The liberalisation of the railway market generated enthusiasm among the private investors who began to set up companies able to compete with the state-owned operators. At the end of 2008, the European market evolved. Aside from the operators which activated successfully in several European countries, more and more strong private companies appeared, such as Veolia, Arriva or Freightliner. These companies competed with large state-owned operators, such as Deutsche Bahn or SNCF, but the economic crisis had a negative impact on their business in 2009. The result? State-owned operators began to take over most private companies and set up a DB-SNCF bipolarism. Now, DB and SNCF are battling to win over the European railway market. The two giants are fighting to win the title of “largest private operator on the Western market”.
After taking over UK and Spain, Deutsche Bahn becomes the largest private operator in Italy and Poland
The year 2010 brought DB the finalization of the 95% takeover of Polish private operator PTK Holding, where DB owned a major share package following the takeover of holding PCC Logistics in the summer of 2009. The takeover was made through DB Schenker. PCC Logistics also owns PCC Rail. PTK has 2.000 employees and, in 2008, it carried around 7.2 million tonnes of freight, which generated a turnover of over EUR 90 Million. A large part of PTK’s business focuses on cross-border traffic with Ukraine and Belarus. PTK, located in Zabrze also holds a major share package in the Baltic port of Swinoujscie, major intermodal hub for the traffic between Poland and Germany. Cristoph Wolff, General Manager DB Schenker Rail Poland, said that this takeover allows the company to expand its services on the Polish market. He also said that the group plans to put together all Polish companies and set up a single large entity, which would provide various types of services under one name.
At the end of January 2010, DB announced that DB Schenker had become the second largest railway freight operator in Italy, after taking over a major share package from CargoNord, the largest private operator in the Peninsula. Later on, a merger followed between CargoNord (located in Milan) and the Italian division of the German group, DB Schenker Italy. DB increased its participation in CargoNord to 60%. In 2008, the Italian company recorded a turnover of EUR 40 Million, carrying 1.4 million tonnes/train/km. The company has 200 employees. Alexander Hedderich, General Manager of the new DB company to activate in Italy, said that the unification of the Italian companies will allow the group to provide transport services from North Germany to South Italy.
After the finalization of the intermodal terminal in Sofia, a cooperation agreement was signed between Deutsche Bahn (through DB Schenker), one of the terminal operators*, Rail cargo Austria and the freight transport division of the Bulgarian state-owned operator. Based on this agreement, when there were talks in the Bulgarian Parliament about BDZ’s privatisation, DB was voted favourite for the takeover of BDZ Cargo. In March 2010, Deutsche Bahn announced the new structure of its freight transport operations, which would be divided into three geographical areas: West, Centre and East. The West includes operations in the UK (where DB Schenker Rail is the largest freight operator), Spain (where DB owns the largest private operator, Transfesa) and Italy. Due to these new takeovers, Deutsche Bahn becomes the largest freight operator in Europe. For DB, the future holds new prospects, such as the takeover of major share packages – the takeover of 49% of Swiss operator SBB Cargo who, in the beginning of the year, announced that the negotiations with DB and SNCF will be continued in the spring of 2010; increasing the participation in BLS Cargo (Switzerland), where DB Schenker currently holds 45%; the takeover of a Swedish operator. According to Michael Almmenas, head of Northern Operations, DB plans to operate high-speed trains in Scandinavia starting 2011.
SNCF unifies its European operations under one name
SNCF and Eurotunnel’s takeover of Veolia Cargo became effective on January 1, 2010. The French operator managed to defeat its rival, Italian state-owned operator Trenitalia, which was voted favourite by most railway experts.
The first step towards unifying the activities developed by Veolia Cargo and Fret SNCF and all the other logistics divisions was made in February, when all the subsidiaries of SNCF Geodis (SNCF’s freight, logistics and shipping division, which includes Fret SNCF, Veolia Cargo, VFLI, ERMEWA and AKIEM) located outside of France were unified under the name CapTrain. This change involved SNCF Fret Benelux, SNCF Fret Deutschland, SNCF Fret Italy, Veolia Cargo Belgium, Veolia Cargo Deutschland, Veolia Cargo Italy, Veolia Cargo Netherlands, Freight Europe UK, VFLI Romania and ITL Benelux. Therefore, VFLI Romania becomes CapTrain Romania. SNCF Geodis’s initiative was taken in order to unify all the divisions under one name and to separate itself from the Veolia brand, which is still used by the former owners. Anthony Lucas, General Manager CapTrain, said that “integration is a major step towards the supply of unique solutions to customers who come from different railway sectors”.
After taking over Veolis Cargo, SNCF became the largest private operator in the Netherlands and Germany, where the freight transport company owns several operators: Bayerische CargoBahn, Dortmunder Eisenbahn, TWE Bahnbetriebs, Industriebahn-Gesellschaft, Hörseltalbahn, Regiobahn Bitterfeld Berlin etc.
In the beginning of March 2010, the negotiations between SNCF and Arriva for the takeover of Keolis came to an end. Keolis is owned by SNCF and operates the regional railway passenger networks in the UK and Germany. The deadlock was reached because of DB’s increasing interest in taking over Arriva. There is also talk about increasing the participation in Italian operator Nuovo Trasporto Viaggiatori (NTV), who will operate Alstom AGV units on the Italian network. Currently, SNCF owns 20% of NTV.
Arriva, the new stake in the DB-SNCF battle
The most recent stake in the DB-SNCF battle – as the competition between the two large operators is seldom referred to – is British company Arriva.
In mid-March 2010, Deutsche Bahn confirmed the offer submitted for the takeover of Arriva, whose shares increased very rapidly following the announcement for the sale of a package share. In the beginning of 2010, Arriva confirmed negotiations with SNCF for a possible merger, which was supported even by the French Secretary of State for transport Dominique Bussereau, who said: “We are open to any type of project that can help SNCF to expand and grow”. According to experts, Arriva stakeholders prefer the offer made by Deutsche Bahn, and not another proposal from SNCF related to a possible merger between Arriva and French transport company Keolis, where the former major stakeholders of Arriva would become minor stakeholders. However, it is likely that Deutsche Bahn will have to raise its offer. Other voices outlined the fact that Arriva’s fate may all depend on a political decision, which would favour SNCF. Arriva’s takeover by DB might mean that the European Commission will force DB to sell Arriva’s operations in Germany, which would make the company much less attractive. A very remarkable move on the railway freight market was made by DSB, the Danish state-owned operator, who took over 50% of German company VIAS, therefore entering the German market. Danish State Railways is very present on the Swedish market. Here, DSB is the largest private passenger operator. DSB’s business in Sweden exceeds the business undertaken in its country of origin in terms of investment value.
The international market follows the same pattern as the European market
While in Europe there is talk about the monopole of several state-owned companies and the end of private operators, the international market is still in the “boom” phase of private companies, which threaten the leadership position of national operators.
In Russia, Globaltrans, the largest private operator in the country, announced that, this year, it will acquire 6.000 wagons due to an increase in the order intake and in the freight volume. To that effect, Globaltrans took on a loan from EBRD, which owns 3.2% of the company. In return, RZD announced that freight transport dropped and the company plans to sell its share in all the companies that are not related to the railway sector in order to finance its investments. In China there is talk about the separation of the freight and passenger transport activities and the set up – in cooperation with a foreign group – of a freight transport consortium, in order to revitalize this sector and bring it to the same level as passenger transport. In India, the founder of the first private railway operator in the country, Inlogistics, announced in March 2010 that business is going well and that they refused an offer from the government to incorporate the company in a Public-Private Partnership meant to revitalize the freight transport operations of Indian Railways. Success can be, however, only temporary, just like in the case of Western European operators who were literally swallowed by the large state-owned groups.
This trend is due to the fact that governments support the state-owned company and they also provide financial guarantees for the investments made by these companies. The economic crisis has shown how vulnerable private companies are in the absence of a sustainable strategy, based on long-term financial resources and reserves that can allow them to surpass the obstacles encountered during the periods of economic deadlock.
* Read more on the subject in the article entitled “Sofia-Yana intermodal terminal”(page 39)
by Alin Lupulescu
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