Abellio Germany

By increasing the funding of regional public transportation services (‘regionalisation fund’) in 2020, the German government is supporting the financing of regional public transportation This will give the 16 federal states the opportunity to order more public transportation, make rail transport more attractive and thus achieve the goal they have set themselves of doubling the number of passengers by 2030. An important development is the implementation of the “Deutschlandtakt”, a logistics plan that will see trains run between major cities every half hour. The German state and Deutsche Bahn will invest € 86 billion by 2030 to modernise the rail network. This will increase the capacity of rail infrastructure in the longer term but will cause lots of construction works in the short term with massive impact on both passengers and train operating companies.

The year 2020 has been exceptionally difficult for rail operations in Germany due to the corona virus pandemic. The Government and federal states responded to the outbreak by implementing regional lockdowns for several months. During these lockdowns the use of the railways was limited to essential travel for key workers only. The local public transportation industry in Germany expects a loss of around € 5 billion due to the corona virus pandemic. The individual federal states are in charge of the local public transportation. At the end of May 2020 the individual federal states announced that they will contribute € 2.5 billion to the public transport rescue package on top of the German government contribution which also amounts € 2.5 billion. As a result of the rescue package Abellio Germany expects to be compensated for any loss resulting from the corona virus pandemic as Abellio has concluded gross contracts with the authorities. Abellio Germany has no revenue risk and therefore the financial impact of corona has been relatively limited. Abellio has claimed compensation of additional costs relating to the pandemic and has received first payments in 2020.

German rail concessions

Abellio Germany was founded in 2004 as a regional rail company in Essen. Today Abellio operates 50 lines in 9 rail concessions in 9 federal states across 3 regions. The region West includes Abellio Rail Nordrhein-Westfalen GmbH (ABRN) in North Rhine-Westphalia (NRW) and WestfalenBahn GmbH (WfB) in North Rhine-Westphalia and Lower Saxony. ABRN operates the 5 concessions S-Bahn Rhein-Ruhr (SBRR), Ruhr-Sieg-Netz (RSN), Der Müngstener (S7), Niederrhein-Netz (NRN) and Rhein-Ruhr Express (RRX) and WfB operates the Emsland and Mittelland (EMIL) concession. In Central Germany, Abellio operates the Saale-Thüringen-Südharz network (STS) and the Sachsen-Anhalt diesel network (DISA) with Abellio Rail Mitteldeutschland GmbH (ABRM). In southern Germany it operates Lot 1 of the Stuttgart network (STN) with Abellio Rail Baden-Württemberg GmbH (ABRB). In addition, Abellio in Germany owns the cleaning and security services company PTS, located in Essen.

*estimate pre-corona

In Germany, Abellio only has gross contracts with the local authorities (PTAs), which means that Abellio Germany is paid for its services per train kilometre. The revenue risk is allocated to the PTAs. In addition, the inflation risk of certain costs (e.g. personnel costs and energy costs) is hedged by indexation formulas in the contracts with the PTAs. Therefore, the risk profile of gross contracts is relatively low when the operating performance is solid. However, the reduction of working hours and additional restrictions for the employer in planning working hours, as well as the possibility for the employee to opt for a wage increase or additional vacation days in new tariff agreements, results in an increased need of employees (mainly train drivers and conductors). The consequential increase in training and staff costs is not adequately covered by the inflation and personnel cost index.

A working group within the PTA association BAG/SPNV has been discussing an adjusted index for more than a year, which index should adequately reflect developments in personnel costs in the compensation. The presentation of the new index has been postponed four times in 2020 and is now expected in March 2021. The labour market in Germany is difficult. Experienced train drivers are scarce, and it is not easy to recruit qualified specialists as career changers in the industry. This leads to higher recruitment and training costs.

In connection with the high level of track construction works, the lack of personnel has led to increased penalties for lower punctuality and train cancellations by the PTAs. In future it will be crucial to work together with the PTAs and the state governments to solve the problems of the German public rail industry regarding the index and the penalties for low punctuality that cannot be influenced by operators such as Abellio. The general conditions existing at the time of the submission of the European tenders have changed so drastically due to the reasons mentioned above that the rail companies consider adjustments of compensation and penalty mechanisms in the current contracts necessary. If no solution is found, the operation will remain lossmaking and it will be difficult to achieve a reasonable profitable result for the German business. It is therefore crucial for Abellio Germany's strategy to reach an agreement with its PTA’s to receive structural additional payments to compensate for increased personnel and training costs, as well as an adjusted penalty regime, whereby fines are only imposed for factors that can be influenced by train operators.

Abellio Germany has won several concessions in 2015 and 2016 and has completed all mobilisations. In the mid of 2020 the last of these start-ups were set into operation. This comprises the start of the RE1 at the Rhein-Ruhr-Express (RRX) in North Rhine-Westphalia and the route Stuttgart to Tübingen in the Stuttgarter Netz (STN). Due to the delayed delivery of trains by the manufacturer, Abellio had to implement replacement concepts at STN which led to a high complexity of operations and low punctuality. Abellio has been compensated for additional costs. At the end of 2020 Bombardier delivered 46 of the 52 Talent 2 trains ordered.

The current strategy is to optimise already contracted services and pursue opportunities that are regionally well connected to our current business activities and will offer synergy potential. Preferably the cross-border traffic between the Netherlands and Germany is expanded and improved. This supports the strategy of NS and is an attractive prospect for Dutch passengers, but only if the contracted fee enables Abellio Germany to earn a reasonable return over time.

Financial result 

In 2020 Abellio Germany achieved a revenue of € 744 million from its operations which will grow to approximately € 800 million in 2021. The negative EBIT of € -127 million (2019 € -24,5 million) is due to:

1. exceptional impact of € 84 million from impairment of assets because the carrying amount of these assets exceeded the estimated realisable value. The impairment is related to the issues in the German rail market rather than the corona virus outbreak;

2. collective tariff agreements with the unions resulted in reduced working hours, which require hiring more employees, higher personnel costs and additional recruitment and training costs;

3. high penalties for cancellations, lower punctuality and lower quality (€ 36 million), mainly due to an increased level of track works and lack of staff. In addition, there were several force majeure events leading to cancellations and delays beyond control of the operators;

4. start-up problems of new concessions (SBRR, RRX and STN) and issues due to late delivery of new trains and start-up issues with delivered new trains had a negative impact on the 2020 operational performance and financial results.

The financial performance of Abellio Germany for the period ending 31 December 2020 is as follows:

*The negative equity position in 2020 is to be seen in conjunction with subordinated loans
from the direct shareholder Abellio Transport Holding BV

Operational performance

In June 2020, Abellio in Baden-Württemberg started the third and last phase of the Stuttgarter Netz (STN) concession. Due to a high utilisation of the infrastructure at Stuttgart main station combined with a renovation, the delay in the delivery of new trains and a shortage of skilled work force, Abellio encountered start-up issues for STN. Abellio in North Rhine-Westphalia simultaneously launched the second and last phase of the concession Rhine-Ruhr Express (RRX). Similar to STN, in 2020 Abellio had start-up issues with SBRR (started in December 2019) and RRX. The issues are mainly due to the lack of train drivers and a significant number of infrastructure constructions. These constructions are causing delays and cancellations that could not be influenced but nevertheless led to severe penalties. During the year mobilisation costs in the amount of € 4.6 million (2019 € 9.5 million) have been expensed prior to the start date of new concessions.

In Central Germany, the STS concession entered its fifth year of operation in December 2019. Despite much infrastructure work by DB Netz, the performance of ABRM on the STS network was good with an average punctuality of 95.1%, and punctuality in DISA improved during the year, resulting in an average punctuality of 95.0%.

In the quality reports of the Regional Transport Association of Westphalia-Lippe (NWL), Abellio has consistently been on the podium as a gold and silver medal winner in recent years including 2020. The Verkehrsverbund Rhein-Ruhr- (VRR) also consistently gives Abellio top marks in its customer satisfaction ranking. RE 11 (RRX) with a punctuality rate of 94.4% is the most punctual line of the RE lines. 

Customer satisfaction

The company also received good remarks from passengers in terms of seat availability, vehicle condition, exterior cleanliness, and passenger information. In addition, passengers feel safe on Abellio trains. Accordingly, the company occupies the first five places in the ranking of 49 lines. The general customer satisfaction with the company increased and, according to VRR, made Abellio once again the most popular rail company for passengers in North Rhine-Westphalia in 2019, which is awarded in 2020.

Organisation and staff

Abellio Germany’s head office is based in Berlin with subsidiary offices in Halle, Bielefeld, Hagen and Stuttgart. Abellio has collective tariff agreements with the unions Gewerkschaft Deutscher Lokomotivführer (GDL) and Eisenbahn Verkehrs Gewerkschaft (EVG). With the mobilisation of several new networks and the consequences of the collective tariff agreements with the unions Abellio had to make great efforts in an empty labour market in Germany in order to hire enough staff to comply with the contract requirements.