08.02.13
UK operator to run two German regional rail services
National Express has won two contracts to run regional rail services in Germany, in a first for a UK transport company.
The services will cover the North Rhine-Westphalia area and will run for 15 years from December 2015. The contract is expected to generate about €1.6bn in revenues.
National Express beat incumbent Deutsche Bahn for the services, which carry around 18 million passengers a year. The operator will acquire 36 new electric trains on behalf of the German local authorities.
“I'm particularly pleased that our success in running the UK's best performing franchise has been recognised by the German authorities,” said chief executive Dean Finch. “We look forward to maintaining these high standards and serving the people of North Rhine-Westphalia for many years to come.”
The contracts are for a regional express service between Rheine-Munster-Cologne-Krefeld and a Bonn-Cologne-Wuppertal stopping service.
National Express owns c2c, which runs the Essex Thameside franchise, but otherwise its position in the UK rail market has shrunk significantly over the last decade. The biggest blow to its reputation in the UK came when it chose to default on the East Coast franchise in 2009, forcing the Government to step in to run it via Directly Operated Railways, which has remained the operator ever since.
It had been shortlisted to run the next Great Western franchise, until the DfT scrapped the competition at the end of January in the wake of the West Coast franchising debacle.
Dean Finch, the chief executive of National Express, attacked the Government over its refusal to reimburse bidders for costs incurred – £10m for his company alone – as “grossly unfair”. The DfT said a clause in the tender documentation made clear that bidders are solely responsible for their costs and expenses.
German state operator Deutsche Bahn and German firms like Siemens have had great success penetrating the UK rail market in recent years, which makes this new contract win a welcome rejoinder to that trend.
Strong state-level government in Germany means the regions there have very strong powers over rail. The states (Länder) get direct transfers from the federal government, plus a share of national petrol tax revenue, which is indexed, ringfenced and predictable over five-year periods. While freight and long-distance services are purely commercial, regional railway services are procured by the Länder, which in turn often devolve the tendering to cities or council consortia. Contracts range from three to 21 years, but about eight years is the average.
The overall regionally-procured train market in Germany totals about 643m train km, of which DB runs about 496m train km.
The bidding process is relatively simple and cheap, in contrast to the UK franchising model, and there are many small contracts of just 1m to 4m train km a year. Rolling stock tends to be specified in the contract and procured directly – as opposed to the leasing model – and there tends to be no transfer of people, trains or depots from one operator to another on initial tendering, making for very long mobilisation periods of up to three years.
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