Germany liberalised its long-distance bus market in January 2013, enabling buses to operate between cities in direct competition with train services for the first time. By the middle of this year there were already 40 long-distance bus operators vying for business and the number of services has trebled since the market opened. According to a recent study by IGES Institut, the largest player is MeinFernBus (MFB), which has a 40% share of the market, followed by German Rail (DB) with its berlinienbus.de and IC-Bus brands, but there are also many small operators, which in contrast to Germany's inter-city rail business helps to make this a dynamic and highly-competitive market.
Traffic figures released last month by Germany's federal statistics agency Destatis suggest that all this dynamism might be harming long-distance rail ridership. Passenger numbers on inter-city trains fell by 0.5% in the first half of this year to 62 million, while long-distance buses saw an 8.1% increase in ridership to 1.4 million passengers. With so many new entrants coming into the bus market during this period, Destatis says the actual level of growth may well be higher.
With such a sudden increase in capacity in the long-distance passenger transport market, it's easy to see why conditions have become even tougher for open-access rail operator such as InterConnex, which have to keep fares (and therefore margins) low to compete with the incumbent DB Fernverkehr.
Pressure group Allianz Pro Schiene says that the federal government introduced legislation on liberalisation of the long-distance bus market three years ago with the promise of more choice for passengers, but warns this policy may now be having the opposite effect. "As long as long-distance buses remain exempt from tolls, no new entrant [to the rail market] will be able to survive this ruinous price war," says managing director Mr Dirk Flege. "The Ministry of Transport expressly said that buses would not be drawing passengers from trains but these promises have not been fulfilled. InterConnex is a warning sign - a purely commercial long-distance rail market in Germany is not possible."
Likewise, DB admits that liberalisation of the long-distance bus market is bad news for its inter-city rail business. In its 2014 Competition Report, DB notes "There are clear indicators that long-distance bus transport is luring a large number of potential passengers away from long-distance and regional rail. Based on current data, roughly one third of long-distance bus customers have switched from long-distance rail, which puts even more pressure on the earning power of long-distance services and on the operation of routes which have become unprofitable, particularly in the supplementary network."
Reading between the lines, this seems to suggest marginal long-distance train services that are not eligible for PSO funding are in the firing line. Rail is at risk of losing the most price-sensitive segment of the market – and this is a big chunk of its ridership – unless it can find a way to counter the effects of such intense competition in the long-distance bus business. According to the International Association of Public Transport (UITP), inter-city bus users in Europe tend to be younger or older travellers, the lower-income population, and international travellers, and these are the groups rail needs to target to maintain its market share in the face of bus competition.
High fixed costs are one of the key challenges that rail will need to address if it is to remain competitive in these conditions and there are questions here for politicians as well as rail operators. Veolia cites high infrastructure charges as one of the reasons why InterConnex became unsustainable. For a single journey between Leipzig and the Baltic coast, InterConnex pays infrastructure manager DB Networks around €1700 in track access fees.
A truly competitive inter-city rail market, with all the innovation and investment that would bring, is only going to become a reality in Germany – or anywhere else – if such charges are sustainable. But as long trains are forced to cover a much higher proportion of infrastructure costs than buses it looks set to remain little more than an aspiration.