation Adoption of the third railway package, reform of the regulation on public passenger transport and simplification of the approval procedures for rail vehicles were important additions to the European legal framework in 2007. Although market opening in the European rail passenger transport market in 2010 will still remain behind the degree of liberalisation already achieved in Germany and a few other Member States, European legislative progress over the past year can largely be rated as positive. Opening of the rail freight transport markets is beginning to show success, particu- larly as regards international rail freight transport on corridors of those Member States whose markets have been liberalised for some time. The rapid agreement between the European institutions to simplify the legislation governing approval procedures for rail vehicles is an important step towards eliminating existing access barriers in the European rail transport market. This development of the European rail sector is also promoted by concerted international efforts to improve interoperability, especially on the major freight transport corridors. The Commission has defined the key items of its work for the coming years as ini- tiatives for freight transport logistics, port policies and the development of a priority network for rail freight. It will therefore be vital to identify the fields of action where European transport policies can effectively improve the competitive situation of rail Liberalisation in the rail passenger transport in Europe. The crucial requirement remains ensuring sufficient rail infra- transport still falls short of the status which rail freight had already achieved structure and providing the financial resources required for that purpose. in 2007. After a phase of intensive activity by the European legislator in the form of three railway packages, the focus now has to be on ensuring full implementation of Commu- nity law in all Member States, as there are still severe discrepancies in that respect, as evident for example in the recently published Rail Liberalisation Index 2007 by IBM. Liberalisation of passenger transport falls short of expectations The compromise on the liberalisation of rail passenger transport adopted in the third railway package falls short of the status that has already been achieved in rail freight transport in Europe since the beginning of 007. The new European Directive merely obliges the Member States to open up cross-border transport as from 00, but does not specify a target date for the liberalisation of national transports. The Commission is merely obliged to submit a report by the end of 0 which, amongst other things, will deal with potential further opening of the rail passenger transport markets. As from 00, railway undertakings will also be entitled to pick up and set down passengers on the national segments of cross-border routes. However, the Member States will have the possibility to restrict these rights severely in order to protect those transport connections which are offered as a public service: The Direc- tive includes an option of restricting market access rights and imposing a levy on cross-border transports to finance public service transports. 37 New EC Regulation on passenger rights in rail transport On 3 December 2009, a regulation governing passenger rights in rail transport will come into force throughout Europe. However, the compromise reached for the new regulation means that Member States will be permitted to exempt their national trans- ports from a large part of the requirements until 04 and their regional and urban The European regulation on transports indefinitely. The regulation contains primarily provisions governing duties passenger rights generally en- to provide information, the sale of tickets, the liability of the railway undertakings in sures a fair balance between case of delays and special rights for persons with reduced mobility. In case of delays, passengers and the railway passengers will in future be entitled to a refund of 5 per cent of the fare for a delay undertaking. However, the of one hour or more and 50 per cent of the fare for delays of more than two hours. provisions are far stricter Many parts of the European regulation on passenger rights will create a fair bal- than in aviation. ance between the legitimate interests of the passengers and the commercial interests of the railway undertakings. In order to ensure a uniform standard of protection for passengers throughout Europe and avoid imposing unilateral burdens on some railway undertakings in the gradually opening European market, the Member States should refrain from introducing additional national legislation which goes beyond the scope of the EC regulation. In the case of Germany, for example, which borders on nine other countries, the application of divergent legislation would not be feasible. Another critical point is that the European regulation on rail passenger rights goes far beyond the scope of comparable provisions for air passengers. The European air pas- senger regulation, for example, prescribes monetary compensation only if the flight is cancelled, but not in the case of delays. As these less stringent provisions are moreo- ver not sufficiently applied by the airlines, according to reports of the Commission, this constitutes distortion of competition to the detriment of rail. European train driver's licence will facilitate cross-border deployment The Directive on the certification of train drivers specifies uniform minimum require- ments for train drivers, the objectives of vocational training, as well as examination and licensing procedures. Mutual recognition of the standardised driver's licences is intended in particular to simplify the execution of international transports. During the first stage, all train drivers deployed on international routes have to be in pos- session of an EU licence by December 00. However, this requires extensive and coordinated preparatory work by the European Rail Agency, the Member States and the railway undertakings. The Directive is to be transposed into national law by the Member States by 4 December 2009. It deliberately grants extensive freedom of ac- tion which Germany should use to ensure practicable transposition of the Directive. It has to take operating procedures in rail transport into account and at all costs avoid unnecessary administrative and financial outlay. New public transport regulation adopted Regulation 1370/2007/EC on public transport, replacing Regulation 1191/69/EEC, has been published in the EU Official Journal and will come into force at the end of 2009. It is a compromise reached after years of negotiation and includes provisions on the duration and mandatory contents of public service contracts as well as provi- 38 Regulatory Policies Arrival at Brussels – the European train driver's licence will facilitate cross-border deployment of personnel sions on the award of contracts. In that respect, the Regulation permits the authori- ties to choose between direct award or a more formal procedure for railway services. In the case of direct award, a shorter contract term applies and stricter transparency criteria have to be met. Contracts can also be awarded directly to internal operators. This in-house award procedure is not in line with the principle of competition as – in contrast to direct awards in the rail market – only one operator is considered in each case. This procedure therefore has to be confined within strict limits. This is provided, on the one hand, by the ban laid down in the Regulation which generally prevents mu- nicipal providers from expanding from the basis of their protected home market. On the other hand, the scope of application of the in-house direct award should not be extended, as joint action of several public authorities could otherwise artificially en- large the area which is exempt from competition. One positive aspect is that the new Regulation generally does not affect the validity of existing contracts. Commission plans to recast the first railway package One of the items on the EU Commission's work programme for 008 is recasting the provisions of the first railway package. In view of the progress made in the rail mar- kets, the Commission now believes that simplification and streamlining measures are called for and will come back to the recommendations laid down in its 006 report on the implementation of the first railway package. It intends to present a Communi- cation together with a proposal for amending or recasting the legal acts currently in force. This will involve combining the Directives of the first railway package to form one single legal act, a "Rail Access Code". The focus will be on the relations between infrastructure managers and RUs. Although it generally makes sense to simplify and combine European railway law in order to create a coherent and transparent set of rules, such a recast should cover the entire European regulatory framework relating to the railways. As the third railway package was not published in the Official Journal of the EU until December 2007, the current initiative by the Commission is therefore clearly premature. Experience of the rail reform in Germany has shown that the actual effects of market opening cannot be judged until several years have elapsed. Only then is it possible to answer the ques- tion of whether supplementary legal acts are necessary, for instance to extend infra- structure access rights or the powers of the regulatory authorities. 39 Heterogeneous liberalisation status in Europe The Rail Liberalisation Index 2007 shows that despite positive trends as regards market opening, there are still severe discrepancies between the Member States. The Commission should therefore focus on asserting the consis- tent implementation of existing railway legislation. Market opening status in the rail freight and rail passenger markets advanced on schedule delayed Points >800 600–800 <600 1,000 900 827 826 825 800 809 788 788 757 739 738 722 700 707 700 698 691 684 676 665 652 650 649 637 636 630 600 581 574 559 500 400 333 300 Czech Republic Great Britain Luxembourg Netherlands Switzerland 200 Denmark Germany Romania Portugal Hungary Slovenia Bulgaria Slovakia Lituania Belgium Norway Sweden Finland Estonia Ireland Austria Greece Poland France Latvia Spain 100 Italy GB DE SE NL AT DK CH PL CZ RO PT SK NO EE LT IT SI BG LV BE HU FI ES LU FR GR IE Source: IBM Global Business Services and Kirchner, Rail Liberalisation Index 2007 Instead of presenting new legislative proposals, it would make more sense for the Commission to concentrate on the uniform enforcement of existing Community law over the next few years. To date, the Commission has instituted 0 proceedings against Member States, but only because they have not formally transposed the provi- sions of the first two railway packages. The Rail Liberalisation Index 2007 published in October 2007, however, revealed clear evidence of existing deficits in the imple- mentation of European railway law. Liberalisation most advanced in Great Britain and Germany IBM Global Business Services and Professor Christian Kirchner of Berlin Humboldt University presented the third Rail Liberalisation Index (LIB Index) in October 2007. The study examines how easy it is for an RU wishing to join the rail market in different EU Member States to actually gain access to the market. The 2007 LIB Index reveals that in the three years since publication of the previous study, the European rail mar- kets have further opened up to competition. However, the latest study also shows that RUs still have to overcome severe barriers in some countries, such as intranspar- ent or time-consuming and expensive approval procedures. Nevertheless, new en- trants have already been licensed for rail freight transport in most countries and are also active there – a clear sign of ongoing liberalisation, although there are still great discrepancies in the passenger sector. Whilst some countries completely refuse new- comers access to the markets, in others there is already fierce competition. 40 Regulatory Policies The 2007 LIB Index ranked Germany in second place in Europe, slightly behind Great Britain, in the top group "Advanced market opening." The study confirms that the countries in that leading group – Great Britain, Germany, Sweden and the Nether- lands – have pushed ahead intensely with market liberalisation. The 2007 LIB Index confirmed that they have regulatory bodies with far-reaching powers and experience of dealing with conflicts and complaints. The bottom group in the 2007 LIB Index, "Delayed", consists of Luxembourg, France, Greece and Ireland. According to the study, these four countries have the highest market barriers in Europe. In addition to the status of market opening, the study also examined the intensity of competition in the European rail markets. These findings are reflected in the sepa- rate COM Index, which in 007 was again led by Great Britain, followed by Estonia, Sweden, Germany and the Netherlands. European initiatives for more efficient infrastructure On many major European transport corridors, rail operators are faced with infrastruc- ture bottlenecks, which lead to delays and other quality impairments. The opening of the national rail markets, common interoperability standards and new regulations Market opening in Europe governing the recognition of vehicles and driver's licences have created important Liberalisation is progressing, even in conditions for strengthening international competition on rail. Nowadays, it is increas- new Member States. ingly the lack of infrastructure capacities which is proving a barrier to competition. Further measures are therefore required at European level to improve infrastructure. advanced In October 007, the European Commission accordingly presented a package of on schedule delayed measures for freight transport, the central element of which is the establishment of a rail network intended primarily for use by freight trains. There are plans to define cross-border corridors within the scope of the existing infrastructure on which inter- national freight transport will be given priority over other users and to set up sepa- rate administrative bodies for each of these corridors. The Commission's intention of defining corridors between major European conurbations which have to be refur- bished to cope with the anticipated growth in traffic is fundamentally to be approved. However, some of the further measures derived from that basis have to be criticised: removing some individual corridors which are used for mixed operations from the integrated network in the Member States would cause severe practical problems and lead to bottlenecks for the remaining rail transports. Implementation of these propos- Source: IBM Global Business Services and als would also entail a substantial degree of additional administrative work. Kirchner, Rail Liberalisation Index 2007 A solution to the capacity problems therefore has to be sought in the form of upgrading the existing infrastructure. According to a study conducted by McKinsey management consultants on behalf of the Community of European Railways and Infrastructure Managers (CER) and the International Union of Railways (UIC), trans- port volumes on six major European corridors are expected to increase by 6 per cent (train-kilometres) by 00. To cope with that growth, a sum of EUR 45 billion would have to be invested in these major rail routes. When presenting its multi-annual pro- gramme for 2007–2013 on financing priority projects in the central trans-European transport network, the Commission indicated that it was fundamentally willing to provide above-average support for environmentally friendly transport modes such as rail. A sum of approximately EUR four billion, that is 75 per cent of the funds avail- able in the Community budget, was therefore allocated to rail projects. 4 Environmental and safety aspects are arguments against a further in- crease in truck lengths and weights. However, in view of the enormous investment requirements, the search nevertheless continues for further sources of financing. To date, the budget plans of the Member States and the European Union include funds of just EUR 30 billion for the period up to 00. The European Commission is currently investigating a promising option involving imposing equalisation levies on those transport modes which pose a par- ticularly high risk for the general public (external costs). Levies such as toll charges in road transport could then be invested in environmentally friendly modes which gener- ate lower external costs. The Eurovignette Directive entrusted the European Commis- sion with drawing up a model for the assessment of external costs and apportioning them to infrastructure charges by June 008. It is important that these external costs are based on reliable and neutral sources – such as the report of the Intergovernmen- tal Panel on Climate Change. Mega-trucks weaken rail transport and generate high costs As part of its logistics initiative, the Commission is also investigating options for rais- ing the permissible maximum vehicle dimensions and weights and the effects of the cross-border deployment of the so-called gigaliners. While the approval of such vehi- cles would lower price levels in the road haulage market, it would raise the costs of the publicly funded infrastructure. Owing to the high intermodal competitive pressure in the freight transport market, a reduction in road haulage prices would immediately lead to a drop in rail freight volumes, with single wagonload and combined transports particularly at risk. Raising the permissible truck dimensions and weights would thus be a biased decision in favour of road transport. Licensing heavy trucks would also be contradictory to the resolutions of the European Council of 8 and 9 March 2007 which obliged the European heads of state to reduce emissions of greenhouse gases by 20 per cent between 1990 and 2020. That target can only be achieved by promot- ing both inter- and co-modality, as well as combined transport, but not by unilaterally promoting road transport. Until it is possible to charge road tolls which actually cover costs, approving the deployment of gigaliners would also cause further negative external effects at the ex- pense of the general population. Raising the permissible gross vehicle weight would require a number of adjustments to existing road infrastructure, such as bridges. Additional stress on motorway infrastructure would also lead to an increase in main- 4 Regulatory Policies tenance and repair costs, whilst the deployment of gigaliners also poses new safety risks in the road transport sector. Approval procedures will soon be faster, more transparent and cheaper In future, the approval or homologation procedures for rail vehicles in the European Union will be significantly facilitated. Divergent homologation practice in the EU Member States in the past has proved to be a severe market access barrier. Until now, rail vehicles have to go through a time-consuming and expensive homologation pro- cess in each Member State. A well known example is the licensing of class 85 and 189 locomotives. After applying for an authorisation for freight locomotive BR 189 in Austria back in 00, DB AG has had to invoke the Austrian Administrative Court of Justice. In the past, the homologation of locomotives and traction units for deploy- ment in other Member States has generated costs running into millions, which in many cases could not be justified on grounds of safety considerations. The rail sector estimates the potential savings from streamlined and more effective homologation procedures at around EUR 400 million by the year 05. The Directive which has now been adopted and which is to be transposed by the Member States by 00 provides leverage for substantially accelerating the homolo- gation processes for new and existing rail vehicles. In particular, the procedures are to be made much more transparent and easier to review. For the first time, the amended Directive specifies time limits within which the national safety authorities have The newly adopted Directive to reach a decision on applications for an authorisation which have been duly and for simplified homologation properly submitted. If they fail to do so, the applicant is entitled to assume that the of rail vehicles would enable authorisation has been granted after a further short period and without an explicit potential savings of decision by the national safety authority. In future, applicants will also have more op- EUR 400 million by 2015. portunities to demand a review of negative decisions by the safety authorities. EU proposes changes in the aviation sector The legislative procedure initiated by the European Commission to include avia- tion in emissions trading could be an important step towards aligning competitive conditions, although this depends on the actual form that the legislation takes. The resources generated from this move should be used to optimise the overall transport system in the interests of society in general and to promote environmentally compat- ible and safe mobility. As long as aviation (and shipping) – unlike railways – are not affected by emissions trading and are moreover exempt from taxation on energy, rail should be relieved of the dual burden simply in the interests of equal competition. The proposed regulation on air transport services in the Community will ensure transparent pricing in that sector in future. The proposal submitted to the European Parliament for its decision specifies that the airlines will be obliged to state the final price of a flight, including all applicable taxes, duties, supplements and charges. At present, low-cost airlines frequently advertise fares which amount to only a fracture of the price that the customer actually has to pay. The planned regulation will put an end to this practice and thus contribute to more consumer protection and greater transparency of competition, not only between the different airlines, but also be- tween the different transport modes. 43 Commission investigates Berlin/Brandenburg transportation contract The European legislator is simplifying and accelerating the homologation of traction units for deployment in other In August 003, Connex Regionalbahn GmbH submitted a complaint to the Euro- Member States. pean Commission concerning alleged state aid relating to the public service contract awarded by the Federal Laender of Berlin and Brandenburg to DB Regio AG. In Octo- ber 007, the European Commission instituted formal investigation proceedings to examine whether the payments made to DB Regio AG pursuant to the public service contract are too high and consequently include inadmissible aid elements. While institution of the formal investigation proceedings does not mean that the Commis- sion has decided in advance, it is nevertheless contrary to the administration practice which has been exercised for years. The investigation by the Commission has led to substantial legal uncertainty, not only for the contract directly affected, but also for other public service contracts in Germany and all over Europe, which were signed in the belief that the existing legal situation was reliable. In its reinterpretation of Regu- lation 1191/69/EEC, which is relevant in this case, the Commission is opposing con- tract award procedures which have been practised by the public authorities for years. However, DB AG is confident that the in-depth investigation will confirm that no in- admissible aids are involved. The contract satisfies all the requirements of Regulation 1191/69/EEC, which is relevant and conclusive in this case. Moreover, the contract also meets the criteria of the Altmark Trans ruling of the European Court of Justice. Financing conditions of DB AG do not constitute aids In August 003, Netzwerk Privatbahnen (an Association of German Rail Freight Operators) submitted a state aid complaint to the European Commission, claiming that DB AG enjoyed inadmissible aids relating to the Federal government's warranty obligations for rail infrastructure enshrined in the German Constitution. It alleged that DB AG benefited from a higher credit rating and was therefore granted better funding conditions than its competitors. However, there is no evidence of aids in that respect. In particular, Article 87e of the German Constitution does not constitute any warranty or state guarantee of the Federal government for the liabilities of DB AG. The fact that the Federal government – and thus the public purse – is the sole shareholder of DB AG is of no relevance for aids pursuant to the EC Treaty. Moreover, under the present legislation, the company's creditors have no scope for seizing rail infrastructure. 44 Market and Competition Regulatory framework defined in court In 2007, the Federal Network Agency (BNetzA) and Federal Railway Authority (EBA) made full use of their powers and also instituted parallel proceedings on some issues. In several cases, the DB companies sought temporary judicial relief to avoid severe financial disadvantages following official orders. The BNetzA continued its regulatory practice from the preceding year and instituted One of the main focuses of more than 70 infrastructure access proceedings against DB companies in 007. Fur- the Federal Network Agency ther proceedings relating to the provisions of Sections 9 and 9a were also instituted last year was to check the by the EBA. In 4 cases, the regulatory authority based its decisions on Sections 4c, network statement for non- 14e and 14f German General Railway Act (AEG). Although the companies filed objec- discrimination. tions to many of these decisions so that they are not final, in some cases they were nevertheless obliged to implement the official orders temporarily, as Section 37 AEG prescribes that decissions in railway law cases are immediately enforcable. As the companies were frequently either unable to implement these measures, or could not reasonably be expected to do so, they had to seek temporary relief against the deci- sions from the courts. In-depth examination of usage conditions In the year under report, the Agency also focussed on reviewing the network state- ments of infrastructure undertakings before they came into force. These documents state the conditions for access to infrastructure, such as the periods of notice for requesting train paths and services facilities. If an infrastructure manager plans to 45 The DUSS had to submit new usage conditions for its freight terminals. amend or recast its network statement, the new version must be submitted to the Agency, which has four weeks in which to object to the statement if it believes that the new version infringes any provisions of rail regulatory law. One of the key provi- sions in that respect is the ban on discrimination of individual companies. In that case, the infrastructure manager is not permitted to enforce the clause to which the complaint refers. The Agency is also entitled to object to any such clauses after they have come into force. Court cases eliminate legal uncertainty The legal requirements of the network statement and other usage conditions and the regulatory authority's powers of review have still not finally been clarified in court. In recent years, this legal uncertainty has led to numerous administrative procedures and court cases. Back in autumn 005, the EBA, which still acted as the regulatory body at that time, objected to numerous provisions of the usage conditions for the passenger stations of DB Station&Service, the infrastructure and service facilities of DB Netz AG and the railway fuel stations of DB Energie GmbH, all of which had been The court concretised the ban adapted in line with the new legal requirements. The EBA also ordered amendment on discrimination which is cen- of the provisions to comply with the legal opinion of the regulatory authority. The tral to the regulation. subsequent appeal proceedings were conducted by the Federal Network Agency, which had in the meantime assumed responsibility for regulatory matters. After sev- eral hearings in the course of the appeal proceedings, the Agency issued its appeal decision, ordering application of the usage conditions in force between 0.4.006 and 9.4.2007. Just a few months later, in October 006, DB Station&Service AG and DB Regio- Netz Infrastruktur GmbH submitted their usage conditions for passenger stations to the Agency for preliminary review. DB Netz AG submitted its network statement for the use of rail infrastructure and service facilities. In notices of 7..006 and 0..006, the Agency objected to numerous clauses and threatened to impose pen- alties if its specific orders for amendment were not executed promptly. The Agency further demanded that DB Netz AG and DB Gleisbau GmbH draw up and submit usage conditions for their maintenance facilities, which it then objected to in full and man- dated the publication of a revised version. Irrespective of unequal treatment, the authority based its complaints on further requirements which it derives from the general ban on discrimination as a benchmark for usage conditions, in particular the "principle of transparency" which prescribes 46 Regulatory Policies that usage conditions must be worded so that a completely unqualified reader can grasp the meaning. DB Netz AG submitted a petition for temporary judicial relief against particularly serious complaints regarding the network statement for rail in- frastructure, for example complaints relating to the incentive system, or the ban on freight transport on the Berlin north–south line and the new-build Nuremberg–Ingol- stadt line. That petition was sustained in full by Münster Higher Administrative Court in its decisions of 26.3.2007 (13 B 2592/06). The infrastructure managers concerned promptly adapted the remaining clauses to satisfy the demands of the regulatory au- thority owing to the immediate enforceability of the notices and they duly came into force on 0.4.007. Nonetheless, they wished to have the fundamental legal issues clarified in court and therefore, after failing to win the appeal proceedings, took legal action against all the notices on which no decision had been issued. Münster higher administrative court rejects extension of the regulatory powers As the outcome of these proceedings is not yet clear, the DB AG infrastructure man- agers concerned decided to avert further intervention by the regulatory authority by waiving any amendments to the network statement in force from 0.4.008 to 9.4.2009 as far as possible in 2007. This was primarily intended to reduce legal un- certainty on the part of the market players. The amendments which DB Netz AG did make referred first and foremost to operating and technical regulations and were necessary owing to technical changes. The company duly notified the regulatory au- thority of these amendments. Furthermore, revised usage conditions were submitted UBB appealed against the order to the Federal Network Agency by Deutsche Umschlaggesellschaft Schiene (DUSS) for to submit new usage conditions. the freight terminals under its management and by Usedomer Bäderbahn (UBB) for its passenger stations, rail infrastructure and services facilities. In the year under report, the Agency again objected to the recast and revised us- age conditions either in full or at least to a large extent, claiming that they infringed its "principle of transparency". It threatened the companies with penalties if they did not adapt these conditions to satisfy the criteria of the Agency. In addition to indi- vidual clauses, it also objected to the methods of structuring the document. All the companies concerned have appealed against the notices and invoked Cologne Admin- istrative Court to ensure that their objections have a suspensive effect. In the appeal proceedings, Münster Higher Administrative Court has meanwhile sustained all these petitions in full or at least in part in rulings of 8.0.008 and 5.0.008. In its rulings, the court issued fundamental statements on the interpretation of the ban on discrimination and the scope of the regulatory authority's powers during the preliminary examination procedures and rejected excessive interpretation. It contra- dicted the wide interpretation of the ban on discrimination advocated by the Federal Network Agency and Cologne Administrative Court and confirmed established court practice, which states that the offence of discrimination is given only when RUs are denied equal treatment regarding access to rail infrastructure without objectively legitimate reasons. Discrimination owing to unclear or contradictory regulations in usage conditions which apply to all parties is given only if that lack of transparency leads to concealed discrimination (Münster Higher Administrative Court, rulings of 8.0.008 – 3 B 04/07, 04/07 and 05/07 and rulings of 5.0.008 – 3 B 2091/07 and 2092/07). In view of the statements by Münster court, it can be as- sumed that the benchmark developed by the Agency for reviewing usage conditions will not be sustained during the formal investigation proceedings. As the regulatory 47 Since two years the Federal Network Agency is in charge of monitoring access to rail infrastructure. authority is increasingly applying the definition of transparency, which it derived from the ban on discrimination, outside the scope of its ex-ante examination in order to de- mand the subsequent amendment of usage conditions during the course of the year, the forthcoming decisions on the network statements of infrastructure managers will play a central role for the future of rail regulation. Regulation of charges and Performance Regime It is still not clear what strategy the Federal Network Agency will pursue for the regulation of charges, although it has announced its intention of conducting a full re- view. A study commissioned by the Agency to clarify charging issues pursuant to the General Railway Act (AEG) and Railway Infrastructure Usage Regulations (EIBV) was presented in May 007. In 007, the regulation of charge systems by the Agency was still largely restricted to sporadic reviews. At the start of the year, it initiated proceed- ings on the charging of loading lanes. DB Netz AG was able to remedy the Agency's reservations by changing its list of charges. In another instance, the Agency issued a notice objecting to a regulation on the adjustment of charges in connection with a contractual dispute. Since August 007, the regulatory authority has been conducting a comprehensive examination of the station charging system of DB Station&Service in the form of an ex-post procedure pursuant to Section 4f () AEG. In February 008, it instituted parallel infrastructure access proceedings in which it is examining the level and structure of the infrastructure charges of DB Netz AG. Independent of the decision by the regulatory authority, DB Netz AG suspended settlement of accounts based on the incentive system for both freight and passenger transport in November 007. The incentive system – or Performance Regime – is aimed at ensuring that rail infrastructure managers and transport companies utilise the capacities of the rail network as efficiently as possible. In response to a request from a group of European freight transport companies, Frankfurt Regional Court declared individual passages of the DB Netz AG Performance Regime invalid in its ruling of 6..007 owing to a breach of the law on general terms and conditions of business. The ruling does not stipulate the relation between the provisions of rail legislation on access to rail infrastructure and the provisions of monitoring general terms and conditions of civil law and thus correctly does not conduct a comprehen- sive investigation of the legitimacy and expediency of the Performance Regime pursu- ant to the law on injunctions. However, it had no fundamental reservations against the review of individual clauses pursuant to civil law, as these clauses had not been 48 Regulatory Policies approved by the authorities. The court was further prepared to accept that the solu- tion based on its ruling did not make any economic sense. It thus forced DB Netz AG to suspend the settlement of accounts based on its incentive system in contradic- tion of the provisions of rail legislation on freight transport. To avoid discriminatory treatment of its customers, DB Netz AG simultaneously also suspended this form of settlement of accounts for passenger transport. This, in turn, led to the institution of regulatory proceedings by the Federal Network Agency. In its ruling of August 007, Münster Higher Administrative Court upheld the ruling of Cologne Administrative Court of 0.0.006 in respect of the "supplement for spe- cial trains." It rejected DB Netz AG's motion for appeal proceedings (OVG Münster 3 A 08/07). The court claimed that the ten per cent supplement which was levied until the end of 006 constituted discriminatory treatment for which there were no objec- tive grounds. The ruling is based on the legal situation prior to the 005 amendment of the Railway Act. Its grounds for the decision were primarily that no sufficient and plausible explanations had been submitted for the additional charges. Point of conflict: construction work and scheduling In connection with construction work, In 007, the Agency paid increasing attention to information and coordination proc- the Agency instituted a total of ten esses in connection with construction work, instituting a total of ten infrastructure proceedings on infrastructure access access proceedings relating to the installation of building sites and issuing four deci- and issued four notices. sions. In its notices of 2.3.2007 and 29.8.2007, the regulatory authority established discrimination of an RU owing to belated information about construction work. It took that individual case as grounds for obliging DB Netz AG to make extensive changes to its information and coordination processes in connection with construc- tion work without any advance warning as part of its ex-post monitoring of network statements pursuant to Section 4f () No. AEG, setting .0.007 as the dead- line for implementation. It did not claim discriminatory treatment of parties entitled to access. The demands of the Agency are neither in line with the processes of con- struction work planning nor with the other operating and technical circumstances in such cases. Even if implementation of the requirements was technically feasible in the first place, it would lead to severe financial consequences. The authority's demands are not appropriate, as DB Netz AG itself has already been endeavouring to remedy this situation for some time and can already offer demonstrable success as regards optimisation of its construction operations planning. DB Netz AG has therefore ob- jected to that notice in the form of administrative proceedings and has also applied to the court for summary judgements. Cologne Administrative Court granted summary legal protection by ordering the Agency to suspend execution of its notice until con- clusion of the appeal proceedings. Since then, the Agency has conducted several hearings at which DB Netz AG ex- plained its current practice and the proposed changes to its planning procedures for construction work. Since October 007, it has been unclear whether the Agency will nevertheless go ahead with the appeal proceedings or whether it will be willing to de- velop a concept for a long-term solution in cooperation with DB Netz AG. In view of this uncertain legal situation, DB Netz AG saw itself forced to revoke its notification of 15.10.2007 on the planned amendments to its network statement. That was necessary to avoid further complication of the procedures owing to overlap- ping orders. The Agency had already implied that it would file extensive complaints about the amended clauses in the scope of its preliminary review. 49 Another focal point of the Agency's work is the examination of the regulations regard- ing traffic control in force at DB Netz AG, which are aimed at ensuring the fastest pos- sible restoration of scheduled operations after disruptions. The Agency took several If they are unable to satisfy demand complaints by RUs as grounds for conducting a fundamental examination of the regu- for train paths to an adequate extent, the operators have to declare the lines lations of DB Netz AG as stated in Directive 40.005, which forms part of the operat- congested. ing and technical rules. Again, the Agency indicated that it believes the DB Netz AG regulations on are "not transparent". Framework agreements rendered possible In 007, three RUs exercised their option of signing aperiodic framework agree- ments with DB Netz AG to come into force as from the 008 working timetable. The DB Netz AG network statement permits parties entitled to access to sign framework agreements for a longer term than the working timetable in order to secure rail in- frastructure capacities. These capacities then enjoy priority in terms of train path construction in accordance with the relevant legal regulations. The three framework agreements could only be concluded after court proceedings, as the Agency had origi- nally prohibited them in its notices of 7.3.007. One of the three RUs concerned succeeded in provisionally enforcing the conclusion of its framework agreement be- fore Münster Higher Administrative Court (OVG Münster, ruling of 0.4.007, 3 B 537/07). DB Netz AG subsequently succeeded in dispelling the Agency's reservations and securing the unconditional conclusion of the framework agreements for all three RUs. In its ruling to dismiss the proceedings of 4.6.007, the court stated that it had reservations against the basis for the Agency's powers and the suitability of the order it had issued. Congested rail infrastructure Pursuant to the EIBV, line sections on which demand for train paths cannot be sat- isfied to an adequate extent must be declared congested by the rail infrastructure manager, which is then obliged to conduct a capacity analysis and draw up a plan for increasing rail infrastructure capacity pursuant to strictly specified procedures. In 2007, DB Netz AG had numerous meetings with the EBA on that subject and finally also with the Agency. The EBA had issued a documented procedure for defining con- gestion on rail infrastructure. In 2007, when applying that definition, DB Netz AG first declared three railway line sections (line 5200: Gemünden–Würzburg, line 5900: node Fürth–Bamberg, line 5910: Würzburg–Fürth) to be congested. The administrative and court procedures in connection with non-discriminatory access to rail infrastructure and service facilities in 007 were otherwise limited to a moderate number of individual cases. In its notice of 0..007, the Agency stated that the operating procedures in force on the Köthen–Aken line since 1996 (spur line block) was in contravention of the provisions of railway law on access to rail infra- structure. The EBA, in its capacity as competent rail regulator, had not previously ob- jected to that procedure. The regulatory authority further prohibited DB Netz AG from billing the parties entitled to access for the additional charges sustained because of this procedure. After failing to win the appeal proceedings, DB Netz AG filed an action with Cologne Administrative Court on 12.2.2007 (18 K 494/07), which is still pending. In its notice of 3.4.007, the Agency obliged DB Netz AG to permit steam loco- motives to operate on the Berlin Stadtbahn infrastructure subject to prior notice. 50 Regulatory Policies The decision was not upheld by Cologne Administrative Court which, in its order of 30.4.2007 (18 L 543/07) ordered that the objection filed by DB Netz AG against the decision should have suspensive effect. The Federal Network Agency filed an appeal For its second market survey, the against that order with the Higher Administrative Court which it subsequently with- Agency sent off some 1,600 question- drew, waiving the appeal proceedings as the RU concerned had no longer requested naires to rail infrastructure managers train paths. and parties entitled to access. In its declaratory notice of .6.007, the Agency stated that the removal of level crossing keepers by DB Netz AG on the Dorsten–Coesfeld line operated by NWB was discriminatory. After failing to win the appeal, DB Netz AG filed an action with Co- logne Administrative Court on ..007 (8 K 36/07). In addition to the Federal Railway Office, the Federal Network Agency also insti- tuted infrastructure access proceedings on the conception of the operations centres and the network control centre of DB Netz AG on 8.6.007, demanding informa- tion about the structure, staffing and operating sequences at the operations centres and the network control centre. The Agency classified the operations centres and the network control centre of DB Netz AG as service facilities and therefore believes that non-discriminatory access is jeopardised if only employees of DB companies are granted access. Market survey by the Federal Network Agency in 2007 The Agency conducted its second general market survey in spring 007 and sent ap- proximately ,600 questionnaires to rail infrastructure managers and parties entitled to access. As in the previous year, the DB subsidiaries also participated in the survey, but without acknowledging any obligation to do so. According to the Agency, the market survey data is also used to enable it to monitor infrastructure charges. Claim- ing that the Agency was not authorised to conduct such a survey, the DB companies chose not to answer some selected questions. In its notice demanding information on ..007 the Agency mandated Railion Germany AG to answer the outstanding questions. On February 008, Münster Higher Administrative Court ordered that the objection filed by Railion Germany AG should have suspensive effect as the notice issued by the Agency would "in all probability fail to be sustained in a formal investi- gation procedure". Investigation regarding company lawyers In its notice of 4..006 the EBA prohibited DB Netz AG from entrusting lawyers employed by DB AG to act as its representatives or consultants in legal cases relating to decisions about the working timetable, allocation of occasional train paths and infrastructure charges. The ban also applies to the preparatory work for these deci- sions. The Agency based its decision on Section 9a AEG, claiming that this practice of seeking / providing legal advice constitutes unlawful intervention in the entrepre- neurial freedom of DB Netz AG. The parties concerned filed an appeal against the order and applied for provisional judicial relief from Cologne Administrative Court. In view of the complexity and fundamental importance of the issues in dispute, the EBA temporarily suspended execution of its notice until a decision was reached in the formal investigation procedure. In its ruling of 4..007, Cologne Administrative Court confirmed the decision of the EBA, upon which the parties concerned filed an appeal with Münster Higher Administrative Court. 5 Learning from others is a key to success. A look at the details of the railway markets in Austria and Switzerland reveals highly different approaches. The second symposium on "Competition and Regulation" provided an opportunity to hear about the experiences of regulation in other countries and industries. However, before German railway law undergoes a further reform, it is impor- tant to gather sufficient experience inside Germany itself. 5 Special Areas of Discussion A look at the alpine regions Switzerland is frequently regarded as a model country as regards the structure of its rail market. In Austria, too, the railway enjoys a central role. Developments in both countries and a comparison with the German rail markets reveal that we can learn a great deal from each other. As transit countries for the enormous freight quanti- In Austria, on the other hand, traffic performance by the ties carried on the north-south corridors, Austria and railways fell from 9.76 billion passenger-kilometres in Switzerland play a key role for cross-border transport 1995 to just 8.17 billion in 1999, although the popula- to and from Germany. As a result of environmental tion is comparable with that of Switzerland. Since then, pollution and roads which, despite high infrastructure however, rail has again gained ground and by 006 had expenditures, remain notoriously congested, transit traf- reached a figure of 9.30 billion passenger-kilometres. fic increasingly presents a problem in both Austria and The rail freight trend, however, is totally different. Switzerland. Although traffic performance in Switzerland in this sec- Both countries have consequently introduced tolls for tor also rose by 3 per cent to .68 billion tonne-kilo- all truck traffic with a gross vehicle weight of 3.5 tonnes metres between 1995 and 2005, Austria was the clear or more. In contrast to Germany, toll charges are not winner here, with growth of almost 60 per cent between restricted to motorways. Both countries are attempting 1995 and 2006, reaching a figure of 20.98 billion tonne- to limit the negative effects of the high traffic volumes, kilometres. especially for the environment, by encouraging rail transport. Their experience of steering traffic flows can Successful Swiss railways benefit other countries which have only recently become aware of this problem. A fair comparison between Aus- According to Eurostat, the shares of rail in the passenger tria and Switzerland has to take into account the differ- transport markets in Germany, Austria and Switzerland ent starting points in the two countries. are above the EU average of 6.6 per cent (reference year 000). Swiss railways are the most successful and led Rail transport developments the Western European market in 006 with a share of 14.2 per cent of total traffic performance. It is apparent that the Swiss railways are exception- Swiss and Austrian railways also account for a high ally successful in the passenger transport sector, where share of freight transport and their competitive posi- traffic performance has risen continuously from 11.71 tion is particularly good in trans-alpine domestic and billion passenger-kilometres in 1995 to 16.14 billion in transit traffic. In addition to the bottlenecks on the 005, which means a growth rate of approximately 38 roads, this can be attributed to numerous transport per cent. This can be attributed to a highly concentrated policy instruments, such as extensive infrastructure product range (half-hourly departures on most main projects, toll charges for trucks, and public support for lines). According to information supplied by the Swiss combined transport. However, the modal shift from road Federal Railways (SBB), the largest provider, the range to rail accounts for only a part of the extremely high of passengers trains has almost doubled over the past and still growing share of rail in Switzerland. In view of twenty years. The success of rail in Switzerland is also the weaker growth of rail in absolute figures compared evident from the very high number – in terms of the with Austria, it appears likely that the high share of the population – of more than .3 million regular customers railways is due to the fact that truck traffic has been who have a "Halbtax" or general subscription. rerouted through other countries. The Swiss modal shift 53 policy is therefore partly at the expense of other coun- January 005. Key elements of the new structure are tries and total truck traffic has in fact increased owing four largely independent operating corporate segments, to these diversions. A potential remedy could be better which operate under the umbrella of ÖBB Holding AG. coordination and standardisation of transport policies in These subsidiaries are the countries concerned. ÖBB Personenverkehr AG (local and long-distance New structure in Austria since 2005 rail services) Rail Cargo Austria AG (RCA, freight transport and The largest and best-known railway undertaking in Aus- integrated logistics services provider) tria is ÖBB (Austrian Federal Railways) founded in 1923. ÖBB Infrastruktur Betrieb AG (provision, operation The company was restructured pursuant to the "003 and maintenance of rail infrastructure) Railway Structure Act" which had been the subject of ÖBB Infrastruktur Bau AG (planning, construction, highly controversial debate and which came into force on financing and asset management of rail infrastructure) Passenger transport: Swiss railways have continuously increased traffic performance Traffic performance by rail passenger transport in Switzerland and Austria (million passenger-kilometres) 25,000 20,000 16,144 14,147 14,509 14,914 12,501 12,620 13,301 15,000 11,713 11,890 12,051 12,148 10,000 9,755 9,824 9,061 9.296 8,477 8,313 8,166 8,374 8,573 8,565 8,557 8,549 5,000 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 1) Freight transport: Austria achieved almost 60 per cent growth between 1995 and 2006 Traffic performance by rail freight transport in Switzerland and Austria (million tonne-kilometres) 25,000 20,980 18,957 20,000 17,132 17,931 16,602 16,895 16,869 14,199 14,714 15,039 13,160 13,333 15,000 10,000 11,080 11,172 10,746 11,489 11,677 9,831 10,598 8,856 8,836 9,411 8,031 5,000 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 1) Switzerland Austria 1) No figure for Switzerland – according to the Swiss Federal Statistical Office, the figures for the year 2006 will not be published until the end of 2008. Sources: Swiss Federal Statistical Office; Statistik Austria, ÖBB 54 Special Areas of Discussion Almost all the trains in Austria are run by ÖBB. Until today, public service contracts have not been allocated in competitive procedures. The task of ÖBB Holding is to protect the stake of the Fed- extent to other publicly-owned companies. The Austrian eral government and ensure a uniform strategic focus of the audit office recently harshly criticised the lack of a re- Group. Cross-sectoral functions are currently handled by ÖBB gional rail concept. Dienstleistungs-GmbH, but that company is to be disbanded Nevertheless, several other railway companies – in- and its functions distributed between the Group companies cluding DB AG – also operate trains on the ÖBB network. or, in the case of the major HR division, to the Holding. The However, this takes the form of mutual cooperation branches of the ÖBB Holding in turn have their own subsidi- agreements. The trains run from the connecting or bor- aries, such as ÖBB Traktion GmbH, Brenner Eisenbahn GmbH der station for the account of and under the responsibil- and ÖBB-Postbus GmbH. Altogether 144 companies belong ity of ÖBB Personenverkehr AG. In the road-bound local to the ÖBB group. public transport sector, ÖBB is again the main provider, Based on the year 2006 and the ÖBB network, ÖBB is by far the largest provider of rail transport services in Austria, with an intramodal market share of approxi- mately 93 per cent of passenger transport and 92 per High market shares for rail, especially in freight transport cent of freight transport. According to the 007 annual Share of modal split (per cent) report of the Austrian regulatory body, Schienen-Con- passenger transport freight transport trol GmbH, some private railways provide a substantial volume of passenger transport services on their own 42.6 41.9 infrastructure. The share of ÖBB in total rail traffic per- 40 formance in the passenger transport sector amounts to 35.7 approximately 91.5 per cent. The 5,700-kilometre long 35 ÖBB network makes up more than 90 per cent of the to- 32.5 30 tal Austrian standard- and narrow-gauge network, while the remaining 464 kilometres are split between numer- 25 ous small private railways. In the passenger transport sector in particular, the market shares of the private 20 railways are generated almost exclusively on lines run by 17.4 15.9 15 these railways themselves. 14.2 12.6 To date, there has been practically no increase in com- 10 9.4 petition in the Austrian rail passenger market, although 8.4 8.0 7.8 non-discriminatory access is guaranteed. This is because 5 there have been no competitive awards of public service contracts in rail passenger transport to date and as a 2000 2006 2000 2006 rule, it is not possible to recover the cost of transport Germany Austria Switzerland services which have not been commissioned by public authorities. The greater part of traffic performance is Sources: DB data (Germany); Progtrans – European Transport Report 2007/2008 (Austria, Switzerland) awarded to ÖBB on a discretionary basis and to a smaller 55 with ÖBB-Postbus GmbH, and a market share of more proved to be a crucial obstacle to the development of than 60 per cent. However, some invitations to tender competition. In future, intergovernmental agreements on have meanwhile been conducted in that sector. the reciprocal recognition of vehicle homologation and the amended Interoperability Directives approved in the Dynamic growth in rail freight in Austria first reading in 2007 could remedy this situation. The situation for rail freight transport is totally differ- Switzerland promotes modal shift to rail ent, as traffic performance by private railways rose by approximately 40 per cent in 006, compared with an In 1994, the Swiss electorate voted in favour of the pro- increase of just five per cent for RCA, which means that tection of the alpine region against transit traffic (Alpine the private railways have won market shares from ÖBB. Initiative), endorsing a new transport policy which aimed Competitors have meanwhile secured an intramodal mar- at transferring as much traffic as possible from road ket share of approximately eight per cent (in terms of to rail. That political objective has been confirmed on tonne-kilometres) on the ÖBB network. The share of pri- several occasions since then, latterly in 004 when the vate railways is particularly high on certain routes, such Avanti Initiative was rejected. The modal shift policy is as the Brenner transit. As in Germany, the newcomers to actually enshrined in the Swiss constitution and led to the market specialise in block train transports of certain the adoption of a law to promote the shift of traffic from types of freight, whereas RCA – like Deutsche Bahn in road to rail (Verlagerungsgesetz) in 2001 which defines Germany – acts as a classic all-round provider. specific implementation measures. Like DB, ÖBB has set itself the target of expanding Instruments of the modal shift policy include the per- into other countries, enabling it to offer its customers at- formance-related heavy traffic levy, the New Rail Alpine tractive products as a one-stop shop, especially for cross- Transit (NEAT), the rail reform and a ban on night and border transports. RCA concentrates primarily on South- Sunday traffic. The EU acknowledged the Swiss modal Eastern Europe. One notable transaction is the takeover shift policy in the Overland Transport Agreement which of the Hungarian MÁV Cargo for EUR 406 million by a consortium formed by RCA and the Austro-Hungarian company GySEV. When the agreement was signed on January 008, the third-largest player in the European rail freight market came into being. Expansion of capacities on north-southbound lines In accordance with the different access opportunities The largest Swiss rail infrastructure project NEAT involves the following for competitors to the passenger and freight transport three individual projects: Lötschberg, Gotthard and Ceneri base tunnels. markets, the IBM 2007 Rail Liberalisation Index rates Austria in sixth place of the 7 participating countries France Paris Frankfurt Stuttgart Germany in the passenger transport market and in third place in the freight transport sector. It must be emphasised Munich Paris that European law does not prescribe open markets for Basel domestic passenger transports. Even if no competition Olten Zurich St. Gallen has de facto evolved to date, Austria grants access to its FL Austria market in principle, in contrast to many other countries. Arth-Goldau Berne Switzerland On the whole, Austria ranked in fifth place in the 2007 Gotthard Liberalisation Index, which is a substantial improve- Lötsch- ment compared with the previous Index in 004. The berg Geneva time-consuming and expensive approval procedures still Ceneri Lyon required in Austria are described as a problematic aspect Chiasso for market access by both the IBM Liberalisation Index and also the annual report of the regulator Schienen- Milan Control GmbH. As there is no well-developed market for France Turin Genoa Bologna Italy approved used vehicles in Austria to date, the availability Source: Swiss Federal Department for the Environment, Transport, Energy and Communications of locomotives and other rolling stock has in the past 56 Special Areas of Discussion In Switzerland, SBB still enjoys protection against competition in the passenger market. came into force in 00. In return, Switzerland raised the north to south. It involves costs equivalent to approxi- permissible gross vehicle weight for trucks to 40 tonnes, mately EUR 5 billion, 55 per cent of which is funded by the standard figure in the EU, and stipulated a ceiling for the heavy traffic levy. The remainder is funded by loans, transit fees. an increase in value added tax and mineral oil tax. Since 1 January 2001, the heavy traffic levy has been After several adjustments owing to increasing costs, payable on all Swiss roads by vehicles with a total weight NEAT now comprises the following three individual of 3.5 tonnes or over. The level varies according to the projects (cf. map on page 58): distance travelled in Switzerland, the gross weight of the vehicle and its EU emissions classification. Between Lötschberg base tunnel 00 and 008, the above charge for a vehicle in the me- Gotthard base tunnel dium emissions class (Euro 3) increased from the equiva- Ceneri base tunnel lent of one eurocent per kilometre and tonne of gross weight to .7 cents. This means that a 40-tonne truck in Whilst the Lötschberg base tunnel has been in opera- that emissions class has to pay EUR 68 in toll charges for tion since June 007 and has substantially reduced jour- a distance of 100 kilometres, which is roughly five times ney times between the Swiss German region and Central higher than in Germany, where tolls are moreover levied Valais, the Gotthard base tunnel, the most important only on a part of the road network. Switzerland has thus project segment, is not scheduled for completion until created a strong incentive for shifting transports to rail, 06 and the Ceneri base tunnel, which also forms part not least because the state also uses the income gener- of the Gotthard corridor, will not go into operation until ated from the above charge to finance major rail projects. as late as 2019. The Swiss rail network is the densest in the world, with the exception of a few small states, with approximately Competition only in freight transport metres of line per square kilometre of area, com- pared with 06 metres in Germany and 73 metres in Aus- Although Switzerland is not a member of the European tria. The standard-gauge network has a total length of ap- Union, most of the provisions of the first railway package proximately 3,650 kilometres, of which the state-owned nevertheless apply in the country. In 1999, accordingly, SBB railways operate approximately 3000 kilometres SBB was transformed from a state institution into a joint and BLS AG, the second-largest provider, approximately stock company. Infrastructure and transport have been 440 kilometres. Almost the entire network is electrified. separated, underneath the umbrella of the SBB Group. Despite the already excellent infrastructure endowment Since January 007, railway undertakings from the Mem- compared with many other countries, further substantial ber States of the European Union have had open access sums are still being invested in infrastructure. to the Swiss freight transport market, which was opened up to national railway undertakings as early as 1999. Major investments in infrastructure SBB – one of the major competitors of DB on the Ger- man network – has also lost market shares in its home The largest Swiss rail infrastructure project NEAT is in- market since then. According to the Swiss Federal De- tended to enable the transport of larger capacities from partment for the Environment, Transport, Energy and 57 Communications, SBB still handles 55 per cent of all table year if there are insufficient capacities to cope with transit traffic through Switzerland, while its market share all train path applications, and initiates the conflict reso- of domestic rail transport is still as high as 90 per cent. lution procedure. The Swiss Federal Office of Transport In contrast to DB and ÖBB, which have promoted inte- (FOT) and the Railways Arbitration Commission, which is gration of the transport chains in recent years and now part of the FOT in organisational terms, also have regula- offer numerous services – including road haulage – as tory powers. According to the IBM study "Rail Regulation part of the pre- and post-rail transport chain, SBB has in Europe", the FOT is responsible primarily for the issue concentrated primarily on pure rail transport. As the of licences and safety certificates and for reviewing the freight transport division of SBB has been operating with network statement. The Arbitration Commission, whose a high deficit for years despite the booming overall mar- members have other full-time jobs, is entitled amongst ket, it is regarded as a primary concern in Switzerland. In other things to initiate investigation proceedings in cases 2007, the operating loss amounted to 87.9 million Swiss of conflict and discrimination and to make decisions. francs, which was twice as high as in 006. A restructur- Owing to the restrictions in access to the passenger ing programme will involve approximately 400 redun- transport market in particular, Switzerland obtained only dancies at the company. At the beginning of 008, there seventh place overall in the IBM 2007 Liberalisation In- were even rumours in the media that the freight division dex. The country ranked fifth in the freight transport sec- was to be sold off, although these were promptly denied tor and tenth in passenger transport. Switzerland fared by SBB. particularly well in the Europe-wide comparison in terms In the passenger transport segment, railway undertak- of transparency and other practical access criteria. ings have to have a franchise or a transportation contract before they can offer services, a requirement which The Swiss railway poses the highest burden protects the incumbents – first and foremost SBB – from on the taxpayer competition. Although the competitive award of fran- chises is possible in principle, no use has been made of The level of public contributions for rail in Switzerland that option to date. Accordingly, the 3 per cent market is far higher than in Austria: at EUR .4 billion, Swiss share held by the competitors is divided mainly between citizens paid 57 per cent more for transport services BLS AG (in particular S-Bahn Bern) and Südostbahn and infrastructure in 005 than the Austrians, where (SOB), companies in which the majority stakes are also the figure was EUR 1.42 billion (all figures based on year state owned. 000 prices). That gap continues to grow. In 000, the The structure of the local rail passenger market has difference between the two countries was only 44 per been deliberately encouraged by the politicians. The cent. However, such a comparison has to take into ac- Swiss Federal Council recently expressly stated that the count that infrastructure projects such as NEAT have target of consolidation and restriction of the number of a major influence on performance by the state in both railway undertakings stated in the "SBB+X" concept in these countries. In view of the long service life of tunnels 003 had been achieved. This concentration is intended and bridges, which can be up to several decades, these to raise the competitiveness of the remaining undertak- projects distort the costs of rail. ings, also on a Europe-wide scale. This means that not Moreover, the rail mode is highly successful in Swit- only SBB, but also BLS and their freight transport subsid- zerland. A meaningful comparison of the two countries iaries can participate in international competition from a places the burden on the budget of the state in relation secure basis in their home market. to traffic performance. This has the additional advantage SBB, BLS and SOB each own a 25 per cent stake in of ensuring that the figures can be compared with trends Trasse Schweiz AG – the remaining 5 per cent are in Germany. owned by the Association of Public Transport (Verband In all three countries, public contributions per unit öffentlicher Verkehr). Requests for train paths for the of traffic performance peaked in the years 2001/2002. annual timetable have to be addressed to that company, In addition to declining absolute monetary sums in Ger- which checks them for completeness and forwards many and Austria, this is attributable to the increasing them to the relevant infrastructure managers. Trasse traffic performance in all three countries. Because of Schweiz AG is also consulted during the course of a time- the high fixed costs of the rail mode – especially in the 58 Special Areas of Discussion Costly tunnels and bridges raise the costs of the infrastructure in the alpine regions. infrastructure sector – an increase in transport volumes 4.7 cents over the same period. In Germany, state contri- automatically means a sharp decrease in the contribu- bution were down 37.5 per cent, from 6. cents in 00 tion required per traffic performance unit. State funds to four cents in 006. This means that the German gov- per traffic performance unit in Switzerland thus de- ernment pays only just over half the Swiss level of public creased from nine cents per passenger-tonne-kilometre funds per traffic performance unit. The comparability in 00 to eight cents in 005. That decrease was even of these figures is limited by the different geographical more pronounced in Austria, where the public funds per structures of the countries as well as the different statis- passenger-tonne-kilometre decreased from 6.7 cents to tical methods for recording and breakdown of the funds. Public support for rail in Germany, Austria and Switzerland State funds to the railways at year 2000 prices Actual public contributions per traffic performance unit (EUR billion, figures rounded) (EUR per passenger-tonne-kilometre at year 2000 prices) 10.0 0.10 9.777 9.854 0.090 0.088 9.5 0.09 0.084 0.085 0.085 9.520 0.080 9.0 9.025 0.08 0.067 0.067 8.5 0.07 0.063 0.062 0.061 8.0 0.06 0.063 0.062 7.950 0.058 0.051 7.842 0.055 0.047 7.5 0.05 7.369 0.048 0.046 0.04 0.040 2.5 2.241 2.221 2.232 2.237 0.03 2.090 1.995 2.0 1.709 1.714 0.02 1.602 1.616 1.385 1.424 1.417 1.5 0.01 2000 2001 2002 2003 2004 2005 2006 1) 2000 2001 2002 2003 2004 2005 2006 1) Switzerland Austria Germany 1) No figure for Switzerland – according to the Swiss Federal Statistical Office, the figures for the year 2006 will not be published until the end of 2008. Sources: German Federal Statistical Office, Swiss Federal Statistical Office, Statistik Austria, Eurostat, DB data, ÖBB, IMF World Economic Outlook Database (October 2007) 59 Regulation practice not yet settled Numerous fundamental questions on the practical application of railway legislation in respect of unbundling and access regulation have yet to be clarified. This refers above all to infrastructure charges. As a consequence, the market players face a considerable planning uncertainty. In a European comparison, the German rail regulation re- for instance by calling in experts, the substantial effort gime is highly effective. However, in the third year since spent on demanding further amendment of the charging introduction of the new legal framework, regulation regulation was actually counterproductive. practice has revealed that stable conditions have still not been achieved. The comprehensive activities of the Fed- Regulation of access charges still uncertain eral Network Agency last year did little to alter that situ- ation. On the whole, no positive effect on competition is The Federal Network Agency has repeatedly expressed evident from the numerous proceedings instituted by the concerns that the existing charging systems could po- Agency since it took up work. This is hardly surprising, tentially infringe the provisions of the German General considering that competition had already been working Railway Act (AEG) or the Railway Infrastructure Usage well for years. At the same time, the regulation activities Regulations (EIBV). However, no formal complaints have have generated substantial expense. been filed. In August 2007, the Agency first demanded The gradual optimisation of regulatory practice on the detailed cost documents on the station charging system basis of existing rail legislation is in the interests of the from DB Station&Service. In February 008, similar entire market. It is vital to remedy uncertainty regarding requests were submitted for information on the infra- interpretation of the existing provisions, in particular structure charging systems of DB Netz AG and Usedomer those concerning the regulation of charges. Although the Bäderbahn. All the data requested by the authority was Agency has endeavoured to provide more legal certainty, provided, together with detailed explanations. 60 Special Areas of Discussion The Agency's call for an incentive regulation is of par- The cost pressure exercised on the infrastructure sectors ticular relevance for the market players. This would by internal customers in the integrated Group further be aimed at creating incentives to boost efficiency by raises the incentive to be efficient. Being the largest user unbundling the maximum permissible charges from the of the network and being connected with the infrastruc- costs of the regulated undertakings. The infrastructure ture through the DB Group, they would be particularly manager would then be permitted to levy charges below, affected if the tracks were managed inefficiently. but not above, the specified price ceiling. In spring 2007 The opportunity provided by the future Performance the Federal government appointed a "working group for and Financing Agreement (PFA) of using funds flexibly the ongoing development of the regulation of charges wherever they yield the greatest benefit on the basis of in the rail sector". The party was chaired by the Federal economic criteria will ensure a further increase in effi- Network Agency and included representatives from Fed- ciency. The European Commission also believes that such eral and Land ministries, public authorities and business multi-annual contracts will be a major instrument for enterprises. After a total of seven meetings, the Agency ensuring efficient management of rail infrastructure and presented a final report in which it advocated incentive is therefore currently drawing up concrete recommenda- regulation. tions on that subject. The Commission's Communication DB AG believes that the Agency's demand is not only on multi-annual contracts which was directed to the Eu- wrong, but also does not accurately reflect the outcome ropean Parliament and Council makes that clear. of the working party's discussions. There are no objective reasons for incentive regulation in the rail infrastructure Government should decide on use of funds sector, neither at present nor in the case of implementa- tion of any of the privatisation models currently under In contrast, efficiency paths prescribed by the authori- discussion. Nor does the Agency's report eliminate DB's ties will not raise management incentives. Still, pro- reservations regarding the proposed changes in the tagonists of the incentive regulation use this argument regulation of the charging systems. DB AG has submitted to raise the hopes of the market players: in addition to a comprehensive statement on its position regarding in- declining infrastructure charges, they also promise other centive regulation: supposed advantages of the concept, such as avoiding The significant intermodal competitive pressure in the future line closures or cancellation of local rail services. transport markets prohibits rail infrastructure managers Even if satisfactory market trends enable recovery of from demanding excessive monopoly prices, which could the capital costs in future, so that efficiency gains could not be enforced in the market and would lead to an inter- be put to other uses, it should not be the remit of the modal shift onto road. That is also clear from the earn- Agency to state their appropriation. It should be first and ings of the DB infrastructure companies, which are still foremost in the hands of the Federal government to de- unable to achieve an acceptable return on their capital cide whether to reduce infrastructure charges or relieve employed. As price increases are confined within strict the burden on the taxpayer by spending lower govern- limits, the only way to improve earnings is to reduce ment funds on infrastructure. Alternatively, such funds costs. The present legal framework therefore already could also be used to upgrade infrastructure or improve provides a strong incentive to reduce costs and this will local transport services. However, such decisions be- remain the case as long as the charges are not sufficient tween budget and transport policy objectives should not to cover total costs, including costs of capital. In view be left to an authority which has already stipulated the of the level of invested capital which has still not earned course it will take. appropriate returns, this is unlikely to change in the fore- Before this debate can be continued, it is also neces- seeable future. sary to reassess the arguments discussed by the working 6 Intermodal competition limits the leeway of the network operator to set prices. party in the light of the current state of the privatisation managers (IM) satisfies the legal requirements stated in discussion. The reasoning propounded by the Federal the Railway Infrastructure Usage Regulations (EIBV), ac- Network Agency in favour of incentive regulation is cording to which access charges – such as infrastructure based on a privatisation model which is no longer up for and station charges – have to be designed to offer both discussion. Further development of the access charging infrastructure managers and transport operators "incen- systems should therefore not be discussed until tives for reducing disruptions and increasing efficiency". The Deutsche Bahn IM have implemented these regula- the cornerstones for continuation of the rail reform tions as part of their charging systems and published have been defined in detail them in the network statement. the fitness and efficacy of the existing regulatory The PFA will provide the federal railways with a fur- framework for access charging can be reliably assessed ther contractual instrument for quality control in the rail under practical conditions infrastructure sector. The design of the PFA is closely the risk of abuse through excessively high prices has linked to the political decision process on partial privati- become relevant in practice sation of DB AG. Although the Key Performance Indica- tors – such as standard journey time loss, or minimum Reconciling quality assurance regulations investment and maintenance expenses – have not yet been finally specified, the PFA will prescribe strict speci- The income from access charges, in combination with fications for the quality of the entire infrastructure. Like public funds, determines the scope and the quality of the Performance Regime, this mechanism also works services that infrastructure managers can offer their cus- on the principle of sanctions. A company which fails to tomers. In their own economic interests, railway under- meet the defined standards runs the risk of penalties or takings already have an incentive to offer their customers a reduction/repayment of the funds stated in the public a high level of quality. This is true both for the transport service contract. Monitoring compliance with the PFA market, where transport companies serve passengers specifications is expected to be the responsibility of the and shippers, and for the infrastructure market at the Federal Railway Authority (EBA). interface between infrastructure operator and transport The coexistence of different quality control systems undertaking. These incentives are backed by statutory (see table) entails the risk of multiple burdens and con- and contractual regulations, such as the EU regulation on flicting specifications for the regulated companies, which rail passenger rights, or quality standards which are sub- consequently places high demands on the competent ject to sanctions in the public service contracts between authorities. Although different systems of quality con- ordering authorities and transport undertakings in the trol affect different contractual relations in each case, market for local and regional passenger rail services. there is close interaction between all the market players There are also several regulation systems in force for involved. This can be shown from the example of train rail infrastructure. On the one hand, the so-called Per- delays. A delay caused by a network operator can simul- formance Regime is aimed at reducing disruptions. The taneously mean that the railway undertaking has to pay Performance Regime implemented by DB's infrastructure compensation to the passengers and penalties to the or- 6 Special Areas of Discussion dering public authority, while the network operator has original plans of implementing its own scheme of quality to pay a penalty based on the PFA to the Federal govern- control in addition to the quality assurance measures of ment as well as payments pursuant to the Performance the PFA. Regime to the affected railway undertaking. In addition, if poor performance of the infrastructure manager is Regulatory framework must be transparent involved, the transport company also has the option of reducing the infrastructure charges. Each regulatory system has to abide by a number of fun- In this complex set-up of interlinked control systems, damental principles, which also serve as benchmarks for it is the job of the Federal Network Agency to assess their appropiateness. The costs of regulation must not the reasonableness of the Performance Regime and its exceed the potential additional benefits. The regulatory correct implementation. As part of the regulation of the authority has to make its decisions on the basis of trans- charging systems, it is also responsible for ensuring that parent and objective criteria to ensure that they are pre- the expenses sustained in connection with the applica- dictable and logical. Discretionary scope should be kept tion of these systems can be recovered. to a minimum wherever possible. The Federal Railway Authority, on the other hand, is The objective of regulation is thus to protect com- responsible for monitoring network quality and scope. petition, but not to protect individual competitors or Potential overlapping responsibilities also have to be groups of competitors. This not only involves preventing taken into account in the interests of integrated regula- discriminatory behaviour, but also supporting regulated tory practice. The final report of the Federal Network companies in their endeavours to achieve balanced earn- Agency on incentive regulation shows that the Agency is ings on a sustainable basis whilst simultaneously provid- aware of these problems, and has meanwhile rejected its ing investment incentives. If these basic rules are not Quality control systems in the rail sector Control system Affected market Implementation What is controlled? Competent authority Transport market Courts/ Passenger rights regulation Contractual Delays (RU/customer) conciliation body Local rail market Various quality Public authority as Public service contracts Contractual (RU/orderer) parameters contracting party Infrastructure market Regulatory authority Various quality Performance Regime Federal Network Agency (IM/RU) (Regulation of charges) parameters Performance and financing Infrastructure market Various quality Federal Railway Authority/ Contractual agreement (IM/Federal government) parameters Federal Audit Office Source: DB data 63 Providers and potential customers of rail infrastructure have specific knowledge of the subject matter involved. observed, regulation could in fact aggravate the market OECD: separation means higher regulatory expenses shortcomings that it is actually intended to remedy. When selecting which cases are to be investigated, The need to regard market reforms and regulation as their practical relevance should therefore be considered one integrated whole is also stressed in an OECD study to a greater extent than in the past. To date, the regula- which recommends distinguishing between vertical mar- tory authority has mostly investigated purely theoretical ket organisation in relation to the specific market condi- discrimination potential, which is virtually irrelevant for tions, stating that it is not possible to issue one catch-all network access under practical operating conditions. recommendation for or against the separation of infra- These complaints have often been triggered by a gen- structure and transport. It stresses that the disadvan- eral mistrust in the companies concerned, a motivation tages of full separation could outweigh the advantages, which is not in keeping with the rules of good regulatory especially on high-volume networks which are used for practice. mixed operations. For example, the Federal Network Agency objected to One of the key reasons for that recommendation are certain phrasings in the DB network statement simply the increasing regulatory expenses required to replace owing to the choice of words, although the meanings internal coordination mechanisms and existing quality were identical. Although the passages referred to main- and investment incentives created in the companies' tenance facilities of DB Netz AG and DB Gleisbau that own interests. As intermodal competition already re- were of no relevance whatsoever to competition, the stricts the market powers of the network monopolies in Agency claimed that they infringed a supposed "prin- the rail sector even without regulation, these expenses ciple of transparency", alleging that many expressions are offset only by limited potential additional benefits. were incomprehensible to the "lay reader", despite the The findings of the OECD are relevant for the debate fact that management of rail infrastructure is a business- on completing the German rail reform in two respects: to-business sector. firstly, they point out that the German government is The powers of the authority were specified in closer pursuing the right strategy in defending integrated rail detail in several rulings by Münster Higher Administra- operations. Secondly, they raise the question of whether, tive Court in January and February 008 (cf. chapter in view of the circumstances stated above, it would not "Courts define regulatory framework", p. 45). The court be advisable to consider less rather than more regula- rejected the "principle of transparency" made up by the tion. The potential outcome of additional benefits which Agency as grounds for intervention in the RIU's network might be generated by more intensive state influence statement. This stricter definition of discrimination has on the rail sector has to be weighed against substantial improved legal certainty for RIUs and the entire rail costs which would definitely be sustained by the authori- sector. ties and rail undertakings. 1) "Report to the council on experiences on the implementation of the recommendation concerning structural separation in regulated industries", OECD 2006 64 Special Areas of Discussion Discussion of regulatory framework At the second symposium on "Competition and regulation in the rail sector" held in Berlin on 31 January 2008, leading experts from politics and science continued to exchange their experiences. While the comparison with other regulated industries had been the dominant subject the previous year, this symposium concentrated on the question of the effectiveness of the reforms to date in the European railway markets. The opinions of the invited experts were by no means congruent. Dr. Iris Henseler- Unger, Vice-President of the Federal Network Agency, explained the fundamental reg- ulatory policy of the Agency, which states that its work has to lead to noticeable im- provements in price and quality for the consumers, as only then would the consumer accept privatisation. Professor Christian Kirchner of Berlin Humboldt University countered that argumentation with the statement that the rail reforms were aimed at improving the overall market situation and that restricting the focus to consumer interests was therefore inadequate. A key aspect was the question of what consequences should be drawn from initial experience of the new rail regulation. Henseler-Unger presented the position of the Federal Network Agency and advocated further amendment of the existing legislation Experts from politics, business and as a number of deficits had been identified, especially as regards the regulation of science attended the symposium charging systems, where investigations by the Agency had so far come to nothing. "Competition and regulation in the Georg Fürnkranz, Managing Director of the Austrian rail regulator Schienen-Con- rail sector" in Berlin. trol GmbH, argued that before any further legislative steps were taken, it was vital to define the objectives of market opening more precisely. That statement was backed by Professor Helmut Schmitt von Sydow, representative of the European Commis- sion, who spoke out against a fourth railway package, explaining that the European Commission was concentrating on the effective application of the existing legal framework. In connection with the formal implementation of the first two railway packages alone, the Commission had had to institute 0 infringement proceedings and was only now beginning to monitor implementation of the contents. Joachim Fried, Competition Officer of Deutsche Bahn AG, also pointed out the different status in the implementation of the European regulations. It was first important to gather and evaluate experience of how successful the different regulation models were in practice before there could be any question of revising the European legal stand- ards. To create a single market for the rail mode, market opening had to be pursued consistently throughout the whole of Europe and market regulation had to satisfy Europe-wide efficiency standards. That would raise the attractiveness of the rail mar- kets in future. The event clearly showed that there is no sound statistical basis for many of the analyses which were demanded. Some of the scientists in attendance are currently performing groundwork in this field, which will be taken into account in future dis- cussions and decisions. 65 Annex Practice of contract awarding differs considerably between regions Railway undertakings active in local and regional passenger transport (2008 timetable / correct at: 31.01.2008) NEG Flensburg NOB PRESS Kiel UBB OLA Heide MBB Stralsund SHB UBB Neumünster Rostock NOB NBE Wismar OLA Cuxhaven Lübeck AKN Wilhelms- ME haven Bremer- OLA Pasewalk haven Hamburg Schwerin OLA Neubrandenburg Emden NWB ODEG EVB Leer Neustrelitz Arriva ME Lüneburg NL Bremen Pritzwalk PEG Oldenburg Templin ME PEG Uelzen Soltau Wittenberge ODEG NEB Cloppenburg NWB Eberswalde Nienburg Celle Stendal NEB ME Berlin Wolfsburg OLA Potsdam Frankfurt/O. Hanover Rheine Osnabrück Brandenburg Brunswick ODEG Gronau WFB Hildesheim WFB OLA Bielefeld ERB ERB Magdeburg Hameln PEG NWB Halberstadt Jüterbog Münster HEX WFB Emmerich NWB ME Lutherstadt Dorsten Hamm HSB Wittenberg Cottbus NWB Lünen Paderborn KML CXS PEG Duisburg HSB/SWN HEX Halle Dortmund Arnsberg Göttingen Essen ABR RT Nordhausen Mönchen- gladbach RBE Hagen EB EB Kassel Mühlhausen Leipzig Görlitz Düsseldorf ABR CXS SDG HLB RTB CAN Dresden CXS RT Eisenach Zittau EB Freiberg Cologne Siegen Bebra Gera SBE Erfurt FEG SOEG Düren CBC Aachen WEBA Dillenburg Chemnitz Bonn HTB Gießen STB EB/STB Altenkirchen VBG Zwickau VEC Fulda STB SDG Koblenz Limburg HLB VEC EB Hof TR Wiesbaden Frankfurt/M. Coburg VBG HLB DB Regio and Schweinfurt subsidiaries Traben- Mainz Trarbach Bayreuth Subsidiaries of Darmstadt Bamberg VEN Alzey VIAS Trier Würzburg Veolia Verkehr TR Mannheim RNV VBG Subsidiaries of Kaisers- Heidelberg Nuremberg Cham Arriva Germany lautern SWEG RBG Rothenburg SB o.d. Tauber Saarbrücken VBG/RBG Zwiesel Other companies have Karlsruhe AVG Heilbronn Regensburg RBG been assigned to WEG discretionary colours Baden-Baden Aalen Donauwörth Deggendorf Stuttgart Passau AVG Ingolstadt Freuden- WEG VBG stadt Landshut List of abbreviations of Offenburg SWEG/ Tübingen Augsburg transport undertakings OSB Ulm HZL on page 67 BSB Munich Villingen HZL Freiburg SWEG VBG HZL Rosenheim Friedrichs- BOB SBB hafen BOB* Kempten SBB/Thurbo SBB Konstanz Garmisch- Basel Lindau BZB Partenkirchen Note: Does not show museum or mountain railways. All lines show the transport undertakings which actually operate services. As some of the undertakings provide services on behalf of other undertakings, the map does not indicate the contractual relationship between the undertakings shown and the ordering authorities and customers. Source: Bundesarbeitsgemeinschaft Schienenpersonennahverkehr, 2008 66 Annex Deutsche Bahn succeeded in competition DB companies won a substantial share of the transportation contracts awarded in competitive procedures in 2007. Contract award procedure New contract Contract Federal million Term awarded in Land Procedure Network/Routes Previous Operator Operator train km Begins (years) Jan. 07 NI, HH Tender Hamburg Süd DB Regio Metronom 1) 1.2 Dec. 07 3 Feb. 07 BY, HE Tender E-Netz Würzburg DB Regio DB Regio 5.9 Dec. 09 12 DB Regio Ostdeutsche Mar. 07 SN, BB Tender Spree-Neiße-Netz 2.7 Dec. 08 10 Lausitzbahn Eisenbahn 2) May 07 BY Tender München–Passau DB Regio DB Regio 2.6 Dec. 09 12 Negotiation May 07 HH S-Bahn Hamburg S-Bahn Hamburg S-Bahn Hamburg 10.5 Dec. 09 8 procedure Discretionary Sächsisch-Böhmische Sächsisch-Böhmische Jul. 07 SN Mandaubahn 0.2 Dec. 08 2 award Eisenbahn Eisenbahn SH, HH, Negotiation Aug. 07 Netz Ost DB Regio DB Regio 7.0 Dec. 09 10 NI procedure Hohenzollerische Hohenzollerische Aug. 07 BW Tender Seehäsle 0.3 Dec. 08 15 Landesbahn Landesbahn Sep. 07 RP, SL Tender Mosel-RB DB Regio DB Regio 2.4 Dec. 09 15 Negotiation Berlin Wannsee–Jüterbog Okt. 07 BE, BB DB Regio Ostseeland Verkehr 3) 1.0 Dec. 07 2 procedure Rathenow–Brandenburg Negotiation Fürstenwalde– Ostdeutsche Oct. 07 BE, BB DB Regio 0.1 Dec. 07 2 procedure Bad Saarow–Pieskow Eisenbahn 2) Oct. 07 BB, SN Tender Leipzig–Cottbus DB Regio DB Regio 1.3 Dec. 09 13 Discretionary Nov. 07 RP Eifel–Mosel Transregio DB Regio 0.7 Dec. 08 5 award Negotiation Dec. 07 NW Maas-Rhein-Lippe-Netz DB Regio NRW Keolis 4) 3.3 Dec. 09 12 procedure Veolia Verkehr Dec. 07 SN Tender Leipzig–Geithain Lausitzbahn 0.4 Dec. 07 2 (+2) Sachsen-Anhalt GmbH Discretionary Fichtelbergbahn Sächsische Dampf- Sächsische Dampf- Dec. 07 SN 0.1 Jan. 08 2 award (narrow gauge) eisenbahngesellschaft eisenbahngesellschaft Discretionary Dec. 07 NW NRW RB 43 NordWestBahn GmbH NordWestBahn GmbH 5) 0.6 Dec. 08 2 award Negotiation Rügensche Kleinbahn Pressnitztalbahn Dec. 07 MV Rasender Roland 0.1 Jan. 08 20 procedure GmbH & Co GmbH 1) Majority shareholding of Arriva, minority shareholding of Hamburger Hochbahn AG and Bremer Straßenbahn AG; 2) 50 per cent shareholding of Arriva and Hamburger Hochbahn AG; 3) Majority shareholding Veolia, 30 per cent shareholding of Nahverkehrsgesellschaft Schwerin; 4) Shareholding of SNCF and financial investor; 5) Majority shareholding Veolia, 36 per cent shareholding of Stadtwerke Osnabrück and Verkehr and Wasser GmbH Osnabrück Source: DB data List of abbreviations of railway undertakings HSB Harzer Schmalspurbahn GmbH RT RegioTram Betriebsgesellschaft mbH HTB Hellertalbahn GmbH RTB Rurtalbahn GmbH ABR Abellio Rail NRW GmbH HzL Hohenzollerische Landesbahn AG SB SaarBahn+Bus GmbH AKN Altona-Kaltenkirchen-Neumünster Eisenbahn AG KML Kreisbahn Mansfelder Land GmbH SBE Sächsisch-Böhmische Eisenbahngesellschaft mbH Arriva NL Arriva Nederland MBB Mecklenburgische Bäderbahn Molli GmbH SBB SBB GmbH AVG Albtal-Verkehrs-Gesellschaft mbH ME metronom Eisenbahngesellschaft mbH SDG Sächsische Dampfeisenbahngesellschaft mbH BOB* Bodensee-Oberschwaben-Bahn GmbH & Co. KG NBE nordbahn Eisenbahngesellschaft mbH SHB Schleswig-Holstein-Bahn GmbH BOB Bayerische Oberlandbahn GmbH NEB NEB Betriebsgesellschaft mbH SOEG Sächsisch-Oberlausitzer Eisenbahngesellschaft mbH BSB Breisgau-S-Bahn GmbH NEG Norddeutsche Eisenbahngesellschaft Niebüll GmbH STB SüdThüringenBahn GmbH BZB Bayerische Zugspitzbahn Bergbahn AG NOB Nord-Ostsee-Bahn GmbH SWEG Südwestdeutsche Verkehrs AG CAN cantus Verkehrsgesellschaft mbH NWB NordWestBahn GmbH SWN Stadtwerke Nordhausen GmbH CBC City-Bahn-Chemnitz GmbH ODEG Ostdeutsche Eisenbahn GmbH TR trans regio Deutsche Regionalbahn GmbH CXS Connex Sachsen GmbH OLA Ostseeland Verkehr GmbH UBB Usedomer Bäderbahn GmbH EB Erfurter Bahn GmbH OSB Ortenau-S-Bahn GmbH VBG Vogtlandbahn GmbH ERB eurobahn (Keolis Deutschland GmbH & Co. KG) PEG Prignitzer Eisenbahn GmbH VEC vectus Verkehrsgesellschaft mbH EVB Eisenbahnen und Verkehrsbetriebe Elbe-Weser GmbH PRESS Eisenbahn-Bau- und Betriebsgesellschaft VEN Rhenus Veniro GmbH & Co. KG FEG Freiberger Eisenbahngesellschaft mbH Pressnitztalbahn mbH VIAS VIAS GmbH (Rhenus Veniro GmbH & Co. KG) RBE Rheinisch-Bergische Eisenbahn GmbH WEBA Westerwaldbahn GmbH HEX HarzElbeExpress (Veolia Verkehr Sachsen-Anhalt GmbH) RBG Regental-Bahnbetriebs-GmbH WEG Württembergische Eisenbahn-Gesellschaft mbH HLB Hessische Landesbahn GmbH RNV Rhein-Neckar-Verkehr GmbH WFB WestfalenBahn GmbH 67 Annex Liberalisation making good progress in Europe The rail freight markets are opening up to a greater extent than the rail passenger sector. Germany is the only country to achieve more than 800 of a possible 1,000 points in both sectors. 2007 Rail Liberalisation Index – Freight Transport 1,000 The liberalisation promoted 900 by the EU is taking effect 908 887 852 848 848 844 836 800 In most countries, external 811 798 797 797 786 785 780 rail undertakings are already 761 756 744 743 740 734 733 732 727 727 700 licensed and active in the 690 688 600 freight transport market. The high median of 780 and 500 high average value of 771 points in the Index – with a low 458 400 variance of just 85 points – are 300 proof of this trend. Czech Republic Great Britain Luxembourg Netherlands Switzerland 200 Lithuania Denmark Germany Romania Portugal Hungary Slovenia Bulgaria Slovakia Belgium Norway Sweden Finland Estonia Ireland Austria Greece Poland France Latvia Spain 100 Italy SE NL AT GB CH DE NO DK CZ RO PT PL ES BE BG SK LT SI HU IT LV FI FR EE GR LU IE 2007 Rail Liberalisation Index – Passenger Transport 1,000 Market opening has devel- 900 oped to different extents 800 On average, the values are 166 809 798 points lower than for freight 757 742 732 727 700 transport. The liberalisation of 692 679 667 662 650 643 passenger transport has made 624 600 619 617 585 far less progress, and there 576 574 557 540 533 500 are substantial differences be- 518 486 474 tween the countries. 431 429 400 300 206 Czech Republic Great Britain Luxembourg Netherlands Switzerland 200 Lithuania Denmark Germany Romania Portugal Hungary Slovenia Bulgaria Slovakia Belgium Norway Sweden Finland Estonia Ireland Austria Greece Poland France Latvia Spain 100 Italy DE GB DK SE NL AT PL CZ EE CH RO SK LT PT IT SI LV NO BG FI HU BE ES LU FR GR IE Source: IBM Global Business Services and Kirchner, Rail Liberalisation Index 2007 68 Deutsche Bahn AG Communications Potsdamer Platz 2 10785 Berlin www.db.de
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