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Business

Deutsche Bahn Reforms New Price System

Following months of criticism and heavy losses, Germany's national railway, Deutsche Bahn, is rolling back some of the most controversial elements of the new price system -- more changes are expected by year's end.

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With great fanfare Deutsche Bahn introduced its new price system last December

At a meeting of Deutsche Bahn's Board of Directors on Tuesday, chairman Hartmut Mehdorn gave in to pressure and announced changes to the controversial new pricing system ushered in last December. The move represents a significant about-face for the company's top executive, who has vehemently defended the new system, heralding it as more transparent, despite harsh criticism.

Effective immediately, one of the most oft-attacked elements -- the high cancellation fees placed on early booking "Plan & Spar" ("Plan and Save") tickets -- is being reduced from €45 to €15. Mehdorn conceded that "the public's fixation on the fees acted as a deterrent, impacting long-distance (travel) bookings on the whole." New prices spark backlash

Mehdorn is yielding to public pressure, made all the worse by heavy losses in the first quarter of this year, when long-distance travel decreased by 6.1 percent, contributing to a loss of €133 million. For Mehdorn, who had hoped to limit Deutsche Bahn's losses to €200 million this year and achieve profits of €400 million as early as next year, the shift represented quite a setback.

Rail travelers simply did not accept the changes. At a time when train travel faces increased competition from budget airlines, many can and did opt to take to the skies.

High cancellation fees, the replacement of the much-loved "Bahncard" (Train Card) -- which used to allow customers to travel at a 50 percent discount -- with a newer version that only offered 25 percent of the savings, and the increased cost of spontaneous travel -- led to enormous price increases that fueled the consumer backlash. Tickets on some routes, such as the line between Cologne and Berlin, rose by as much as 25 percent, hitting spontaneous, business and tourist travelers particularly hard.

After the introduction of the new price system last December, the Berlin-based German daily Die Tageszeitung famously called Mehdorn the "Rumsfeld of the Rails." And editorials around the country called for his resignation. Federal Transportation Minister Manfred Stolpe of the ruling Social Democrats joined the chorus of critics, stating that "The new price system is not well designed and its implementation has not gone well." More changes on the way

There could be more changes by year's end. The rules governing the number of stops and overnight stays allowed with a "Plan & Spar" ticket may be relaxed, giving travelers a bit more flexibility. What's more, restrictions dictating that part of a "Plan & Spar" journey take place over a weekend may be dropped.

Last but not least, the 50 percent rebate for "Bahncard" travelers may return, should Green Party members, who have been supporting such a measure, be successful in pushing through their agenda.

Corporate Casualities

Despite calls for his resignation, Chairman Mehdorn seems to have weathered the storm -- at least for now. His contract was extended Tuesday through 2008, and Transportation Minister Stolpe expressed his support for the embattled executive: "Mehdorn is the right man for the job."

Some other top executives at the company have not fared so well. The controversy over the price system claimed two: Christoph Franz, a member of the board of directors and head of passenger traffic, and Hans Gustav Koch, head of Marketing, were both forced to leave the company. Should the changes not be enough to appease angered rail travelers, the entire price system may be scrapped. And more changes among Deutsche Bahn's top brass may follow.

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