HISTORY will record 2006 as a landmark year for Deutsche Bahn AG. A political decision on the future of Germany's national railway is expected this month, and the signs are that the company will move sooner rather than later into the private sector.
A stream of other high-profile events has made this an action-packed summer for DB, not least the 2006 football World Cup. The railway won media acclaim, even outside Germany, for its performance in carrying millions of football fans to and from the matches, an accomplishment for which it can justifiably be proud.
Undoubtedly this feat will stand DB in good stead when policymakers examine its commercial acumen and assess its ability to ride the market in the private sector. Its achievements during the football festival were down to thorough preparations and to the timely completion of several major investment projects in the preceding months, but that is only part of the story.
More fundamental, perhaps, is the hard-hitting policy which has helped turn round DB's long-distance passenger operations. Responsible for this strategy at board level is Dr Karl-Friedrich Rausch.
'We have been very successful in the last two years, and traffic is up by 4·5% in the first half of 2006. This is really significant because the overall market is falling, which means we are winning market share - and we are very proud of this.' Rail's share of long-distance travel currently stands at nearly 12% (Table I), and Rausch attributes the recent rise in passenger numbers, in passenger-km and in customer satisfaction ratings to 'the high quality of services'.
Load factors have risen to 42% between Nürnberg and Ingolstadt since opening of the high speed line in May (RG 6.06 p305), and Rausch is especially pleased with a 1% improvement in the Berlin - Hamburg load factor to 49·2%, despite a huge increase in capacity with ICE trains running hourly instead of two-hourly. Many of these are ICE-T services operating at 230 km/h on tracks upgraded in 2003-04 in a €650m project (RG 10.04 p812). Excluding dedicated high speed lines, this is the highest maximum reached in Europe, with several trains timed at an average speed of nearly 190 km/h over the 285 km between Hamburg Hbf and the new Berlin Hbf.
In a similar but less ambitious project, upgrading of the Berlin - Leipzig main line for 200 km/h was completed in time for the launch of accelerated services on May 28, the same day that commercial services arrived at Berlin Hbf. Opening of this modern railway cathedral (RG 7.06 p386) marked the culmination of a €10bn investment programme that has seen Berlin's entire rail network remodelled to ease traffic flows and ensure better interchange between the wide range of services that converge on the capital.
World Cup bonanza
When Germany was selected to host the 2006 World Cup, DB was appointed an official supplier, at once setting out to convince the football fraternity that rail was the best way to travel to and from the 64 matches at German stadia.
There can be no doubt of its success. Halfway through the series DB reported that 600 000 extra passengers a day were riding its regional and long-distance services, confirming the huge take-up of special tickets that were on sale to fans.
'We have sold more than 400 000 Weltmeister BahnCard 25 railcards', enthuses Rausch, pointing out that 'this is really significant because more than 80% of these people did not have Bahncards before - and many had not even travelled by train.' Just as successful were the combination match tickets that offered travel by public transport within the city hosting the game on the day it was played.
No less than 10 000 Weltmeister Passes giving unrestricted travel throughout Germany were purchased, 'a really terrific take-up, much higher than we expected'. As for the Weltmeister Ticket, a promotional fare offering holders reduced fares for travel to and from matches, DB AG reports that 75 000 return trips were made. Another 53 000 journeys were made using Weltmeister Surf&Rail tickets.
Add to this the 13 specials chartered by fans from Brazil, Mexico, Poland and Australia, plus the national teams from Mexico, Costa Rica, Sweden and Croatia choosing to take the train during the first round, and DB AG's pride looks justified. Rausch's only lament is that 'the German team chose one of our competitors'.
'In operational terms we ran more than 300 extra long-distance trains, and on average we ran three unscheduled extras a day using stock on hot standby - everything on wheels was hauled out of the depots to meet demand', continues Rausch. Trains did not just carry fans to the matches; they also took people to the special public viewing areas set up in many cities where giant TV screens relayed the matches to the crowds. Load factors on long-distance trains averaged 47%, with ICE services recording 51%.
The World Cup organising committee had expected 50% of fans to travel to the matches by public transport, 'but in practice it was much better than that. We reached 80% in Nürnberg and 90% in Berlin - that's a huge success', says Rausch. Totting up the scores after the final in Berlin, DB AG counted 15 million World Cup passengers during the period of the tournament.
Football events are not renowned for encouraging good behaviour, but the 2006 World Cup was an exception - good transport and effective organisation clearly bring benefits. Rausch notes that 'the mood on the trains was very good. Even though they were 100% full, they were clean, orderly and colourful.'
But was all this a one-off, with the extra traffic melting away as the afterglow of the football faded? 'Not at all - we expect this level of demand to continue', comes the reply. Taking the effects of the network enhancements and the football traffic together, 'we anticipate that turnover will be 4% to 5% up over 2005, when we were already in the black', Rausch affirms, 'with the new infrastructure helping us to keep the business.'
A carefully-tailored package of special fares appears to have been a critical factor in the achievement. In fact, DB knows that attractive fares win business - and that the converse is also true.
In December 2002 DB launched a fares policy that stipulated compulsory reservations to secure quota-controlled discounts on long-distance trips. This unleashed a storm of protest, prompting the company to revise the rules just eight months later and to restore a railcard that had offered a 50% discount.
At the time, DB was also suffering from the onslaught of the low-cost airlines on the German market, whose publicity had successfully hammered home a message that flying was cheap.
The fares debacle had created a perception that rail travel was poor value for money, and Rausch, whose board responsibility changed from technology and engineering to passenger traffic in 2003, took on the challenge of winning back what had been lost. His 15 years of experience in the air travel industry made him an ideal tactician for dealing with the competitive pull of cheap flights.
'We did underestimate the low-cost airlines', he admits, pointing out that there were numerous carriers so that a 'network effect' was quickly achieved. 'We realised we had to fight back, and we did so with the quality of our new trains and then with prices. We wanted to change the perception of rail travel.'
In came a plethora of special deals such as 'the Lidl offer and the McDonalds offer - we put lots of good offers into the market'. The attraction of go-anywhere promotional tickets at just €29 caused jams at supermarket checkouts, with the quotas sometimes being sold out within hours. 'We were looking for new customers', says Rausch, 'and we wanted to give the message that train travel was value for money.'
The policy worked. Rausch notes that passengers appreciated that the fares were stable, 'not €19 one minute and €60 the next'. Word of mouth helped spread the message, to the point that 'we are still finding new passengers'.
With an eye to the day when demand may start to tail off, Rausch says that the model 'has been proven for future use'. To keep the momentum up, a special summer fare of €29 for a one-way trip in second class anywhere in Germany was launched on July 12.
DB AG is also cashing in on high petrol prices. Rausch concedes that 'higher energy prices are affecting us too, but train travel is now better value.' His calculation puts monthly season ticket prices below the cost of petrol for an equivalent commuter trip by car.
Overnight and international
To an outside observer, DB has enjoyed a surprising success with its overnight train policy. Whereas long-distance night services elsewhere in Europe are being killed off by airline competition - and by daytime high speed trains - DB has kept a useful share of this market niche.
Rausch observes that there is 'huge demand for the high-priced and low-priced segments' whereas the middle of the market is 'more difficult'. He feels that the €50m invested in 2004 in a fleet of 42 new sleeping cars offering compartments with private shower and toilet was well worthwhile, with customers being 'very satisfied'.
The fleet is deployed on both domestic and international services, including trains from Hamburg and Berlin to Paris. The French capital has long been a target destination for ICE services, but only next year will DB realise this ambition when TGV Est opens in June.
Rausch says that 'from December we will operate five return services a day - they will be fast, high-quality and attractive'. Asked if the €8·6m spent on modifying each of the five ICE-3 sets required will be covered by fares revenue, Rausch affirms that 'we wouldn't be doing it if we didn't get the money back. We are a limited company, and it's our job to make money; we think this will generate a strong shift in the market and take a big share of traffic from the airlines.'
His confidence rests on the proposed timings of around 4 h from Frankfurt to Paris and 3 h 40 min from Stuttgart to Paris. Pointing out that the Berlin - Frankfurt ICE Sprinter services timed at 3 h 30 min are well used, he confirms that the 3 h threshold for day return business traffic is moving towards 4 h.
Around 10% of DB AG's long-distance passenger traffic crosses a frontier, with 'good market shares' on services to Belgium, the Netherlands, Poland and Switzerland. That may be, but international high speed services remain disparate with widely-differing fares structures and standards of service. In an attempt to bring high speed services up to minimum standards, DB has signed up to the Railteam concept launched in October 2005, initialling a Letter of Intent with six other railways on June 14.
'This is more than just a good idea', declares Rausch. 'In practice there are many different products', and the Railteam project aims to ensure 'that passengers know what to expect'. Rausch suggests that the railways will be 'playing the comfort card', offering passengers a minimum seat pitch, laptop access and highlighting other features not found in the air. To a comment that none of this is new Rausch replies that 'we need to communicate the message more effectively to the international market, presenting ourselves to our customers with a quality product'.
Challenged on the complexities of international ticketing, for example between London and German destinations, Rausch admits that 'there is a lot to be done'. Another Railteam meeting is scheduled for this month, at which more detailed plans may be agreed.
The nature of the international rail passenger business is set to change in the future when European legislation introduces competition. DB is already monitoring the market and Rausch considers Germany to be ahead of the pack in terms of market opening, along with Sweden and Britain.
Indeed, DB put its toes in the hot franchising waters in the UK as a partner in a joint bid for InterCity East Coast in 2004, but withdrew because the risks were too high. 'In hindsight, it was a good decision', observes Rausch.
Attention in the immediate future is focused on DB's own future. Confirming that a decision on privatising DB AG will be 'how' rather than 'if', Rausch remarks that the railway enjoys support right across the political spectrum. 'And there are good reasons - we've said goodbye to the losses of the past, and the future is looking good because rail is economically and environmentally sound.'
On the form of privatisation Rausch says that 'we can only suggest what we think is best - Parliament will decide.'
Table I. Modal share of trips over 100 km in Germany
Table II. The DB Fernverkehr fleet at August 1 2006
|ICE-TD diesel trainsets||19|
|Locomotive-hauled coaches||2 400|
Table III. DB Fernverkehr in brief
|Passenger-km million 36226||32330 33641|
|Passenger journeys million||144·8||115·3||118·7|
1. includes sales organisation
Picture caption: More than 300 scheduled extra services ran during the football World Cup, with a further 70 additional trains operated at short notice. Trains were lengthened and the frequency of local and S-Bahn trains was stepped up. DB AG calculates that 15 million extra passengers rode the rails during the championship Photos:DB AG/ Matthaei, Louis
Picture caption: Now being delivered are the last of 28 additional ICE-T tilting trainsets needed to expand services with the December timetable change Photo:DB AG/Jazbec
Picture caption: Dr Rausch points to improving load factors on its long-distance trains as evidence of a successful commercial policy Photo:DB AG/Wagner
Picture caption: With Hamburg - Berlin ICE-T services operating at 230 km/h past platform faces at intermediate stations, barriers have been erected to keep passengers away from the edge
Picture caption: Special offers with attractive fares have generated favourable publicity. Low-priced tickets sold through Lidl supermarket outlets were used to spread the message that train travel was affordable Photo:DBAG/Lidl
Picture caption: International and domestic overnight services in Germany remain relatively successful, with strong demand for the high end of the market and for budget travel. DB AG co-operates with Polish State Railways to run the Warszawa - Frankfurt Jan Kiepura Photo:DBAG/Louis
Picture caption: High petrol prices have given DB AG another marketing opportunity - rail travel can cost less than driving a private car Photo:DB AG/Koch
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