The need for a new document on state aid eligibility stems from the Fitness Check carried out by the Commission in 2020, which concluded that the current framework is obsolete. More specifically, the new ones no longer include the conditions on cancelling historic debt directly linked to the activity of rail transport and the specific conditions for restructuring freight branches of railway undertakings.

New services and interoperability

Regarding new services, financial support can be provided for a maximum of five years to purely rail or inland waterways connections. New services involving more modes of transport will not be eligible. New services also include pre-existing connections that have not been in operation for at least three years, the document specified. When it comes to rail interoperability, financial aid can be provided for ETCS, FRMCS, ATO, DAC, rolling stock adaptation to different electrical systems, different gauges and to transport intermodal loading units.

No funds for infrastructure use, some funds for sidings

The new guidelines do not include direct aid for infrastructure use, but Member States can provide support “to reduce the external costs of transport (…) to cover the costs linked to” it. This support can be applied to sustainable multimodal transport. Moreover, some infrastructure projects specific to rail freight, such as building, renewing or replacing private sidings, are now eligible for state aid. “Private sidings play a key role in reducing the need for first-/last-mile road transport for freight”, the Commission highlighted.

Who cannot apply?

Despite extending their scope, the guidelines still have thresholds assessing eligibility. For example, railway undertakings in difficulty cannot benefit from this type of state aid. These are companies losing half of their capital, under restructuring or insolvency and with large debts. State aid guidelines for them are regulated with a specific and separate document. Furthermore, aid cannot be granted for transport services on routes that have established capacity constraints that would prevent the modal shift.

Harsh reality check

Other than explaining the new state aid scheme, the EC’s documents included a few statements that finally recognised the struggles of the rail freight industry and its stagnating situation. “The Commission observes that rail freight transport services cannot always be operated on a commercial basis”, it admitted.

From inadequate rail links to terminals and the traditional fragmentation of the EU which hinders rail coordination, such schemes are now a necessity not only to increase the share of non-road modes, but also to avoid a decrease, the EC urged. Rail freight has been on a downward trajectory for a few years now in Europe, while the road seems to continue to grow.

New CEO Bernhard Osburg told the German press agency dpa that the company is planning to reduce the workforce by 6,200 by 2030. The current workforce consists of some 14,000 people. The measure will affect almost all areas, including train operations, dispatching, planning, administration, sales, and IT, writes Die Zeit.

Osburg had explained that DB Cargo recorded a 2025 loss equalling “a mid two-digit million amount”, meaning around the 40-60 million euro area.

The CEO said that he presented a restructuring strategy with a medium-term focus extending to 2030. Experts are expected to complete their evaluation of the plan by the end of February.

UPDATE:

The DB and DB Cargo Supervisory Boards seem to have endorsed Osburg’s restructuring plan. “DB Cargo should be able to live on its own again – and even more: we will be a rail freight operator with real European DNA”, Osburg wrote on LinkedIn.

DB Cargo’s four pillars of restructuring

Osburg wants to focus on four pillars: International markets, savings, a restructuring in SWL and corporate culture. In short, demand for rail transportation among Germany’s industries is weakening, so Osburg intends to focus on international markets instead. “We are significantly aligning sales, planning, scheduling, and production more strongly with European markets and are developing DB Cargo into the leading European rail logistics provider with clear, cross-border system solutions”, the CEO said.

In terms of cost savings, this is where the job cuts come in. DB Cargo wants to implement leaner administration and improve productivity. The restructuring in the SWL segment is also accompanied by severe job cuts of 2,000 positions. Osburg also plans to concentrate train formation operations at four main locations: Cologne-Bremberg, Seelze, Mannheim, and Nuremberg.

DB Cargo will continue to operate five additional shunting yards as flexible secondary locations. Of the current 27 maintenance depots, twelve are to be closed or sold.

In terms of corporate culture, Osburg said that he wants to stimulate responsibility among decision-makers at the operational level.

It is unclear if this plan will help DB Cargo succeed in becoming profitable by the end of 2026. The company still needs to clarify details, which it plans to do in summer. Gradual implementation will only start then. The single wagonload restructuring will continue into 2027.

The Interporto Bologna terminal

The Interporto Bologna is the most important intermodal facility in the area and the ninth intermodal terminal in Europe according to GVZ. It is made up of three terminals covering a surface of 665,000 square metres. The new investment aims at inverting the recent downward trend. In 2023, for example, the terminal handled 3,391 trains, a drop of one-third compared to 2022. Rail wagons handled also declined by 26,7% to roughly 56,000 units.

Currently, Interporto Bologna has set a goal of 8,000 trains managed annually by 2027. Hopefully, the state aid unlocked by the European Commission will help in this direction, despite the many challenges faced by the Italian rail freight industry. Between climate change, temporary capacity restrictions and unilateral disruptive moves from its neighbours, the past few years have put a strain on Italy, which will probably remain at least for the next couple years.

Deutsche Bahn confirms that DB Cargo is working on a plan to make its SWL business more profitable. DB “has asked the company to submit a revised concept for sustainable, profitable single freight car transport”, a spokesperson explains to RailFreight.com.

“All of DB Cargo’s other divisions have already achieved this level of profitability. In contrast, single freight car transport is still in the red – due to the incomplete distribution of federal funding in 2024 as well as the tense economic situation and declining transport volumes in Germany.”

An enormous SWL player

If the 80% reduction scenario were to come true, it would have a profound impact on the German rail freight landscape. Single wagonload traffic accounts for 14% of total German rail freight as of 2023. Out of those 14%, DB Cargo had a market share of 90% in 2024. In other words, if DB Cargo were to largely cancel its SWL business, it would leave a big gap in the German rail freight market.

The Commission is watching DB Cargo closely

DB Cargo needs to become financially stable and reduce its dependence on state aid, otherwise the European Commission could take decisive action against the company. Its French counterpart Fret SNCF was broken up for similar reasons. SWL remains an obstacle to the financial stability of DB Cargo, for which reason a cancellation under consideration.

The German steel, chemical and construction sectors are big customers of DB Cargo’s SWL services. Companies in those sectors would face considerable logistical challenges if DB Cargo were to kill its single wagonload business.

Also read: EU Commission approves German rail freight scheme for 1.7 billion euros

State aid for DB again?

Soon after the Commission’s approval, several reports appeared claiming, more or less, that the German state would use this scheme to favour once again its “favourite child,” e.g., state-owned and currently financially struggling DB Cargo. The discussion started focusing on “another state-aid scheme” targeting DB, despite the company currently being under EU investigation for ‘illegally’ receiving state funds in the past.

However, this is not how the situation works. According to information collected by several industry parties, the funding is company-neutral and relates to the type of freight transport, i.e. single-wagon transport. Consequently, it becomes clear that the scheme itself is not intended for DB Cargo.

Despite the funding budget being company-neutral, its allocation will be based on Germany’s single wagonload market share. This is where the real problem regarding the 1.7 billion euro financing occurs. Specifically, the scheme does not target encouraging new players to enter the market but instead supports existing services.

Considering then that single wagonload transport accounts for 14 per cent of German rail freight and that DB Cargo dominates around 85 to 90 per cent of this share, it is understandable that the largest share of the nearly 2 billion euro funding will be allocated to the state-owned operator.

What about new market entries?

The new funding scheme is essential for single wagonload transport in Germany; this is a fact that no one denies. It is also possible that now that public money is available, more new players might appear interested in joining the market.

According to industry feedback, however, the conditions created by the German approach are not ideal for incentivising companies to take the next step in single wagonload transport even though they might be willing to do so. That is because the funding seems to primarily promote connecting journeys over long distances, while it should possibly only promote service journeys to incentivise new players to launch services. As a result, if Germany wants to encourage single wagonload transport, it should create the right conditions for private companies, too.

More urgent issues

While single wagonload subsidisation is critical, the German rail freight sector faces more challenges. One of the most important concerns the increased track access charges that rail undertakings will have to deal with from December 2024 onwards. While TACs will increase, their subsidisation will phase out, creating another headache for rail professionals.

Peter Westenberger, managing director of industry body Die Güterbahnen, commented on that: “This new funding, strongly determined by the desolate situation at DB Cargo, cannot be a substitute for the recently massively reduced track access charge funding, which would benefit all providers in rail freight transport.”

The Polish finance minister, Andrzej Domański, provided an update on the state of a tax exemption for rail freight terminals earlier this month. For the time being, Poland cannot apply the tax exemption. The tax relief first has to get the green light from the European Commission (EC).

State aid

Such a measure is considered to amount to state aid in EU law. In order to prevent state aid from creating competition distortions in the EU’s single market, the measure first has to be approved by the EC.

Poland has not yet obtained such approval. The exemption was initially planned to go into force on 1 January 2023, and a notification was sent to the EC. Poland ended up delaying the entry into force until 1 January 2024, which led to a procedural mistake with the EC notification. In practice, this means that terminal operators cannot file for a tax exemption until the EC approves the relief measure.

Also read:

• Poland to invest over a billion euros in Silesia rail infrastructure
• Twenty years of EU membership: What has it brought Polish rail freight?
• “Rail should copy road’s funding mechanisms in Poland to grow”

One and a half years ago, there was a management change in the company, with Mr. Bernard Gustin taking over the position of CEO. What were the main challenges Mr. Gustin faced during this period?

There were some fields in which actions had to be taken. The focus over the past period has been on four key areas of concern, which included simplifying the company’s offering and stopping non-profitable activities, optimising pricing and margins, improving the quality of our products, resulting in better customer satisfaction, and implementing a cost-reduction program.

Today, we are happy to say that we have made significant progress in each of these areas, which makes that we are confidently looking towards the future.

How vital has state aid been in keeping Lineas and other Railway Undertakings financially afloat? Does the company need state support, or can it operate without it?

We are a private company, functioning as such. Our main shareholder is a private investment fund (Argos wityu 65 per cent). The minority shareholder is SFPIM (Belgian Federal Investment Fund for Strategic Assets, 35 per cent). We do not benefit from State Aid.

The Belgian government grants a budget of about 10 million euros for single wagonload activities in Belgium that are directly returned to the customers, so they do not benefit Lineas.

Of course, as our main competitors are state-owned companies, we welcome the European Commission’s investigations going towards a level playing field and are ready to serve former SNCF customers in France, for example.

Lineas used to be Europe’s largest private operator. However, in the last two years, there has been little visibility regarding new services. How is the company’s network developing? Has the focus turned towards domestic and short/medium-distance services with neighbouring countries, or are international links still going strong?

Lineas did indeed make the strategic decision to discontinue some unprofitable lines to optimise the network and concentrate on the most attractive corridors.

However, this decision does not imply that our focus would be exclusively on short and medium-distance services with neighbouring countries. On the contrary, we maintain a diversified approach that includes domestic and international transportation services.

In France, Fret SNCF is giving up some of its services. Will Lineas France take over any of them? If yes, how do you prepare for that?

Lineas is ready to serve more customers in France with its recognized high-quality service, and therefore, accelerate its international development in an enhanced competitive market.

A thorough strategic analysis has been conducted to assess the lines that hold the most promise for Lineas. This process involves a careful evaluation of what areas offer the greatest potential for growth and development. Based upon our analysis, we are looking into more detail for the lines we think are interesting for us.

How do you assess the capacity management proposal of the EU Greening Freight Package? Do you think it will make a difference in cross-border operations? What would you request from the EU as an operator?

The Capacity Management regulation contains several elements that are really positive. One of these is the rolling planning, which allows for safeguarded capacity over multiple years. For operations that cross borders, it is also very important that Infrastructure Managers are required to provide cross-border services with multiple-network (i.e., international) capacity rights. Moreover, the proposal rightly prioritises multi-network trains over single-network ones. Additionally, it introduces reciprocal commercial conditions and considers socio-economic and environmental cost/benefit factors when allocating capacity, which is another positive.

However, the main downside of the proposal is its unambitious timeline, with implementation dates set for 2030, which are too late, especially when gradual implementations could begin sooner. We also suggest including a new forum for Railway Undertakings (similar to RAGs and TAGs, which will be discontinued) to balance the influence of ENIM (European Network of Infrastructure Managers).

What are the main international traffic bottlenecks you face, and what are your ideas about the Infrastructure Managers you cooperate with?

International bottlenecks often result from a lack of harmonisation procedures and coordination. Procedures for applying for capacity and running trains must be harmonised as much as possible across the EU. Close collaboration among Infrastructure Managers is necessary, particularly for coordinating works (TCRs) and establishing contingency plans to keep international traffic flowing smoothly during major disruptions.

Furthermore, the implementation of EU-wide standards like ERTMS should be coordinated at the national and international levels. Nationally, upgrades to the ERTMS network should align with the installation of equipment in locomotives, and internationally, Infrastructure Managers should work together to ensure locomotives can cross borders without requiring multiple ERTMS / security systems.

Another significant barrier to expansion is the strict language requirements for train drivers, which demand a high knowledge of the local language to communicate with the Infrastructure Manager of the countries they pass through. At the very least, language requirements should be relaxed at border sections. In the long term, we support the idea of having a single operational language, such as English, in the railway sector across the EU, and we hope steps in that direction will be taken soon.

Has performance dropped significantly this year? If so, what are the main reasons?

On the contrary, our performance has increased significantly. This is shown clearly in our customer mood: every week, we measure customer satisfaction through our “Customer Mood” survey, where customers can rate us from 1 (not satisfied) to 5 (very satisfied).

Thanks to our improved performance, our consistent customer focus and the dedication of our teams, we have been able to achieve our goal: we wanted a score of “4 or more” in customer satisfaction and did do so in the past weeks.

One of the things that made a big difference, is that our customers want to know where their goods are and be proactively informed if there are any issues. We understood this and invested in important digital developments, resulting in MyLineas: a unique real-time and self-service platform. We can see that the use of the MyLineas application has a direct and positive impact on customer satisfaction.

It was Lineas, the Belgian rail freight operator that had taken the initiative. The company, itself struggling to make ends meet, had to witness how DB Cargo, while making losses of around 1.5 to 2 billion euros, was still investing in new locomotives. That was due to state aid and creates an unfair playing field, said Hans-Willem Vroon, director of interest group RailGood, an organisation that stands by the Belgian operator on the matter.

“The Commission received a complaint alleging that the profit and loss transfer agreement as well as certain other measures benefitting DB Cargo amount to incompatible State aid in favour of the company”, the EU institution confirms.”

Why is this a problem?

State aid is a sensitive matter in Europe. In the strive to create a private market with a fair chance to enter for every company, there are rules when it comes to providing state aid. These are called the EU State aid rules. Thus, when receiving the complaint from Lineas, the commission acknowledged that certain measures in favour of DB Cargo may not be in line with EU State aid rules, and it decided to open an in-depth investigation.

In this investigation, which has now been ongoing for more than a year, it is looking into the open-ended profit and loss transfer agreement between DB and DB Cargo, under which DB has been covering DB Cargo’s losses since 2012.

It is also looking into the pricing terms of intra-group services to DB Cargo and the group financing conditions of loans, which are allegedly favourable to DB Cargo. And, it investigates the partial coverage by the German Federal Railway Fund of the remuneration of civil servants previously employed by the former national railway company Deutsche Bundesbahn and currently allocated to DB Cargo.

A cornerstone of the EU

“Competitors in the free market have to compete with Deutsche Bahn with its infinite amount of money bags and German state aid. Market forces on the railways remain a special matter in Europe. Entrepreneurs are smart and inventive, although this form of competition is not very pleasant from a business financial perspective” Vroon said earlier.

Moreover, Ludolf Kerkeling, CEO of the Network of European Railways, also favours the in-depth investigation on DB Cargo. “Fair competition is a cornerstone of European cooperation, and it is the Commission’s duty to demand this fairness and react in the event of possible violations. We have repeatedly heard from our members about incomprehensibly priced offers from DB Cargo and are looking forward to the result of the investigation with eager anticipation,” he commented.

Money talks

“Public companies have a lot of power in the EU”, said Vroon and this may be part of the reason why state aid is allowed to exist in the first place. The competition is often limited in its ability to take over the market. Even now that the investigation is ongoing and DB Cargo may end up having to sell parts of the company to competitors, the industry fears that DB Cargo may sell these at a price that nobody can afford.

In fact, doing rail freight business in Europe is not a profitable business. “In the US, rail freight companies make it to the stock market but in the EU, this is a rare occasion. The profits are very low. Especially as a private company, it is not easy to make a profit in the industry, explained Onno de Jong, transport consultant at Ecorys. This is slightly different for state-owned companies, which have more money at hand to support its divisions when needed.

Shift of tide

There is a shift of tide, though. Last year, private companies or subsidiaries of large holdings that act like a private company accounted for a majority of the European rail freight market, with a market share of 51 per cent. This was for the first time in history, indicating that the liberalisation of the rail freight market is still taking place.

According to the European Rail Freight Association (ERFA) this is a good thing, as private companies are “efficient, growth-focused, and drive innovation in customer service and deployment of new technology. They focus on a more narrow business and geographical area, and they are lean and agile, in comparison to the complex legacy processes of the holding companies. This makes them distinctively sharper, simpler, and better”, the group says.

Red figures

Agile or not, DB Cargo has been struggling to make a profitable business as well. It has now been more than six years since DB Cargo last managed to write black figures. Since 2015, the rail freight company has made parent holding company Deutsche Bahn (DB) around 2,5 billion euros in losses, with the last low point being 2020 when a deficit of 728 million euros had to be credited to the profit and loss account.

The arrival of Sigrid Nikutta four years ago at DB Cargo did not end that series of losses, although she managed to reduce them by more than 30 per cent last year compared to 2020. This is why she was entrusted with five more years in driving DB cargo towards financial growth.

The big problem at DB Cargo, according to DB chief executive Richard Lutz, remains the single wagonload traffic. This is still a heavily loss-making segment, but Lutz expects a ‘renaissance’ and improved results, including further automation and digitalisation. “In the meantime, we still need support”, said the head of DB in February last year, just a month after the investigation was launched.

A final blow?

It is yet to be seen if this support is uncompromised. As we saw with SNCF Fret, the company pays heavily for the state aid it received. While the European Commission was still in the process of of drafting a verdict, the French government did not wait to see how the company was penalised, as this could mean the end of it. Instead, it proposed a reorganisation, which will result in the loss of 500 jobs, 20 per cent of its contracts and 30 per cent of its traffic.

The same could happen to DB Cargo, although the German government has not yet made its intentions to jump in. There are also no angry railway workers on the street asking for DB Cargo to be left alone. The matter is less urgent as in France, but this may very well change with a verdict of the European Commission.

Back then, Conor Feighan, secretary general of ERFA, had explained in an interview to RailFreight.com that the support measure would apply for up to 90 per cent of historical or forecast demand. In practice, Germany will implement the measure by reducing freight and passenger operators’ monthly expenses and directly reimbursing the electricity suppliers.

Need for more similar measures

The EU Commission admitted that the measure is of significant importance considering the impact of the Russian invasion of Ukraine on energy prices, and specifically electricity. Some could say that help came quite late. However, it’s in the hands of each European government to implement such support measures and not the EU’s.

As UIRR has highlighted before, most EU Member States have not supported or even considered supporting their railways. That is why more similar measures should be in place soon in Europe. For instance, transport associations in France have stressed that rail freight operators might soon struggle to pay their bills since the expenses are unprecedented.

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Focus on last-mile operations

At this point, countries like Austria and France already support single wagon traffic. In Austria, the support has the form of a subsidy per tonne/km, while in France, subsidies are granted per manoeuvre. The latter is the right way to go, says ERFA, specifically in view of the ongoing discussions in Germany to support the service product. that is because this subsidy (manoeuvre) supports last-mile operations, “especially for less used sidings”.

Moreover, financial aid should not target long-haul operations since such a “subsidy might make single wagon traffic cheaper over longer distances, meaning that it directly competes with block train traffic which is not subsidised”, mentions Feighan. “In such a case, all that happens is moving from one product to another”, he adds.

Follow RailFreight.com on Google News and get the latest industry updates. 

Also read:

• Single wagonload in Switzerland: state aid or competition with road?

• Commission injects nearly half a billion into French single wagonload transport

• Why rail sidings can transform German rail freight

• Can single wagonload traffic be profitable in Switzerland?