Passengers, taxpayers & environment will suffer
BERLIN, 23rd July 2020: Earlier this month, it was announced that the German state-owned rail operator Deutsche Bahn („DB“) – which already has 99% share of the long distance market – will ‚acquire‘ 30 new ICE high speed trains for €1 billion.
In a truly competitive market, new trains would be a good development. However, these ones are being financed under questionable circumstances and will further strengthen DB’s dominant market position thus effectively closing the market for another generation. As a consequence, passengers, taxpayers & the environment will suffer.
There is a distinct pattern emerging: in 2019, under the guise of tackling climate change, the German government announced it will be pumping €11 billion of equity into DB until 2030. This year, DB will receive an additional equity increase of at least €5 billion euros in order to help it cope with the COVID-19 pandemic. With €16 billion in directly awarded financial support, it is easy to afford €1 billion for new trains.
“How can new privately funded long distance competitors – which have to finance their trains themselves – compete against DB if it is gifted new ICE trains by the government?“ asks ALLRAIL Secretary General Nick Brooks: „This is a major disincentive to all future private investment – it is impossible to compete against the scale & volume of such public funding.“
With this will come all the disadvantages that are the hallmark of one dominant operator: (1) inefficiency leading to increased taxpayer subsidy, (2) higher fares for passengers & (3) modal shift away from passenger rail to less sustainable transport modes.
Italy has demonstrated that the opposite approach can stimulate significant benefits. Since the privately owned operator NTV-Italo entered the high speed market in 2012, average fares have fallen by 40% while frequencies and quality have improved – leading to positive modal shift to rail with a doubling of passenger numbers. Furthermore, COVID-19 state aid has been fairly applied between both publicly & privately owned operators.
Germany is missing a big opportunity to open up the long distance rail market. If climate change funds & COVID-19 state aid were to be spent in a non-discriminatory manner, then other operators would probably be able to procure new high speed trains as well.
Mofair President Christian Schreyer comments: „Then Germany would experience the same modal shift as has happened in Italy. Market opening in long distance rail is needed more than ever – not only is it the most effective solution in order to help the environment and the EU Green Deal but it is also necessary for future generations.“