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Passenger transport

DB Bahn Regional business unit

EVENTS IN 2013

Success rate up year-on-year

In the year under review, DB Bahn Regional had to defend its position in the highly competitive German regional transport market and won a number of tender procedures for both rail and bus transport. The two largest contracts are:

  • the S-Bahn (metro) contract for Hamburg with a term of 15 years until 2033,
  • the third transport operation contract (VDV III) of local rail passenger transport services in Bavaria. The contract took effect from January 1, 2014 and contains a step-by-step transfer of all partial networks to the competition by no later than December 2023.

Continuing delays with regards to the delivery of new trains

In 2007, DB Bahn Regional and Bombardier signed a framework agreement for the development, manufacture and delivery of up to 321 electric multiple units (EMU) from the 442 series (Talent 2) on a platform basis. Altogether we have requested 295 vehicles.

In order to push forward with the delivery of vehicles despite existing problems, we have agreed on a procedure with Bombardier whereby we will continue to take deliveries but will hold back a certain amount of the purchase price. Based on this agreement, 266 vehicles in total were delivered and received by us by the end of the year under review. All of the vehicles were delivered with significant delays. Bombardier is also late in delivering the remaining 29 vehicles. These delays have required, and still do require, substitution transport services with old vehicles. There are many defects in the vehicles delivered. The remedying of these defects is ongoing.

The delivery of 87 EMU of the series 430 for the S-Bahn (metro) Stuttgart began in April 2013 after delays but could not be continued after provisional contractual procurement of 13 vehicles in the middle of the year due to technical problems. Substitute transport with older vehicles was also necessary because of these delays.

The first of 56 diesel multiple units (DMU) of the 620/622 series for the Diesel Network Cologne should have been delivered by the manufacturer, Alstom, in June 2013. No vehicle had been delivered by the end of the year under review due to quality problems and delays in approval. The transport contract Diesel Network Cologne has therefore been served by substitute transports since December 2013.

Lawsuit of S-Bahn (metro) Berlin against Bombardier

The investigation of the service disruptions of S-Bahn (metro) Berlin since May 2009 found that they were caused essentially by defects in the 481/482 series vehicles delivered by Bombardier. This result confirmed a report submitted in July 2011 by an independent expert group set up by the Federal states of Berlin and Brandenburg.

Out of court negotiations with the vehicle manufacturer Bombardier collapsed at the beginning of 2013. Thereafter, before the conclusion of the agreed-upon limitation provision, S-Bahn (metro) Berlin filed a claim against Bombardier with the Berlin Regional Court concerning serious defects in wheels and brakes and in addition filed a motion to order Bombardier to compensate for further damages.

Subsidy procedures and requests for information on transport contracts

In the context of the ongoing formal investigation against the Federal Republic of Germany for the alleged provision of illegal subsidies as a result of the conclusion of a transport contract between DB Regio AG and the States of Berlin and Brandenburg, there was no significant difference in the year under review. This also applies to the information requests of the European Commission concerning the transport contract for S-Bahn (metro) Berlin, the transport contract Rhine-Ruhr transport association (Verkehrsbund Rhein-Ruhr, VRR) as well as the transport contract Baden Württemberg. It remains to be seen if and possibly to what extent the Commission will implement additional steps.

MARKETS AND STRATEGY

The German local rail passenger transport market will again be one of the most interesting markets in Europe in the coming years. In the next five years, we expect more than 60 tender procedures to be launched for a likely total volume of more than 250 million train kilometers. This accounts for about one-third of the total German local rail passenger transport market.

The DB Bahn Regional business unit has set itself the long-term goal to remain the leading public transport company in Germany. We pay attention not only to the size of the company, but also to the way in which we pursue our business, with an eye on the interaction between profitability, a focus on customers and employees, and innovative and environmental aspects. The long-term aim is to bring these components together harmoniously.

Enlarge imageIcon Ökonomie, Investor Relations (DB)

In the economic dimension we want to increase our customer satisfaction and defend our market position profitably.

Our service pledge in the rail line of business is the central orientation focus of our presence for our two customer groups – ordering organizations and passengers. In addition to the comprehensive activities, in order to become more efficient and effective a focus on the customer must be maintained. We are currently implementing concrete measures aimed at improving our services as part of the DB Group-wide customer and quality initiative. The ordering organi-zations and the passengers are also our focus in the bus line of business. A survey of ordering organizations as well as a market analysis of passenger needs is the foundation upon which measures to improve customer satisfaction is based.

In 2012 DB Bahn Regional Rail was not able to win as many contracts as in the previous year. Therefore, in the year under review, all regions, transport operators and central processes were examined for their efficiency and orientation to customer needs. As a result, numerous measures were identified, evaluated and implemented with the aim of improving our revenue and expenditure positions as well as quality and thereby increase our competitiveness over the long term.

Bus transport had to prove itself in a field that has become increasingly competitive in recent years. Increasing cost pressure in competitive invitations to tender was balanced with a comprehensive efficiency program by DB Bahn Regional Bus. Over the long term, the market share in the public road passenger transport market shall be maintained and profitable growth opportunities through innovative products and creative market penetration shall be used.

Enlarge imageIcon Soziales, Investor Relations (DB)

In the social dimension, we want to increase employee satisfaction. Satisfied employees are essential for a success-ful business in the public local transport market. For this, we have placed an emphasis in the year under review on the evaluation of the employee survey and the derivation of appropriate measures.

Enlarge imageIcon Ökologie, Investor Relations (DB)

In the environmental dimension, we want to develop further our environmental advantages. Long-term business success will also be shaped by the extent of our acceptance of environmental responsibility. The aim here is to build further our strengths as a structurally environmental transport operator, above all compared to auto transport.

DEVELOPMENTS IN THE YEAR UNDER REVIEW

The business development of DB Bahn Regional in the year under review was characterized by decreases in volume sold in both the rail and bus lines of business. While the development in the rail line of business was moderate on the whole because of the loss of invitations to tender and an increase in personnel expenses due to wage increases, the bus line of business recorded a drop in performance due to negative demographic effects and increased competition.

Punctuality records slight decline

Punctuality passenger transport (rail) [ % ]201320122011
DB Bahn Regional94.694.9*95.1*
Regional trains92.593.393.2
S-Bahn (metro) d.c.95.195.695.5
S-Bahn (metro) a.c.97.696.998.0

* Figure adjusted.

In rail transport, as a result of difficulties in operations, punc-tuality in the year under review fell slightly to 94.6% (previous year: 94.9%). Improvement was recorded only in S-Bahn (metro) a.c. in Berlin and Hamburg.

Customer satisfaction improved slightly

Customer satisfaction [ SI ]201320122011
Regional transport (rail)686766
Regional transport (bus)74

In the year under review, customer satisfaction with their most recent trip in rail services resulted in an SI of 76 (previous year: SI of 76). Overall satisfaction with rail services improved slightly in the year under review, resulting in an SI of 68 (previous year: SI of 67).

The measurement of customer satisfaction in bus services was newly introduced in the year under review, so there are no comparable figures from previous years. In the year under review, satisfaction with the latest bus trip among customers of scheduled bus services reached an SI of 79. For satisfaction of the entire bus line of business, an overall SI of 74 was achieved.

Business development slightly lower

DB Bahn Regional
Selected key figures
[ € million ]
20132012Change
absolute
Change
%
Passengers (million)2,5882,565+ 23+ 0.9
Volume sold (million pkm)51,83351,778+ 55+ 0.1
Total revenues8,8398,908– 69– 0.8
External revenues8,7348,82– 86– 1.0
Concession fees (rail)4,1684,265– 97– 2.3
EBITDA adjusted1,3371,439– 102– 7.1
EBIT adjusted777882– 105– 11.9
Gross capital expenditures908709+ 199+ 28.1
Employees as of Dec 31 (FTE)36,87836,959– 81– 0.2

Growth in volume sold was stable in the year under review because the decrease in the bus line of business with a minus of 2.0% as a result of lower numbers of schoolchildren and losses of invitations to tender could be offset by an increase in the rail division (+0.5%).

Business development of DB Bahn Regional was characterized essentially by growth in the rail line of business, which is the strongest in terms of revenue and performance. As a result, the drop in revenues seen here had a negative effect on profits for the business unit. The bus line of business with increased growth in revenue contributed positively to revenue growth.

Overall, the profit situation developed negatively. This took place due to lower revenues, the decrease in other operating income (–14.7%) and increases in personnel expenses due to works agreements (+3.2%). While adjusted EBITDA sank by € 102 million to € 1,337 million, adjusted EBIT decreased by € 105 million to € 777 million.

Gross capital expenditures increased significantly due to higher capital expenditures in the vehicle fleet, particularly in the rail line of business. Important measures were the procurement of 442 series EMU for the region Werdenfels in Bavaria, the region Nordost Berliner Umland and Warnow, Mittelhessen and for the S-Bahn (metro) Leipzig. In addition, new 430 series EMU were purchased for S-Bahn (metro) Stuttgart. We also increased our capital expenditures in the area of workshops and maintenance facilities (for example, in Ulm and Cologne).

Employee numbers in the business unit have remained nearly stable in comparison with the figure for December 31, 2012. A slight decrease in employee numbers in the rail line of business was offset by growth in the bus division.

Bus line of business

In addition to declining numbers of schoolchildren and lower performance as a result of increasing competition, one-time mandatory refund of compensation payments also slowed the business development of the bus line of business. Losses in bus transport were reduced by optimizing the business portfolio.

Bus line of business
Selected key figures
[ € million ]
20132012Change
absolute
Change
%
Passengers (million)653.4672.4– 19.0– 2.8
Volume sold (million pkm)7,4247,577– 153– 2.0
Volume produced (million bus km)567.3578.2– 10.9– 1.9
Total revenues1,3041,294+ 10+ 0.8
External revenues1,1991,211– 12– 1.0
EBITDA adjusted131138– 7– 5.1
EBIT adjusted6569– 4– 5.8
Gross capital expenditures8282
Employees as of Dec 31 (FTE)8,5058,259+ 246+ 3.0

The year under review saw a decline in performance in bus transport. The total number of passengers fell (–2.8%), as did the volume produced (–1.9%) and the volume sold (–2.0%). The main reasons for this were lower numbers of schoolchildren, the loss of invitations to tender and performance reductions in the context of business portfolio optimization.

Lower performance and mandatory refund payments in accordance with Section 45(a) of the German Law on Passenger Transport (Personenbeförderungsgesetz; PBefG) in the North Rhine-Westphalia region was also noticeable in the negative external revenue growth (–1.0%). Total revenues could be increased due to higher internal revenues from rail substitution services (+0.8%).

Cost of materials were slightly up year-on-year because of increased costs for maintenance services as well as price-related increases in energy costs, among other reasons.

Personnel expenses increased significantly because of both volume effects and wage increases. In contrast, depreciation fell compared to the previous year figure due to the postponement of capital expenditures.

Slighty positive revenue growth was more than offset by the rise in costs especially for personnel, which led to declines in adjusted EBITDA by € 7 million to € 131 million and in adjusted EBIT by € 4 million to € 65 million.

Gross capital expenditures remained at the same level as in the previous year.

The number of employees increased in comparison to December 31, 2012 due to the expansion of services in certain regions.

Rail line of business

On the whole due to the loss of invitations to tender and a rise in personnel expenses due to wage increases the business development in the rail line of business was moderate. The increase in the number of passengers, however, had a positive effect.

Rail line of business
Selected key figures
[ € million ]
20132012Change
absolute
Change
%
Passengers (million)1,9351,892+ 43+ 2.3
Volume sold (million pkm)44,40944,201+ 208+ 0.5
Volume produced (million train-path km)487.7496.8– 9.1– 1.8
Total revenues7,9018,031– 130– 1.6
External revenues7,5357,608– 73– 1.0
Concession fees (rail)4,1684,265– 97– 2.3
EBITDA adjusted1,2061,301– 95– 7.3
EBIT adjusted712813– 101– 12.4
Gross capital expenditures826628+ 198+ 31.5
Employees as of Dec 31 (FTE)28,37328,7– 327– 1.1

Development in the rail line of business was characterized by a decline in volume produced (–1.8%). The northeast and southeast regions in particular accounted for the lion’s share of the decline. In contrast, volume sold could be increased slightly (+0.5%). The positive development of the number of passengers (+2.3%) is due to increased demand in S-Bahn (metro) Hamburg and the regions Baden-Württemberg and Bavaria.

The lower volume produced also had a negative impact on the development of revenues. Pricing measures, in contrast, had a positive effect. Nevertheless both total revenues and external revenues decreased (–1.6% and –1.0% respectively). The decrease in total revenues was largely a result of lower internal revenues due to the merger of DB Regio NRW GmbH with DB Regio AG. As a result of the decline in performance, concession fees also fell, which could be partially offset due to the regular annual increases of concession fees. Other operating income decreased as a result of lower utilization and reversal of other provisions.

Lower expenses for infrastructure usage due to the lower volume produced and lower maintenance costs led to a reduction in the cost of materials (–1.9%). Increased wages as a result of the wage agreement led to higher personnel expenses (+3.1%). Other operating expenses fell (–10.4%) especially because of the lower setup of provisions in 2013. Depreciation rose year-on-year (+1.0%) through new vehicle additions.

Lower revenues in conjunction with an increase in personnel expenses led to a decrease of € 95 million in adjusted EBITDA to € 1,206 million, and a € 101 million drop in adjusted EBIT to € 712 million.

Gross capital expenditures were significantly higher year-on-year. This was due primarily to the addition of EMU of the 442 series and the 430 series.

The number of employees decreased slightly in comparison to December 31, 2012 due to performance losses.

Last modified: 28.04.2014

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