GERMANY: Financial aid earmarked for national operator Deutsche Bahn in the form of a €5bn equity increase as compensation for the effects of the Covid-19 pandemic constitutes unfair state aid under European Union law, according to Netzwerk Europäischer Eisenbahnen, an association of around 60 independent rail freight operators.
In a letter dated August 18 addressed to Margrethe Vestager, Executive Vice-President & Commissioner for Competition and Transport Commissioner Adina-Ioana Vălean, NEE argues that ‘the planned increase in equity would result in a serious distortion of competition for the rail freight companies represented by our association that do not belong to the DB Group’.
This would ‘unilaterally and exclusively support the market-dominant state-owned company in response to the Covid-19 pandemic in the rail freight transport market’ and ‘inevitably, equalise deficits of the DB rail freight division, which result from unresolved, structural problems of the DB companies regardless of the Covid-19 pandemic’.
This would enable DB Cargo to offer prices below market costs, NEE continued, ‘which would impair fair competition and risks market exits, which are significantly more likely in the current climate.’
NEE particularly regrets that the performance of independent operators in attaining a 53% share of the rail freight market in Germany is not reflected in the German government’s decision, independent companies having been solely responsible for the growth in rail freight performance in recent years; NEE members logged 136 billion tonne-km of traffic in 2018.
NEE also notes that ‘the ever more extensive financing of the rail freight division of Deutsche Bahn AG, which has been in financial loss for five financial years, within the so-called “group network” of DB AG, had already affected competition before the pandemic and reached a new high in the 2019 financial year with a deficit of €488m’.
The association is also concerned that ‘key representatives’ of federal government have ‘repeatedly and expressly spoken out against compensating for lost sales or comparable economic damage to rail freight companies that do not belong to the DB Group or helping such companies in economic emergency situations’.
NEE points out that pandemic-related events led to some of its members having to cope with a drop in sales of up to 60%, especially during the month of April. It estimates that independent operators may experience a revenue shortfall of €422m in the years 2020 and 2021 combined.