THIS spring Abellio Germany is set to begin operating cross-border services between Germany and the Netherlands on the line from Düsseldorf to Arnhem. It is the latest in a series of regional concessions that the operator has won in recent years to establish itself as a major player in the German market.

Abellio, a subsidiary of Netherlands Railways (NS), now operates 850 daily train services in North Rhine Westphalia, Saxony, Lower Saxony, Saxony-Anhalt, Thuringia and Hesse, using 86 trains and serving 80,000 passengers per day.

Stephan Krenz CEO AbellioIn 2017 the company is also set to work on mobilising the Neckartal/Stuttgart network, Rhine-Ruhr Express and Saxony-Anhalt diesel network for the start of operations in the next few years, and CEO Mr Stephan Krenz is optimistic that the operator will continue to expand its presence.

“The market is expected to remain buoyant, in part due to the increase in financial support provided for regional rail transport by the federal government,” Krenz says. “Subsidies were increased from €7.4bn to €8.2bn per annum. Thus, Abellio will continue to bid selectively and responsibly.”

Optimism for 2017 follows success in 2016: Abellio won three tenders, including the contract to operate six lines of the Rhine-Ruhr S-Bahn network as well as the Ruhr-Sieg network (the first time it had retained an operations contract) and the Neckartal/ Stuttgart network contract. The company was also commended for offering punctual and high-performing services by Rhine-Ruhr Public Transport Authority (VRR).

Despite the success of Abellio and other private operators, German Rail (DB), backed by its long-distance offerings and as the leading provider of infrastructure services including stations, energy, and sales and distribution, remains the dominant force. However, since the liberalisation of the regional market in 1995-96, and the entry of players such as Abellio in the early 2000s, DB Regio’s market share has slowly eroded.

Krenz argues that competition has improved the quality of the service to the benefit of passengers.
“We work hard to make the journey by train as comfortable as possible,” Krenz says. “That’s why we do lots of market research to find out what our passengers want so that we can develop more and more innovations and create new business.”

Level playing field

Yet it has not always been plain sailing. Some regional transport authorities have been perceived as favouring DB as the incumbent when structuring and awarding tenders.

This led to the Federal Court of Justice ruling in 2011 that all transport services across the rail passenger network are subject to procurement law and must be competitively tendered. Now known as the “Abellio Ruling,” Krenz says that it has resulted in fresh impetus in promoting customer-oriented services, introducing pioneering technology and offer exciting opportunities for employees.

Abellio’s prominent role in this campaign is also reflected in Krenz’s chairmanship of Mofair, an alliance that strives to promote fair competition in rail passenger transport in Germany.

“We campaign for equal, non-discriminatory access to infrastructure for all competitors, encourage high-quality conditions for rail infrastructure and fight for reliable framework conditions for environmentally-friendly rail transport,” Krenz says.

“One of the main topics is handling of construction sites by DB. The expected increases in engineering works will have an adverse effect on both performance and quality of service, but there is no alternative. As a result, the railway companies must be protected from losing traffic by means of more effective coordination and communication of the plans for these works and a lower burden of charges on the part of the network operator.”

As for further enhancements to competition, Krenz says there remain vast differences between how transport authorities are structuring their tenders. For example, there are variations in the sharing of risk and responsibility, with not all authorities using mechanisms like providing a vehicle pool or rolling stock financing model including a guarantee for reuse or a debt service guarantee that would increase the capability of third-parties to bid for specific contracts. There are also variations in the allocation of fare revenues, including the use of gross cost or net cost contracts.

Krenz says his company must continue to carefully consider which contracts it bids for in the future. And when it does decide to bid, it is only because the company feels it is able to offer a sufficiently high level of service with respect to its existing portfolio, and the ratio of revenue and risk.

Indeed, while the conditions for competition have improved, it is clear that the market still has a little way to go to achieve a truly level playing field for all operators and to offer truly effective competition.

“The German regional rail market has an attractive volume with promising competition and diverse awarding structures,” Krenz says. “It is the task of the public transport authorities to push that competition forward. First of all, they have to offer attractive tender volumes, vehicle financing models and bonus-malus-systems.”