ARTICLE IN PRESS

0967-070X/$ - s

doi:10.1016/j.tr

�CorrespondE-mail addr

1Visiting stud

Transport Policy 14 (2007) 399–409

www.elsevier.com/locate/tranpol

Challenges confronting new traction providers of railfreight in Germany

Brian Slack�, Alexander Vogt1

Department of Geography, Concordia University, Montreal, Canada

Available online 30 May 2007

Abstract

Germany is one of the most liberalised countries in Europe for rail freight. Since the market became deregulated in 1991, 299

companies have obtained licences to haul freight of these approximately 130 actively engage in providing traction, but 85% of the market

is still dominated by Railion, the freight arm of DB. Many obstacles to market entry have been identified in the literature since

liberalisation. The goal of this paper is to assess if these obstacles persist and what new challenges have arisen. The study, based on a

survey of new rail traction providers, suggests that several of the challenges identified in the literature have been overcome, but major

problems persist because of the dominance of DB through its control of infrastructure and its market power.

r 2007 Elsevier Ltd. All rights reserved.

Keywords: Short line railways; Freight; Germany

1. Introduction

Freight traffic in Europe doubled between 1990 and2000, and the rate of growth shows no sign of abatement.The modal split for European freight traffic is dominatedby road transport, with only 8% [15.8% in Germany(BMVBS, 2005)] of goods being transported by rail, despitethe extensiveness of the European rail infrastructure(European Commission, 2003, p. 6). Over the last 15 yearsthe European Commission has recognised the need toimprove rail performance. One of the major policydirectives has been to increase competition by breakingup the vertically integrated national railways (Sanchez,2001). This process began in 1991 with directive 91/440(Gouvernal and Daydou, 2005). This directive (amendedby directive 2001/12) required separate accounts to be keptfor the rail network and the provision of transport services,and demands of member states to open up a 50,000 km railfreight network throughout Europe with guaranteed accessrights for intramodal competition (European Commission,

ee front matter r 2007 Elsevier Ltd. All rights reserved.

anpol.2007.04.003

ing author. Tel.: +1514 848 2053.

ess: slack@alcor.concordia.ca (B. Slack).

ent from the University of Freiburg, Germany.

2001). The European Commission (2003) describes thesedirectives as legislation to ‘‘improve the quality andefficiency of Europe’s transport network and createconditions for a modal shift to alleviate road use and theproblems it causes’’ (p. 1). For Bennett (2003, p. 34) ‘‘theselegal measures combined with technical advances under-way [y] are meant to ensure that Europe’s rail networkbecomes faster, open to competition, and fully integrated’’.This deregulation has been applied unevenly across the

EU. In 2004, the year before all member countries weresupposed to complete the separation between track andoperations, an Index of Liberalisation (Kirchner, 2004)provided a measure of the current degree of liberalisation.UK, Sweden and, Germany were shown to the mostliberalized (‘‘on schedule’’) in contrast to Spain, Greeceand, Ireland which were ‘‘pending departure’’ to open uptheir markets. Germany was one of the early adopters ofopen access, breaking the virtual monopoly of DeutscheBundesbahn (West-Germany) and Deutsche Reichsbahn(East-Germany) in 1994 by creating Deutsche Bahn (DB).It presently accommodates the largest number of railwayundertakings (for passenger and freight) in Europe (SCI,2005). In February 2007 there were 361 different railwaycompanies (freight and passenger) in possession of a licence

ARTICLE IN PRESSB. Slack, A. Vogt / Transport Policy 14 (2007) 399–409400

to operate on the German network (Federal RailwayOffice, 2007).

Despite the relatively long period in which new entrantshave been able to provide traction services in Germany,freight transport is still dominated by Railion, the newname of the traction provider created from the former DB.Railion has a 85% market share (Hohnscheid, 2006) andthe rate of growth of the new traction providers has beenslow (Aberle, 2002): ‘‘Germany is indeed one of the mostliberal countries, but genuinely independent newcomers tothe market still face operational problems’’ (Hope, 2003,p. 154). What constitutes these operational problems isopen to debate. Although a wide range of factors have beensuggested in the professional and academic literature, therelative importance of the issues still has to be determined.Yet if the EU policy is to achieve its goals, these entry andoperational constraints need to be addressed.

The objective of this paper is to identify the contempor-ary challenges being faced by new freight traction providersin Germany. We use the term freight traction providers inlieu of the widely used term ‘train operating companies’ orTOCs, because the latter can include third parties wholease locomotive and freight wagons. We are particularlyinterested in the companies that operate locomotives andhave licences to run freight trains because of their directfinancial involvement in the activity. We consider a rangeof issues drawn from the literature. By undertaking asurvey among a sample of providers the relevance of thechallenges is measured. The survey complements an earlierinvestigation by Zauner (2004) with two differences. Theearlier survey (data were collected before September 2003)treated both passenger and freight companies, while thepresent is more focussed. Secondly, our survey provides theopportunity to identify other challenges confrontingnew entrants and to indicate the measures suggested bythe industry for resolving the present problems.

2. Germany’s rail freight actors

Nearly all rail infrastructure in Germany is part of theDeutsche Bahn Group (DB Group). With the authorityover the network, the former monopolist is a company withfour domestic subsidiaries: Railion (freight), DB Netz(infrastructure), DB Regio (regional and local passengerservice) and, DB Fern (long-distance passenger service)(Deutsche Bahn, 2005). The freight operator Railion is thedominant freight undertaking (Leenen and Neumann,2004). Although DB Group was privatised in 1994 it stillreceives large subsidies (3.41 billion h in 2004) (BMVBS,2006). The subsidy is made up of 2.45 billion h ‘‘buildingcost subsidy’’ (since the majority of infrastructure is usedby freight and passenger trains—it is impossible toseparate); 0.25 billion h interest free loans; 0.25 billion h

of payments to the ‘‘Association for Rail InfrastructureFinancing’’ [VerkehrsinfrastrukturfinanzierungsgesellschaftSchiene]; 0.27 billion h for the ‘‘Future InvestmentProgram’’ [Zukunftsinvestitionsprogramm] and 0.19

billion h identified as ‘‘other’’. The subsidiary DB Netz isresponsible for the German rail network which operates ata deficit.New entrants into the freight market are not subsidised

at all (Muller, 2000). The rail market has been described as‘‘y[DB Group] manages the strategic and operationalactivities of all the participating companies and where allpossible forms of political pressure are brought to bear tosecure its monopolistic control of the network’’ (Aberle,2002, p. 19). The dominant market position of DB Groupis confirmed by several other authors: Pallmann (2004),Raith and Gasser (2005), Conseil National des Transports(2001).In March 2007 a total of 299 companies held a licence to

operate freight trains on the national infrastructureaccording to the Federal Railway Authority. Many licenceshave not been used and in 2006 only 160 actually operatedtrains on the network of DB Netz. According to arepresentative of VDV contacted in early 2007, only 30are in competition with DB (personal communication). Thefive leading companies are Railion, TX Logistik, HGK,SBB Cargo and Rail4Chem (NEA, 2005).A number of studies have identified a range of problems

confronting the new entrants:

�

The charge for traction current is too high (Raith, 2003;Muller, 2005; Kuhlwetter and Frohlich, 2001). � The access to shunting sites is a problem for new

entrants (Link, 2004).

� Maintaining and servicing rolling stock is a problem

(Muller, 2000).

� There are shortages of locomotive pools (Muller, 2000). � The time consuming process of licensing new locomo-

tives through the German Railway Authority is proble-matic (Hope, 2003).

� There is a lack of wagons (Muller, 2000; Geitz, 2001). � There is a shortage of professionals with sufficient rail

freight market know-how (Muller et al., 2002).

� The credit rating of the new entrants is much lower than

for DB Group which enjoys the surety of the federalstate, the only shareholder of DB Group (Raith andGasser, 2005; Bjelicic and Sudholter, 2000).

� The costs to further penetrate the rail market are too

high (Muller et al., 2002).

� The technical and organisational requirements for new

entrants are a problem (Link, 2004).

These issues fall into a number of discrete groups. Thereare clearly several factors that relate to equipment, thelocomotives and wagons for example. Others relate toaccess to the rails through the awarding of slots and accessto sidings. Financial difficulties such as costs of energy andaccess to capital comprise a third group.The majority of these issues have been raised and

discussed for many years. An issue is whether any havebeen resolved or whether they still persist? Have any new

ARTICLE IN PRESS

Table 1

Motivations for the new entrants to enter the rail market

Number of

responses

Reasons of entering the rail market

8 The traction and service provision of Railion is expensive

4 The quality of the Railion service provision is poor

2 The lack of reliability of the service provided by Railion

2 There is little flexibility in Railion’s service provision

B. Slack, A. Vogt / Transport Policy 14 (2007) 399–409 401

challenges been raised? This paper goes on to answer thesequestions.

3. Methodology

A questionnaire was prepared comprising two sections.The first part sought to define the reasons for entry and thebusiness activities of the rail freight undertaking, thesecond to explore the challenges suggested by the existingliterature. Both closed and open questions were included.

A sample was drawn from the list of licensed rail freightoperators in Germany recorded by the Federal RailwayAuthority. It should be noted that most of the licensedcompanies had marginal transport activity. Fifteen rail-ways were selected based on geographical distribution (sixin eastern Germany, nine in western Germany); and,company size based on turnover (five4h40M, five betweenh20M and h40M, fiveoh20M). The contacts were madeby telephone. Twelve indicated a willingness to cooperate.Of course, the relatively small sample size is a potentialconstraint on the relevance of the results, but we wished toconduct on-site interviews, using a closed and openquestionnaire format (copies of which are available fromthe authors), and our resources were limited. Nevertheless,we believe that the small sample is balanced, includingthree of the four largest long-distance players (NEA, 2005),and several small enterprises. On-site interviews with the 12rail freight companies were conducted in December–Jan-uary 2005–2006.

In addition, interviews were conducted with the GermanRailway Authority (Eisenbahnbundesamt) in Bonn, theAssociation of German Transport Undertakings (VDV) inCologne and a politician involved in transport policy fromLower Saxony. These experts on rail freight marketprovided a broader perspective and were presented onlywith the section of the questionnaire dealing with thechallenges facing the industry in general.

Questionnaire results were tabulated. The challengeresponses were ranked, and the level of significance of theresponses were tested using chi square (w2). From theresponses to the open questions it was possible to identifynew challenges, not yet mentioned in the literature. Thesewere ranked based on the mentioned frequency.

4. Characteristics of the new entrants

4.1. Motivations for market entry

Before identifying problems since market entry wesought to understand why the companies had decided toenter the rail freight traction business in the first place. Ofthe factors presented in a closed questionnaire survey to the12 companies, cost reduction emerged as the mostimportant factor for companies to become tractionproviders, especially for the industrial railways (seeTable 1). These are railways that prior to 1994 usedto operate within the sites of large manufacturers

(Le Nenaon, 2005). An example is the VerkehrsbetriebePeine-Salzgitter (VPS) which operates an industrial railwayincluding 375 km of infrastructure for the Salzgitter Group(a steel manufacture). VPS also offers traction and serviceprovision on the infrastructure of DB Netz. In 1988, theSalzgitter Group started operating freight trains onGermany’s rail network in cooperation with the nationalrail carrier (the predecessor of Railion). In order to reducecosts, the Salzgitter Group decided to establish its own railfreight operations (as a subsidiary of the steel manufac-turer) in 1994. Today, VPS competes with Railion ontraction and service provision.Table 1 reveals other motivations including: dissatisfac-

tion with the quality of service of Railion; the possibility tooffer clients ‘‘an efficient and simple type of transport’’;and the lack of flexibility of Railion. It may be noted thatdissatisfaction with Railion was at the heart of all thereasons chosen.

4.2. Characteristics of the new entrants

Before 1994, when the German rail market opened tocompetition, three of the interviewed companies werealready operating freight trains: Havellandische Eisenbahn(HVLE), Bentheimer Eisenbahn and OsthannoverischeEisenbahn (OHE). Unlike most of the European countries,Germany always had a few independent rail freightoperators. Other examples included: SudwestdeutscheVerkehrs AG (SWEG), Hohenzollerische Landesbahn(HZL).Although it was legally feasible for new firms to begin

providing traction after 1994, only one additional newentrant was recorded prior to 1999. Fig. 1 indicates that50% of the interviewed companies operated theirfirst freight trains on the national infrastructurebetween 1999 and 2001. Since 2002 only one newadditional company has begun service. No reasons havebeen found to explain the sudden rise in entry, but thepattern suggests that while opening access has drawn newservice providers, there are difficulties that still have to beresolved.All interviewed companies see the operation of freight

trains as their core business, but there is a great deal ofvariance in turnover (see Fig. 2). Four of thecompanies had annual turnovers in excess of 45 millionh, while four generated less than 10 million h in turnover.

ARTICLE IN PRESS

Fig. 1. Year of market entrance of the 12 companies surveyed.

Fig. 2. Turnover of the surveyed firms in 2005 (* ¼ 2004).

Fig. 3. Transport performance of the surveyed firms in 2005 (* ¼ 2004).

B. Slack, A. Vogt / Transport Policy 14 (2007) 399–409402

These figures must be placed in the context of Railion,which has an annual turnover of 3300 million h andhandles 77,600million t/km of traffic annually (DeutscheBahn, 2005).

The transport activity of the sample firms, as measuredby t/km, is quite varied (see Fig. 3). Included in totals areactivities outside Germany. For example, Rail4Chemgenerates 60% of its transport activities outside of

ARTICLE IN PRESS

Fig. 5. Source of customers.

B. Slack, A. Vogt / Transport Policy 14 (2007) 399–409 403

Germany, and TX Logistik is focussed on tractionprovision crossing the Alps (Holland–Germany–Switzerland–Italy). Apart from two marginal exceptionsinvolving minor services of OHE and Regiobahn Bitterfeld(RBB), all other railways operate only within Germany.

When providing rail freight traction, the companiesdistinguish between regular and spot traffic. Regular trafficoperates on a regular schedule and is part of the officialfreight timetable published by DB Group. Spot trafficrequires spontaneous traction provision because it isresponding to immediate traffic demand, such as is thecase for petroleum shipments. As Fig. 4 indicates, regulartraffic dominates. The exception is Locon, which did notoffer any regular traffic in 2005. However, with the tractionprovision for a container train between Berlin and Bremenwhich commenced in March 2006 (once a week), Loconexpects to increase its regular traffic share to 50%. Theprovision of spot traffic is seen by many of the interviewedcompanies as a competitive advantage, since their greaterflexibility allows them to respond more quickly to clientdemands than Railion.

One of the motivations for the European Commission toderegulate the rail freight market is to increase thecompetitiveness of the rail industry with other modesthrough intramodal competition. It is hoped that this willincrease efficiency and ultimately produce a modal shift,from the road to the rails for example. Fig. 5 shows thecustomer mix for the new entrants. The majority of thecompanies have drawn their customers from Railion. Thisrepresents an intramodal diversion. Very few of thecompanies have been successful in attracting new custo-mers. Bentheimer Eisenbahn is the extreme case with only15% of its clients being former Railion customers. It owns100 km of track in the north-western district of Germany,and with the operation of loading facilities and a freightvillage (Europark Coevorden-Emlichheim) the railway iswell positioned to exploit the regional rail freight potential.The only other respondent which has attracted many newclients is RBB, which belongs to the Connex-Group. This

Fig. 4. Type of traffic.

industrial railway in Saxony–Anhalt offers traction in anarea never served by Railion or its predecessors.As previously mentioned some of the new entrants own

rail infrastructure. Some of these companies emerged outof industrial railways (VPS, InfraLeuna, RBB, EKOTransportgesellschaft [EKO]) or from regional railways(Bentheimer Eisenbahn, OHE, HVLE) (see Fig. 6).However, no main trunk lines are owned by the newentrants.The industrial railways operate their infrastructure to

serve adjacent manufacturers with traction and serviceprovision. The infrastructure owned by the regionalrailways is seen by the companies as a financial burdenbecause of the costs of maintenance and repair. Regionalrailways usually operate tracks which are less frequented.All of the seven railways which own infrastructure dependon access rights to the national infrastructure in order toserve some of their clients. However, no long-distanceplayers own rail infrastructure (TX Logistik, Rail4Chem,SBB).Ownership of the sample railways is wide, including

public authorities (municipalities, federal state, etc.) andprivate companies (Fig. 7). The largest group of stock-holders is made up of private investors. Public shareholdersare usually involved into traditional regional railways suchas OHE and Bentheimer Eisenbahn in Lower Saxony, andHVLE in Berlin. The term regional railway is applied tothese short lines to emphasise that they are owners of mostof the rail infrastructure of a certain region. It should benoted that HVLE had been the major short line for West-Berlin until 1989, today it handles the refuse of Berlin.MEG is the only company in the sample that has Railion

as the main investor (80%). However it is not the onlyshort line with a major railroad behind it. Fig. 7 shows thatforeign national rail carriers are also major investors inGerman freight railways: TX Logistik (51% Trenitalia)and SBB (100% SBB Cargo Switzerland). The involvementof the worldwide operating Connex-Group in the Germanrail freight market is represented in RBB.

ARTICLE IN PRESS

Fig. 6. Length of track owned (in km).

Fig. 7. Shareholders of the new entrants.

B. Slack, A. Vogt / Transport Policy 14 (2007) 399–409404

5. An assessment of the challenges

5.1. Challenge evaluations

The 15 participants interviewed (12 companies, onepolitician and two railway authorities) assessed 15 chal-lenges using a three point scale: agree, neutral, disagree(Figs. 8 and 9). Nine of the challenges were taken from theliterature review. The remaining six were extensions fromissues identified in the literature. In order to test if theresponse pattern could have occurred by chance a w2 testwas employed. With 2 degrees of freedom and a confidencelevel of 0.05, the critical value is 5.999. The null hypothesis

that there is no difference in the results is rejected when theresponse rate exceeds this value. The results are presentedin Figs. 8 and 9.The responses to three questions produced agreements

with the propositions that are statistically significant:First, 73.3% of the participants agree that access to slots

is difficult (question 3), confirming a challenge identified inthe literature (w2 statistic of 11.2). Regular traffic has to bebooked with DB Netz at least eight months before the firstscheduled train operates. However, some traction provi-sion is undertaken on spot contracts (e.g. oil transport). Inorder to fulfil these contracts the new entrants require afast booking process through DB Netz. This is proving to

ARTICLE IN PRESS

Fig. 8. Summary of responses.

Fig. 9. Results of the Chi square (w2) test.

B. Slack, A. Vogt / Transport Policy 14 (2007) 399–409 405

be difficult to obtain. As defined by the law theinfrastructure operator has to respond to a track requestwithin one month. If the track allocation is demanded for amore imminent slot, the infrastructure operator has torespond as early as possible but within five working days.Through a recent directive, DB Netz decided to guaranteeto respond to any offer within 73 h. Through this change inthe administrative procedure, railways which need a slot ona short notice (o73 h) can be denied access by DB Netz.

Second, access to sidings (question 5) was identified as aproblem by a majority of rail freight operators, with astatistically significant w2 of 6.4. Under the pressure ofovercapacity, DB Netz has partially dismantled the net-work [6600 km between 1994 and 2004 (BMVBS, 2005)]and removed points. This has led to a loss of holdingsidings and has eventually reduced the capacity of thenational rail infrastructure. One freight operator reportedthat it is almost always possible to book slots, but to holdthe train on sidings while waiting for clearance to enter amajor automobile plant near Munich is problematic. Some

of the interviewees mentioned concerns about the decisionmaking process within DB Netz since it seems that thenetwork is cut back and developed according to the needsof DB Group and its subsidiaries, and not to the demandof the small traction providers.Third, the difficulty of sourcing capital (question 14) was

identified by 10 respondents as a market challenge (w2: 10).One of the characteristics of many rail freight contracts isits short period (one year). This makes it difficult,especially for the smaller companies, to depreciate invest-ments. Furthermore, the rail freight market requires a highcapital commitment (expensive locomotives, wagons, etc.).Banks are seen unwilling to respond to these demands (lackof venture capital); many feel this situation will worsenwith the Basel II Capital Accord that came into effect atthe end of 2006, which imposes on banks much strictercontrols on loans. This disadvantages small and medium-sized enterprises, which usually possess a lower creditrating than major corporations (Petersen and Schnell,2005).

ARTICLE IN PRESSB. Slack, A. Vogt / Transport Policy 14 (2007) 399–409406

Four questions produced statistically significant dis-agreements:

First, the difficulty of maintaining rolling stock (question6), a problem identified by Muller (2000), was rejected by alarge majority (13 out of 15, with w2 of 19.2). Some of thecompanies operate their own railway workshops. Othercompanies have full service contracts with the locomotivemanufactures (Siemens, Bombardier, etc.). In the last fewyears DB Group has opened many of its main repair shopsto other operators.

Second, the shortage of locomotive pools for long termlease (question 7) produced significant disagreement (w2 of14.8). The market for long-term locomotive lease, whichemerged seven years ago, has improved.

Third, a large majority of respondents disagreed that thedemand for modern locomotives cannot be fulfilled by themarket (question 11). This is a statistically significant result(w2: 9.4). Some of the comments suggested there is a goodsupply of small, but not of large locomotives; the Class 66(General Motors) does not use the optimal clearance of theGerman infrastructure, thus is perceived as inefficient;locomotives are over engineered; the design of locomotivesis defined by the former national carriers only. Thelocomotive manufacture Vossloh will build a new, largediesel locomotive; this is welcomed by many companies.

Fourth, the problem of licensing new wagons (question10) was rejected by a majority of respondents.

The remaining questions, while sometimes garnering aslight majority of approval or disapproval were notmeasured to be statistically significant, undoubtedlybecause of the small sample size. Included in this largegroup were challenges of high costs for traction current,infrastructure access charges are too high, access to loadingfacilities and sidings is difficult, there are insufficientlocomotive pools for short-term lease, licensing newlocomotives is complex, there is a shortage of professionals,and the costs of further penetrating the rail market aretoo high.

The issue of traction current is complex. Until recently,all operating companies had to buy the relatively expensivetraction current (in comparison to market prices) from DBEnergie, a subsidiary of DB Group. In 2005 a courtdecision dismantled this monopoly by allowing tractioncurrent to be bought from an external energy provider.

Table 2

Comparison of responses of firms owning track and those owning no infrastr

Market challenge Track ow

Relative

1. Traction current is too expensive. 57

2. The infrastructure usage charges are too high. 43

3. Booking suitable slots (track allocation) is difficult. 43

4. The access to loading facilities is a problem for your company. 0

5. The access to holding sidings is a problem for your company. 29

Total no. of companies

However, the railways still have to pay charges to DBEnergie for the conveyance of external current through theDB Energie wires. These energy delivery charges limitconsiderably the cost savings gained through the externalcurrent provision. A market expert interviewed sees thecost-efficiency of conveyance of external current onlywarranted when large quantities of kilowatts are con-sumed. The traction current delivered by DB Energie is stillcheaper than the fuel for diesel locomotives.

5.2. Patterns of access challenges

The relative small sample size did not allow a breakdownof differences between the railways in their perception ofmarket challenges. However, a comparison has been madeinvolving the five challenges which focus on access to railinfrastructure (access to holding sidings, track allocation,etc.) and the length of track owned. As identified in 4.2,seven of the interviewed railways own infrastructure. InTable 2, the companies have been divided into two groups:companies with, and without their own track.The breakdown shows that many of the problems of

infrastructure are viewed differently by owners of track.Companies that possess infrastructure have easier access toholding sidings and loading facilities. None of the sevenrailways owning tracks identified challenge no. 4 (access toloading facilities) as a problem for their business opera-tions. While the differences between the groups are not aspronounced for the other issues, infrastructure problemsappear to be greater for those not owning track.

5.3. Other challenges

From the open questions a number of other factors wereidentified by respondents (see Table 3). Many returned tothe issue of the dominance of the DB Group, particularlyhow infrastructure planning is oriented exclusively to theneeds of the Group and passenger services (Rothengatter,2000). A growing barrier is seen in the increasing cost oflocomotives. There are few suppliers (e.g. Bombardier,Alstom, Vossloh), which along with the high technicalstandards required are driving upwards the price ofequipment. Some of these technical standards include: firecontrol regulations, digital train radio telecommunications

ucture

ned No track owned Total

in % Absolute Relative in % Absolute Relative in % Absolute

4 60 3 58 7

3 80 4 58 7

3 100 5 67 8

0 60 3 25 3

2 80 4 50 6

7 5 12

ARTICLE IN PRESS

Table 3

Other identified market challenges

Number of

times cited

Other identified market challenges

5 Infrastructure is tailored to the needs of passenger

traffic and Deutsche Bahn Group.

3 Expensive technical standards such as: continuous

automatic train running system (PZB 90), digital train

radio telecommunications system (GSM-R), European

train control system (ETCS), electronic working

timetable (EbuLa).

3 The acquisition of wagons is a problem. Railion has a

monopoly on bulk wagons.

2 There is a lack of information on line characteristics

(gradient, permissible line speed, etc.); this makes it

difficult to calculate traction costs.

2 Due to recent secondary line closures, less potential rail

freight customers can be reached.

2 The cost of the last mile.

1 Lines can be only operated through movement

inspectors (which are employed by DB Netz). The

working hours for movement inspectors on secondary

lines are too short. This causes diversions and thus

higher access charges.

1 Growing costs for the acquisition rolling stock, caused

by the oligopoly character of the rail industry.

1 Track obstruction due to construction work leads to

rerouting; this often causes higher track charges.

Table 4

Measures to be taken to ease market entry

Nomination Measures to be taken to ease market entry

8 The conflict between DB Group as carrier (e.g. Railion)

and infrastructure owner (DB Netz) should be ended.

3 Shunting yards and holding sidings should be integrated

into the national infrastructure operator.

2 As municipalities provide business parks with road

infrastructure but not with rail sidings, rail should be

given more attention.

1 The traction current policy of DB Netz (discount

system) should be regulated by the federal state.

1 Special depreciation/financial aid for acquisition of

capital equipment (e.g. wagons) have to be introduced.

1 The rail market needs to be under a price control (like in

Poland). Otherwise, an undertaking can be forced to

leave the market through a constant undersell (under

the break even point) of a larger competitor.

1 All operating railways must be taken into consideration

when it comes to infrastructure planning, not only DB

Netz in correspondence with the Federal State.

1 There is need for fast truck lines for rail freight.

B. Slack, A. Vogt / Transport Policy 14 (2007) 399–409 407

system GSM-R (Digitaler Zugbahnfunk), European traincontrol system (ETCS) and continuous automatic trainrunning system (PZB 90). Difficulty in acquiring wagonswas also cited. While car carriers and tankers were readilyavailable, dry bulk wagons have to be obtained fromRailion which has a virtual monopoly.

Other challenges include difficulties in obtaining infor-mation on DB Netz tracks. As defined in the EIBV-act, theinfrastructure company is required to inform the track userabout the correct conditions of each journey route(gradient, permissible line speed, etc.). DB Netz has stillnot published this information, making it difficult for newentrants to calculate the traction costs and journey times.Similarly, there are financial consequences for trackclosures and re-routing. Two companies address theproblem of the ‘‘last mile’’. Certain branch lines accessingindustrial plants (‘‘last mile’’) do not provide an overheadelectricity cable coverage; traction provision has to beprovided with a diesel locomotive. The outsourcing of thattraction provision to another company can increase thetraction costs disproportionately. Undertakings are forcedto use expensive diesel traction for the entire journey toavoid having to make a switch on the ‘‘last mile’’.

5.4. What can be done to ease market entry?

The respondents’ suggestions to improve the situationfrequently turned to the issue of the domination of DBGroup (see Table 4). They saw a conflict of interestbetween DB Netz and Railion, even though for accounting

purposes they are separate. The market power of DBGroup is so great that it shapes planning and operations inevery regard: undercutting contracts, controlling slots andequipment, having unequal access to capital, controllingphysical access to customers, etc.Improving access to customers appeared in a number of

ways. First was the recommendation that shunting yardsand sidings be integrated into the national infrastructurenetwork in order to ensure that short lines could serveclients located along spurs. Second was that municipalitiesshould be required to provide rail access to industrial parksin the same way they provide road connections.

6. Conclusions

The new entrants entered the market to reduce costs andto provide a better service quality in rail freight transport.The survey results presented in this paper suggest that themarket entrance conditions have improved considerablyover the last years. With only three of the challenges stillbeing significant for the new entrants, most of the othershave disappeared or diminished. The rail industry seems tohave adjusted to its needs. The recent emergence oflocomotive pools for long-term lease is an example.However, certain conditions have still to be addressed to

ease market access, and there is a strong policy componentinvolved in ameliorating the conditions. The strongestconcern is the availability of suitable slots. This problem isbound up with the power of the DB Group. This confirmsthe conclusion of the Zauner (2004) study of thediscriminatory behaviour of Railion. For most of theinterviewees, the only solution would be the spin-off of DBNetz from the DB Group. This conflict between DB Groupas a carrier and track owner could be resolved through theemergence of a federal state-owned infrastructure agency.

ARTICLE IN PRESSB. Slack, A. Vogt / Transport Policy 14 (2007) 399–409408

It was also suggested that this agency should extend itsresponsibility to include holding sidings. Thus the newinfrastructure agency would control all infrastructurenecessary to operate freight trains. As one intervieweeput it; ‘‘The actual access to the network is no longerdiscriminatory, but ancillary services like traction currentor access to holding sidings are’’.

It may be noted that the German Bundestag adopted, on24 November 2006, a joint motion for a resolution, tabledby the parliamentary groups of the coalition parties, on thebenchmarks of a scheme for partial privatization of DBbefore the end of the present parliamentary term in March2007. Under the scheme, railway infrastructure companieswill be owned by the Federal Government. However, DBAG will be responsible for managing and operating thenetwork and for accounting.

The difficulty of sourcing capital due to the nature of therail market is an important issue. It re-inforces the unequalnature of competition between the state-subsidised marketdominator, the DB Group, and the small rail tractionproviders. One solution suggested by several interviewees isthat longer term loan guarantees should be made availableby the federal state, a proposal that is claimed wouldstimulate the investments of the new entrants. This wouldrequire a radical change in present policy, where the state isheavily committed to DB through direct subsidies.

The results of this study do little to address the broaderquestion of whether rail freight is best handled by largeintegrated companies such as Railion. Our survey may beseen as one-sided because it reports on the opinions of thenewer entrants who have committed capital and humanresources to offer an alternative service, and does notconsider the responses of DB. European policy, however,has pre-empted this debate by moving clearly in thedirection of opening access, and this study throws light onthe experiences and opinions of the new traction providers.

The case of Germany, as one of the most liberalised of allthe EU member states, presents a sobering picture of thebroader future of rail freight traction provision in theCommunity. After 10 years of open access, the newtraction companies in Germany have faced enormousobstacles to gain a small market share. Many of thedifficulties are being resolved, but there exists the funda-mental inequality of market dominance by DB Group.This pattern is likely to be repeated in the other states, suchas France, Spain and Italy, where the former nationalrailroads are only recently and with great reluctancerelinquishing their unique market powers. Opening railfreight to competition is unlikely to produce the resultshoped for, at least in the short and middle term, at least assuggested by the German example.

References

Aberle, G., 2002. Introductory report—European integration of rail

freight transport. European Conference of Ministers of Transport,

Paris 28th–29th November 2002, pp. 5–25.

Bennett, S., 2003. Private operators face a tough challenge. International

Railway Journal 43 (11), 34–35.

Bjelicic, B., Sudholter, C., 2000. The global transport market. A

tremendous investment opportunity, Frankfurt/main.

BMVBS, 2005. Verkehr in Zahlen 2005/2006. German Federal Ministry of

Transport, Building and Urban Affaires, Berlin.

BMVBS, 2006. Privatisierungsvarianten der Deutschen Bahn AG—mit

oder ohne Netz, Retrieved October 16, 2006. From /http://

www.bmvbs.de/Anlage/original_948433/Gutachten-Privatisierungs-

varianten-der-Deutschen-Bahn-AG-mit-und-ohne-Netz.pdfS. German

Federal Ministry of Transport, Building and Urban Affaires, Berlin.

Conseil National des Transports, 2001. Le fret ferroviaire en Europe. In:

Les dossiers de l’observatoire transports/Europe (Dossier n 2), Paris.

Deutsche Bahn, 2005. Weichen stellen—fur ein integrierten internationa-

len Mobilitats—und Logistikkonzern, Berlin.

European Commission, 2001. European transport policy for 2010: time to

decide. Office for Official Publications of the European Communities,

Luxembourg.

European Commission, 2003. Revitalising Europe’s railways—towards an

integrated European railway area. Office for Official Publications of

the European Communities, Luxembourg.

Federal Railway Office, 2007. Eisenbahnunternehmen in der BRD,

Retrieved March 07, 2007, from /http://www.eisenbahnbunde-

samt.de/Service/files/11_Liste_EVU_BRD.xlsS.

Geitz, W.-D., 2001. Lok-Pools werden dringend gebraucht. Deutsche

Verkehrszeitung 23.

Gouvernal, E., Daydou, J., 2005. Container rail freight services in north-

west Europe: diversity of organizational forms in a liberalizing

environment. Transport Reviews 25 (5), 557–571.

Hope, R., 2003. Freight customers demand open access with fair

competition. Railway Gazette International 159 (3), 153–155.

Hohnscheid, H., 2006. Boom im Schienenguterverkehr. Guterbahnen 3,

16–21.

Kirchner, C., 2004. Liberalisierungsindex Bahn 2004—Vergleich der

Marktoffnung in den Eisenbahnmarkten der 15 Mitgliedstaaten der

Europaischen Union, der Schweiz und Norwegen. IBM Business

Consulting Services, Berlin.

Kuhlwetter, H.-J., Frohlich, H., 2001. Liberalisierung des Strommarktes

auch im Bereich der Energieversorgung von Elektrolokomotiven auf

dem Netz der DB AG. Eisenbahn-Revue International, 3.

Leenen, M., Neumann, L., 2004. Der Deutsche Bahnmarkt—Marktana-

lyse 2004 bis 2009. Internationales Verkehrswesen 56 (9), 395–398.

Le Nenaon, N., 2005. From clients to competitors. Profiling industrial

railways in Germany. Communication to the conference ‘‘Inter-

national Trade and Logistics, Corporate Strategies and the Global

Economy,’’ University of Le Havre and Inha University, September

28–29.

Link, H., 2004. Rail infrastructure charging and on-track competition in

Germany. Transport Management 2, 17–27.

Muller, A. et al., 2002. Modellvorhaben der Raumordnung—Bahnverkehr

in der Region—Abschlussbericht der 1. Phase. Koln.

Muller, C., 2000. Wettbewerb im Schienenguterverkehr. Eisenbahningen-

ieur 51 (2), 26–28.

Muller, C., 2005. Internationaler Guterverkehr im Wettbewerb. Inter-

nationales Verkehrswesen 57 (11), 507–508.

NEA Transport research and training, the Netherlands et al., 2005. Erail

Monograph Germany. Submitted to European Commission, DG

Transport and Energy. Retrieved November 03, 2005, from /http://

europa.eu.int/comm/transport/rail/countries/de/doc/erail6-germany.pdfS.Pallmann, W., 2004. Zehn Jahre Bahnreform: Bilanz und Ausblick.

Internationales Verkehrswesen 56 (4), 127–133.

Petersen, K., Schnell, M., 2005. Basel II und die Konsequenzen fur

offentliche Verkehrsunternehmen. Der Nahverkehr 5, 12–17.

Raith, M., 2003. Rail requires a common language. International Railway

Journal 43 (11), 36.

Raith, M., Gasser, H., 2005. Trennung von Netz und Betrieb der DB ist

dringend erforderlich! Retrieved December 12, 2005, from

ARTICLE IN PRESSB. Slack, A. Vogt / Transport Policy 14 (2007) 399–409 409

/www.rail4chem.de/fileadmin/images/pdfs/trennung_netz_und_betrieb.

pdfS.

Rothengatter, W., 2000. Evaluation of infrastructure investments in

Germany. Transport Policy 7, 17–25.

Sanchez, P.C., 2001. Vertical relationships for the European railway

industry. Transport Policy 8, 77–83.

SCI, 2005. Europaischer Markt fur den Schienenguterverkehr. SCI

Verkehr GmbH, Koln.

Zauner, M., 2004. Vertical integration and discrimination in the German

railway sector: results of a questionnaire survey. Discussion paper

series from the Institute of Economics and Law, University of

Stuttgart 2004/1.