- Railway should longer bear the brunt of decreases in cargo revenue.
The financial arm of German Railways' freight division, DB Cargo, supposedly faces annual losses in the hundreds of millions, routinely balanced out by its parent company. Recent reports suggest that the EU Commission is planning to halt this practice.
According to information from Deutsche Bahn's board and verified by Reuters, the Commission is expected to outlaw this loss offsetting mechanism, which is regulated through a specific agreement known as a results transfer agreement, based on competitive concerns.
The EU's investigation into this matter has been ongoing since early 2022 and is now reportedly reaching its conclusion. As a result, DB Cargo will be required to operate independently financially in the future.
The competition authority has set DB Cargo about two years to achieve a profit. As a wholly-owned subsidiary, it can continue to operate under the DB Group's umbrella without having to repay previously made loss offset payments.
A representative from the Federal Ministry of Transport (BMDV) confirmed that the federal government, DB AG's board, and DB Cargo AG all support addressing DB Cargo's long-term financial crisis urgently and implementing immediate measures. Thus, a comprehensive transformation program has been implemented, which must now be executed consistently during the ongoing state aid proceedings to secure a legally sound future for DB Cargo AG.
DB Cargo is currently undergoing a large-scale restructuring, focusing on cutting administrative jobs and reassessing business sectors. Intense discussions are ongoing with the railway and transport union (EVG) regarding this transformation.
A substantial portion of these losses stem from the so-called single wagon traffic. In this service, loads are picked up directly from industrial customers, and long trains are assembled at marshalling yards. Upon arrival at the destination station, these trains are dismantled, and the wagons are transported separately.
Critics often label the economic viability of this service as questionable. Consequently, the federal government supports single wagon traffic with a subsidy.
The EU Commission, with the backing of the Federal Ministry of Transport (BMDV), is planning to end the Federal government's practice of allowing DB Cargo to offset its annual losses through its parent company, DB AG. Despite this, DB Cargo, as a wholly-owned subsidiary, will continue operating under the DB Group's umbrella during the transition period.
