- The rail service should cease covering financial shortfalls in cargo transportation.
Each year, Deutsche Bahn's freight division, DB Cargo, racks up massive losses totaling hundreds of millions of euros. These losses have been consistently covered by the parent company. It seems the EU Commission is set to put a stop to this practice.
According to DB Cargo's confirmation to Reuters, the Commission will ban the offset of losses by Deutsche Bahn, which is governed by a result transfer agreement, due to competitive reasons.
As a representative stated in response to inquiries, "A solution is emerging in the EU state aid case against the Federal Republic of Germany in relation to DB Cargo." The EU Commission is expected to make a decision with conditions later this year, indicating the end of the profit transfer contract is important for this conclusion.
The investigation by the EU Commission, ongoing since early 2022, is nearing completion. This means DB Cargo will need to operate financically independently in the future.
The competition authority has given DB Cargo around two years to get back into the black, allowing it to remain a 100% subsidiary within the DB group. Previous loss offset payments do not need to be repaid.
The German government, DB AG's board, and DB Cargo AG agree on the urgent need to resolve DB Cargo's long-term financial crisis and implement immediate measures. A comprehensive transformation program has been established to ensure a legally secure future for DB Cargo AG.
DB Cargo is currently undergoing significant restructuring, with a focus on cutting administrative jobs and readjusting business areas. Negotiations with the railway and transport union (EVG) on the transformation are ongoing.
A significant portion of the losses is incurred in the so-called single wagon traffic. Loads are picked up directly from industrial customers and assembled into long trains at marshalling yards. At the destination station, these are dismantled, and the wagons are transported individually further.
Many experts consider operating this offer economically unviable. Consequently, the federal government provides a subsidy to support single wagon traffic.
The European Union (EU) is scrutinizing Deutsche Bahn's practice of covering DB Cargo's losses due to competitive concerns. As per the EU Commission's expectations, DB Cargo will need to operate financially independently in the future, potentially impacting the European Union.
