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Government backs integrated DB

01 Jul 2003

GERMAN Railway has won its battle to keep vertical integration of train operations and management of the infrastructure, at least under the umbrella of the holding company. The need to retain a structure like that introduced in 1999 - which sees five subsidiaries responsible for long-distance passengers, regional and local passengers, freight, stations and the infrastructure - is now accepted. But when the process of moving the railways into the private sector is launched, probably in 2005 through the sale of shares in DBAG, the government has accepted that the crucial link between infrastructure management and the railway's ultimate customers must not be broken.

Ralph Nagel, State Secretary to the Ministry of Transport & Infrastructure, told a German-British conference on public-private rail partnerships in London on June 12 that while his official position 'precludes me from casting any aspersions on the wisdom of the previous British government's policy for railways, sometimes I read the Financial Times and learn that pride is a word no longer used for your trains.'

Meanwhile, Nagel noted that 'the UK subsidy for the railways has been growing faster' to cope with 'under-investment as described by the Secretary of State', Alistair Darling. 'In Germany, the subsidy is decreased and we give DB no subsidies for the locomotives or rolling stock, we give it for the infrastructure.'

DB's Chairman Hartmut Mehdorn became convinced that the separation of trains from infrastructure lies at the heart of the problems in Britain. Asked by David Marsh of Droege & Co, who was chairing the debate: 'would you like to operate trains in the UK?' Mehdorn replied 'there is a mismatch for me which I would like to discuss deeply before I would run trains in UK', but 'if conditions allow it - at present they don't - then yes.'

Mehdorn believed that 'to operate trains you need certain essential things, otherwise you can't guarantee quality. You have really to consider that the timetable is made, the quality is made, punctuality is made, everything is made from the infrastructure - not by the train operator. If there is someone sitting behind the curtain making the train operation without being in touch with the customer, I don't know how it will work. The customer's relationship is with the train operator.'

The crucial question for the German government, Nagel explained, was whether it was really possible to combine open access with vertical integration. He was appointed co-chairman of a committee set up to advise ministers on this key policy issue, and 'we concluded that we can on the one hand have this integrated railway with all its benefits I described before, and on the other hand we can ensure that there is competition on this railway net - we can have both.'

Mehdorn was less enthusiastic about on-rail competition, but pointed out that DB's record on open access was impressive. 'We already have 250 rail companies messing about on our network', he noted, but 'mostly it doesn't bring more customers.' However, when the railways in Sachsen were seriously damaged by floods last year, 'being an integrated company we could take very quick decisions and get it back to normal in two weeks.' To achieve the European Union's objectives, 'we have to invent another way of how we open up the rail system.'

Suggestions that DB's market-priced fares structure requiring passengers to book in advance to obtain discounts had been disastrous were met with the assertion that DB had retained inter-city traffic in the 200 to 500 km range. But longer-distance services had, Mehdorn acknowledged, lost out to low-cost airlines. In a bid to compete with this, a quota-controlled special offer for low-cost overnight fares has been made permanent.