NS threatens to lose a large part of its train services in Germany. Abellio, the ailing subsidiary of NS, will lose its contract for regional train connections in the Ruhr region from 1 February. The local authorities issue an emergency contract; it is unclear whether Abellio is allowed to bid on this.
Other international activities of NS – in several regions in Germany and in the United Kingdom – are also under pressure. For example, the transport agreement in Scotland expires in March. Subsidiary ScotRail generated revenue of more than 1 billion euros in 2020, one sixth of the total revenue of NS.
The Dutch rail company has been active in the United Kingdom since 2004 and in Germany since 2008. NS wanted to respond to the further liberalization of European railways, but that trend is stagnating. In the UK, the British government is regaining control of the rail network and in Germany, competitors are complaining about the power of market leader Deutsche Bahn.
Millions loss
In the Ruhr area, the public client of the regional train services, a group of local authorities, is canceling the contract with Abellio. This Verkehrsverbund Rhein Ruhr (VRR) does not want to pay for the deficits of Abellio Germany.
The German NS subsidiary is suffering major losses and is expected to continue to do so in the coming years. Minister Hoekstra (Finance, CDA), sole shareholder of NS, wrote to the House of Representatives in July that Abellio Germany will be heading for a loss of 30 to 50 million euros per year in the coming years. In 2020, Abellio Germany achieved a negative result of 147 million euros (due to a one-off write-down of 84 million; turnover was 744 million). In 2019, the loss was 33 million (turnover 543 million).
Other international activities of NS are also under pressure
Abellio Germany has been in insolvency proceedings since June. That means that the company is reorganizing under the supervision of the court and that the company is renegotiating with its public clients.
In North Rhine-Westphalia, those negotiations have now broken down. On Monday afternoon, the client VRR decided to definitively terminate the contract with Abellio. The region now has to look for another carrier that wants to operate an emergency concession. This will probably cost the local authorities much more money than they currently pay for public transport. Lawyers are now investigating whether Abellio Germany may bid on the temporary transport contract.
Also read: German NS daughter Abellio on the brink of abyss
Biggest contract
NS would lose its largest contract in Germany with the VRR lines. The five concessions in the North Rhine-Westphalia region – with trains between, among others, Düsseldorf, Cologne, Essen and Dortmund and the regional line to Arnhem – accounted for a revenue of 262 million in 2020 (including a corona contribution from the German government). The revenues thus constituted 4 percent of the total turnover of NS (6.6 billion in 2020). Abellio Rail Nordrhein-Westfalen carried 62 million passengers last year. More than a thousand people work for this business unit. They should all find new work with the rail companies that take over the transport from Abellio.
The impending end of Abellio in North Rhine-Westphalia seems to be the beginning of the dismantling of the German branch of NS. In central Germany, Abellio is negotiating with local authorities: the contract in Saxony-Anhalt may be divested, but in Thuringia Abellio will continue to drive with a higher fee. Abellio will probably also continue in Lower Saxony (Hannover, Münster), because the local authorities there also want to give more subsidies. A local carrier may take over the Abellio lines around Stuttgart.
Higher wages, more maintenance
Abellio Germany has been negotiating higher subsidies with various governments for years. According to the NS subsidiary, its losses are mainly caused by two external factors. The new collective labor agreement for railway staff in Germany leads to higher wage costs. In a tight labor market, it is proving difficult to attract extra train staff. Abellio follows the collective labor agreement that Deutsche Bahn (market leader with more than 60 percent of the German rail market) has concluded with the trade unions.
Furthermore, a lot of work is being done on the rail network in Germany. According to Abellio, these activities lead to major delays. The NS subsidiary would therefore not always be able to keep to the punctuality agreements with regional clients. They then impose fines on the transport company.
Abellio states that it could not foresee the increased costs for personnel and punctuality when it submitted offers several years ago. Critics, however, say that new entrants on the German track, such as Abellio, offered their services for too low prices at the time.
A version of this article also appeared in NRC in the morning of November 23, 2021
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