INTRO: Restructuring of German Railway’s passenger operations and changes to ticketing and catering policy will help to keep DB competitive with new operators and low-cost airlines

BYLINE: Dr Karl-Friedrich Rausch

Board Member, Passenger Traffic

Deutsche Bahn AG

ON October 1, German Railway put in place a fundamental restructuring of its passenger operating business. Our organisational structure needs to reflect the state of the market, and DB finds itself facing increasing competition, particularly in the regional sector. At the same time, new opportunities are opening up in the urban public transport market, where we see considerable scope to expand our suburban operations.

To reflect these changes, the Passenger division has been split into three customer-focused business units: long-distance, local/ regional and urban. These are carefully positioned to tackle the challenges and opportunities of the different market segments. However, overall strategy and management for the three business units remain consolidated in a single company: DB Personenverkehr GmbH.

Operators such as Connex, who have been active in the regional market for some time, are now making tentative steps into the long-distance sector. We welcome the challenge. It may be a truism, but competition animates the business and also spurs us on to become better.

DB’s major advantage over these new entrants is the strong interconnection of our services. We do not just serve individual routes, but a large network, encompassing long-distance, suburban and local trains, S-Bahn and buses. We also have a very widespread and varied sales structure. DB tickets can be bought at station booking offices, of course, but also at vending machines, through travel agencies, call centres, over the internet, and even on board long-distance trains. Anyone who books a ticket by telephone or internet can collect it from an automatic terminal before departure. And the advent of competition will encourage us to develop these system advantages further.

Fares and catering

Another area that has necessitated some changes has been the new fares structure, introduced on December 14 2002. We encountered significant problems of acceptance among our customers, as the introduction of market pricing was a huge step away from our previous distance-based fares. In retrospect, the need to combine different discounts was probably too complex for many people.

So we took another look at the whole structure, and with effect from August 1 we simplified some of the areas which had presented the greatest problems to our customers. We are quite satisfied with the results so far. However, the changes to the discount structure have effectively reduced the average fare paid, which means that we need to attract and carry more passengers to earn the same revenue. And that is not easy in the current depressed economic conditions. So we still have a lot of work to do.

A major challenge for us - particularly in the long-distance market - has been the advent of the low-cost airlines. We believe that the financial advantages which these operators enjoy represents a genuine distortion of the competitive market. Unlike the railways, they pay no environmental levy or fuel taxes, and on international routes they are not even subject to value-added tax.

We are lobbying for the railway to enjoy the same competitive conditions, but we cannot wait for this to happen. We have to act now, before the market is lost. One immediate response has been the introduction of a new range of discounted family tickets, which are also proving an attractive alternative to the private car. An internet-only promotion of return fares throughout Germany for just €50 was launched at the beginning of October. And further offers will follow.

The need to provide an attractive service has also seen revisions to DB’s ’new catering strategy’, which was also launched a year ago. Inevitably, there are certain areas of policy which have to be looked at for the railway as a whole, even if they are not economic in themselves. On-train catering is one of these. In the light of feedback from passengers and opinion formers, we have now decided that our existing fleet of dining cars will continue to operate for the foreseeable future. Passengers on all DB long-distance and inter-city trains will be able to get meals and drinks from a restaurant car or BordBistro vehicle.

More ICE orders

Looking ahead at developments over the next two or three years, an important step will be to improve the provision of information to passengers in the event of any problems. We expect to invest around €220m by 2010 on the installation of a network-wide information system. Delays can never be avoided completely in our very complex network, but I believe that passengers will accept the inevitable disruption more readily if they are given a proper explanation of the reasons and reliable projections of when and how they will reach their destinations.

Beyond that, we are continuing to modernise our rolling stock fleet. We expect to invest more than €6bn in the next few years, not least on 43 new ICE trainsets. We anticipate a significant increase in traffic from around 2005, when infrastructure improvements will enable us to cut an hour off the Berlin - Hamburg journey time.

What we must do is provide our customers with a high quality service from the journey planning stage right through to their final arrival. Only when everything works properly will we be truly competitive.

CAPTION: An ICE-T tilting trainset passes Garmisch-Partenkirchen on a long-distance service to Hamburg Altona Photo: DB AG/Kitzinger

CAPTION: New opportunities for DB’s passenger business are opening up in the urban sector, with the development and expansion of S-Bahn networks in several cities Photo:DBAG/Klee

INSET: Reintroduction of the 50% discount BahnCard has enabled DB to simplify its market pricing strategy Photo:DBAG

CAPTION: LEFT: DB’s ICE-T tilting trainsets include a special play area for young children travelling with their families Photo:DB AG/Jazbec

BELOW: Passengers can collect pre-booked tickets for long-distance journeys from self-service ticket machines at key stations such as Hannover Hbf. The machine on the right sells regional tickets for the local area Photo:DB AG/Gaertig

CAPTION: In the light of strong feedback from users, pressure groups and opinion formers, DB has cancelled plans to phase out on-train dining, and will retain its fleet of restaurant cars for the foreseeable future Photo:DB AG/Jazbec

Competition drives the passenger business

Restructuring of German Railway’s passenger operations and changes to ticketing and catering policy will help to keep DB competitive with new operators and low-cost airlines. Board Member, Passenger Traffic Dr Karl-Friedrich Rausch welcomes the prospect of fair competition to keep the railway on its toes. Investment in passenger information systems, new rolling stock is planned, together with fare promotions and an emphasis on the national railway’s ’system benefits’ compared to its smaller rivals.

La concurrence guide l’activité voyageurs de la DB

La restructuration du service voyageurs du chemin de fer allemand, et les changements dans la billetterie et la politique de restauration à bord, aideront la DB à se maintenir compétitive, face aux nouveaux opérateurs et aux lignes aériennes à bas prix. Membre de la direction pour le trafic voyageurs, le Dr Karl-Friedrich Rausch accueille favorablement la perspective d’une concurrence équitable pour maintenir le chemin de fer sur pied. Des investissements sont programmés dans les systèmes d’information des voyageurs et dans de nouveaux matériels roulants, parallèlement à des promotions tarifaires et à une mise en valeur de ’l’effet de masse’ du réseau national en comparaison avec ses concurrents plus petits

Konkurrenz treibt den Personenverkehr bei der DB

Die Restrukturierung des Personenverkehrs und ??nderungen der Fahrscheinverkaufs- und Verpflegungs-Politik helfen der DB gegenüber neuen Betreibern und Billigfluglinien konkurrenzfähig zu bleiben. Der Vorstandsvorsitzende für den Personenverkehr, Dr Karl-Friedrich Rausch begrüsst die Aussicht auf fairen Wettbewerb, um die Bahn auf den Gleisen zu halten. Investitionen in Reisenden- Informationssysteme und neues Rollmaterial sind geplant, zusammen mit Promotions-Tarifen und dem Hervorheben der Systemvorteile der Staatsbahn gegenüber ihren kleineren Rivalen

La competencia dirige la unidad de negocio de pasajeros de DB

La reestructuración de las operaciones de viajeros de los ferrocarriles alemanes y los cambios en el sistema de tarifas, así como en la restauración a bordo, ayudar