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VDV 2015 Public transport by rail in Germany 19.03.2015, Rome Oliver Wolff

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VDV 2015 Railbound public transport in Germany basic information about legal base and market principles The organisation of the market depends on the egal basis of railbound public transport Tram, Underground (PBefG, i. e. public transport law [bus/tram/metro]) Railway (AEG, i. e. railway law / law on railways [local rail passenger transport (SPNV)]) Common principles for all modes of public transport Integration of timetables for urban, sub-urban and regional transport Definition of local transport: majority of rides 50 km or 60 minutes travel time Public transport is organised in public sevice contracts, i. e. from an entrepreneurial viewpoint the level of service offered wouldnt be profitable Matching expectations of passengers (customers): Passengers do not distinguish between trams and railway services / it is up to the transport companies and public transport authorities to meet the passengers expectations Different parts of the public transport system take different functions within: Urban transport, regional transport / less stops, many stops / shuttle services on particular lines, networks Railways offer all of these elements more or less, depending on the situation on-site 19.03.2015Oliver Wolff, Public transport services by railway in Germany 2

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VDV 2015 What means S-Bahn? Today, the term S-Bahn (rapid transit) first of all covers marketing aspects, adressing particular expectations: High frequency services in/to agglomeration area, short distances between single stops (normally between 800 and 2.000 m), long operating times, level access to train No clear distinction between rapid transit in a narrow sense (e. g. Berlin) and rapid transit in a broader sense (for marketing reasons some regional networks are called S- Bahn as well) Additionally: Tram-train services in Karlsruhe are partly named S-Bahn As to technical and operational rules, there are some exceptions for rapid transit; nevertheless, they are part of railway system in Germany Exemptions concern e.g. signalling, track distance, cross section of tunnels, level of platform (rapid transit: normally 96 cm) Historical background: rapid transit systems in Berlin and Hamburg operate with different power supplies (direct current, conductor rails) on isolated networks But from the legal point of view there is no difference between rapid transit and other services, so rapid transit is operated under the same legal framework like all railways. 19.03.2015Oliver Wolff, Public transport services by railway in Germany 3

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VDV 2015 Example: Map of integrated public transport system (railbound) in Cologne agglomeration 19.03.2015Oliver Wolff, Public transport services by railway in Germany 4 Source: www.vrs-info.de

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VDV 2015 Example: Map of integrated public transport system (railbound) in Karlsruhe agglomeration 19.03.2015Oliver Wolff, Public transport services by railway in Germany 5 Source: www.kvv.de

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VDV 2015 Competition for the market, structure of purchaser market Open access on German railway network since 1.1.1994 incl. local / regional passenger services Problem of local / regional passenger services: Not profitable regarding customersexpectations and political targets/expectations. No public transport service without sufficient public finance, earnings by ticket sales are actually covering about 40 % of the costs of these services Solution: Two-step market: transport authorities award public service contracts to railway companies (step 1); railway companies offer their services to customers (step 2). The federal goverment transfers an amount of federal value added tax to the German Provinces (Bundeslnder), consolidated by law The Provinces themselves are responsible for organisation and implementation of public service contracts. Effects up to now: Additional public services by railways since 1996 (supply: +25%) and remarkable success in terms of passenger demand (> 40 %). 19.03.2015Oliver Wolff, Public transport services by railway in Germany 6

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VDV 2015 Public sector Transport authorities = purchaser of public transport (railways) / tendering and awarding public service contracts 27 transport authorities actually order about 650 million train- kilometers per annum, contracts usually fixed for 10, 12 or 15 years, size of contracts 3,5 Mio. train- kilometers on average, in particular cases up to 10 Mio. train-kilometers 19.03.2015Oliver Wolff, Public transport services by railway in Germany 7 Source: www.bag-spnv.de

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VDV 2015 Purchaser Market, the contractors point of view Contractor = Railway company Business chance depends on the way the transport authority awards the contracts In general: Does the transport authority award the contract in an (open) tender? Europe: choice between open tendering and direct awarding Germany: Tendering procedure In detail: What kind of offer the bidders are allowed to submit? Bidders scopes for suggestions and initiatives concerning the transport concept may vary, e. g. transport companies as carriers only against companies allowed to use their individual experiences and skills Allocation of opportunities and risks between purchaser and contractor, e. g. responsibility for costs and earnings (ticket sales) or costs only Value-added share / companies responsibility for the complete public service might be restricted by the public authority (e. g. split up of contracts: procurement and maintenance of trains, operating service, distribution of tickets) 19.03.2015Oliver Wolff, Public transport services by railway in Germany 8

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VDV 2015 20 years experience with open access and liberalisation: todays market structure Purchaser market actually performed by: German Railway Further state owned railways of neighboring countries (via holdings or subsidiary companies) Railway companies owned by local governments (long tradition in Germany: so called nichtbundeseigene Eisenbahnen, i. e. railways not owned by the federal state) By numbers: > 60 operating companies (> 40 within structures, 20 stand-alone) Market leader: DB Regio & subsidiaries (about 74 % market share by train kilometers) Main competitors: NETINERA, Veolia, BeNEX, Hessische Landesbahn (each incl. subsidiaries), Abellio, Keolis, National Express (start of operation in December 2015), some more locally acting companies Former expectations, not realised yet Nearly no private-owned railway companies (still about 90 % directly or indirectly owned by public governments) Very little companies coming from other parts of the public transport system, e. g. local transport comapies (legal reasons: in-house procurement) Maybe soon: spreading the traditional structure of transport services will give chances to (e. g.) train manufacturing industry (and might give disadvantages to some existing railway companies) 9 19.03.2015Oliver Wolff, Public transport services by railway in Germany

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VDV 2015 Timetable 2015 Overview of local / regional rail services Operating companies and lines 19.03.2015Oliver Wolff, Public transport services by railway in Germany 10 Source: www.bag-spnv.de

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VDV 2015 Agglomeration areas cause special challenges Public transport in agglomeration areas causes special challenges for public authorities as well as for companies Highly differentiated and complex, e. g. Planning processes (interfaces, integration of time tables, limited availability of track capacity) Calculation (investment needed, staff requirement as a bottleneck) Starting the public transport service, fulfilling the contract Contract itself (allocation of risks, contractual penalty, controlling the contract) Performance of the system is highly depending on infrastructure Main lines often without any capacity left = disturbances cause extensive effects on each company and the transport system in general Success might be boon or bane? Increase of demand urgently needs for an increase of supply, but infrastructure capacity is in many (nearly all?) urban areas the decisive limiting factor 19.03.2015Oliver Wolff, Public transport services by railway in Germany 11

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VDV 2015 Agglomeration areas cause special challenges Complexity of agglomeration areas is visible as well when regarding the starting of competition in public railway transport - competion started in rural areas: Regional lines, small networks Smaller lots (partly < 1 Mio. train kilometers, today 3,5 Mio. train kilometers on average) Comparatively less demand / smaller vehicles sufficient, diesel locos or dmu Less lines in the public transport system in general, that means less need for coordination Less companies operating in the (regional) market, that means less complexity of contracts Tendering procedures for all public transport services by rail are mandatory, therefore more complex contracts have been awarded since several years even rapid transit, nevertheless: Market share of DB Regio as general market leader in agglomeration areas still above the average (competitors market share in rapid transit: < 10 %) 19.03.2015Oliver Wolff, Public transport services by railway in Germany 12

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VDV 2015 Challenges for the next years (examples / 1) Financial engagement: If the financial basis will be sufficient for the next years is yet not clear = negative signal regarding the attractiveness of the purchaser market for companies and their stakeholders > 50 % of public finance (purchaser market) is spent for infrastructure use, propably even more tomorrow = badly needed transport services, especially in urban areas might not be financed any longer. Tendering procedures, especially of complex systems, do absorb numerous resources. Which company will be able to work on an offer? Will there be enough engagement left for smaller, possibly less attractive contracts? Transport authorities new approaches of dividing public transport service in single elements show both advantages and disadvantages. It is not sure, in which way the market structure will change as a consequence. New vehicles as a bottleneck: Will availability and technical registration of vehicles soon be sufficient again? Is it realistic to assume a satisfying range of standardisation at least in the medium- run and thus reduce the risk of trains re-use? 19.03.2015Oliver Wolff, Public transport services by railway in Germany 13

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VDV 2015 Challenges for the next years (examples / 2) Additional challenges for companies and transport authorities, e. g. Demographical change, change of mobility needs and requirements Change of relationship in competition: long-distance bus services permitted by now, new mobility offers in terms of organisation and information, search engines covering all transport modes. Technical challenges: public transport must save, at least regain its margin as a environmentally friendly system All-over information: Availability of (real-time) information and communication shows advantages as well as disadvantages of the public transport system respectively its performance A marketing question: the general image of public transport should (at least) be as good as it really is. Staff procurement (esp. train drivers) is one of the decisive, strategic challenges across the whole sector. 19.03.2015Oliver Wolff, Public transport services by railway in Germany 14