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DBAG and NS merge Cargo divisions

Wave of alliances sweeps European freight rail;
German access charges reformed

In the latest of a wave of consolidations in European freight rail, giant DBAG Cargo is swallowing its little competitor, Dutch NS Cargo. The German company has revenues of $2 billion, while NS Cargo grosses less than a tenth of that. The new company, Rail Cargo Europe, will run almost 8000 trains a day and will be headquartered in Mainz (near Frankfurt), Germany.

The owners have not yet announced any particulars, such as who will own how much or how many jobs are expected to go. But they did say ownership will reflect current revenues. As for layoffs, Dutch Cargoweb reports an interesting fact: NS Cargo has a turnover of $90k per employee, whereas DBAG only achieves $40k. It seems there is a lot that needs doing east of the border...

The Dutch transport minister, Annemarie Jorritsma, is investigating whether the deal raises competition issues. Since Holland is a logistics center for Europe, she is probably also anxious over ceding control over rail freight to a company owned by the German government.

Her concern would be understandable: The Netherlands is centrally located in the heart of western Europe, boasts some of the world's biggest ocean- and airports, and has a very fine network of roads and railways. Together with partners like Northwest, Dutch national airline KLM spans the world. Many of the goods arriving in the Netherlands take the train eastward to Germany and beyond. One of the biggest construction projects in Dutch history is the Betuweroute, a four-track freight railway stretching from Rotterdam to the German border.

NS Cargo and the Betuewroute is thus a vital artery for the Dutch economy. And DBAG is not any old profits-driven company -- it has one sole shareholder, the German government, and it still enjoys a virtual monopoly.

But the story is not just about domination -- it is also about economies of scale. Holland is only a few hours wide which makes NS Cargo something of a terminal operator for DBAG. It is also about muscle. NS Cargo has a successful system of shuttle trains radiating from Holland, but RCE will be able to offer transports dep into Europe within one company, and to most of Europe in partnership with another company. It will also have clout buying track access.

Consolidation is the name of the game in Europe, a continent of tiny countries, each with their own national railway. Swiss SBB has announced a gradual merger of its freight operations with Italian FFS, and Belgian SNCB is expected to announce an alliance with French SNCF. The three Nordics have formed Nordic Rail International. Swedish SJ has formed partnerships with DBAG, FFS and Spanish RENFE. Sweden exports a lot of bulk paper, wood and steel, so SJ needs help filling the trains running northward with non-bulk consumer electronics and food.

The council of European transport ministers recently decided that 25% of the rail freight market must be occupied by new operators by 2010. The new merged companies are unlikely to pass as new operators, and they are consolidating, not competing. It seems both the "eurocrats" and the national railways expect the new competition to come from somewhere else. The old players are making some smart moves to be ready when the new ones arrive on the scene.

Officially, anyone has had access to any European railway for most of the nineties. But only in the past few years have things started looking like that in practise.

DB Netz introduces new pricing system

You can now get an InfraCard for frequent, cheap use of the German network, or pay VarioPreis for more sporadic transports.

The previous pricing system, from 1994, was criticized for favoring big, established operators. DBAG has addressed this by introducing two separate price scales. Big operators may still pay a low overall price for extensive network use with the InfraCard, whereas VarioPreis lets you on the network without paying a hefty entrance fee.

Buying InfraCard gives you access to lower rates on a specific part of the 40 000 km DBAG network. There are as many as six grades of track to choose from, with 160 to 300 km/h track being the most expensive, and track allowing 80 km/h or less being the cheapest. DBAG hasn't said what happens if you want a grade that isn't available. The more extreme you needs, the less likely it is that there will be matching track.

The minumum distance you can get an InfraCard for is 500 km (313 miles) for freight services, 100 km for short-distance passenger services, and 1000 km for long-distance passenger services. Several operators may band together and share the network-within-a-network that their InfraCard buys.

The price of an InfraCard not only depends on how fast you want to go, but also on how sensitive your timetable is. If you need to run a train during rush-hour and you can't wait ten minutes, that'll cost you. Being flexible is cheaper.

DBAG boasts of being the first rail administrator to conform to EU directives on rail access charges. The same price scale applies to DBAG's own passenger and freight divisions as well as to other operators -- DB Netz says there are already over 100.

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