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Deutsche Bahn is back in the black

March 23, 2017

German rail operator Deutsche Bahn is back on the success track. After the first loss in more than a decade last year, new CEO Richard Lutz announced a decent net profit for 2016. But many challenges remain.

Deutsche Bahn Pressebild - neue Flotte - ICE 4
Image: Deutsche Bahn/Foto: Detlev Wecke

Publicly-owned German rail operator Deutsche Bahn (DB) said it had returned to profitability. After it booked a loss of 1.3 billion euros ($1.4 billion) in 2015, DB's new chief executive (CEO) Richard Lutz on Thursday announced a 2016 net operating profit of 716 million euros.

Write-offs, a problematic freight division and the company’s large-scale restructuring had driven the balance into the red in 2015, the first time in more than a decade.

"We have managed a turnaround," said CEO Richard Lutz, just one day after formally taking reins from former boss Rüdiger Grube, who had surprisingly resigned over disputes surrounding the extension of his contract. Lutz, DB's former chief financial officer, described 2016 as a "good year" for clients and the corporation alike. This year, DB estimates revenue to total 41.5 billion euros.

Richard Lutz und Rüdiger Grube
Deutsche Bahn CEO Richard Lutz (left) with predecessor Rüdiger GrubeImage: picture alliance/dpa/W.Kumm

Since mid-2015, Deutsche Bahn has been tightly focused on quality as it fends off low-cost competition from long-distance bus operators. "We've clearly increased the quality of our products and our punctuality," Lutz said, with "a record number of passengers on main-line trains" last year.

The return to positive financial territory wasn't the only good news for DB: 2016 also saw a new passenger record with 2.37 billion, a five-percent increase over the previous year, when the number of travelers had slightly dipped. The long-distance segment registered a slightly above-average growth of 5.4 percent, reaching an unprecedented 139 million passengers last year. CEO Lutz attributed the peak to a larger number of punctual train journeys, more thorough cleaning of rail cars and an improved relay of information to clients.

While the rail operator was indeed able to increase punctuality - which it defines as arriving with less than six minutes' delay - to 79 percent in 2016 and 84 percent so far in 2017, it remains the butt of frustrated but fond jokes among the German public.

The new year has also seen Deutsche Bahn install free WiFi service on all of its high-speed ICE trains. Across Europe, the rail company transported people on some 4.4 billion journeys by train and bus last year, an increase of 81 million over 2015's figure.

Freight traffic remains problem child

DB hasn't been able to put an end to the crisis of its rail freight operations DB Cargo, which has logged an operating loss of 81 million euros ($87 million) due to inefficiency and failure to modernize its outdated fleet.

Another problem is the lack of capital investments: The flotations of DB subsidiaries Arriva and Schenker, which were supposed to inject new money into the corporation, were called off in late 2016. An estimated 4.5 billion euros needed for investments are now sorely missing. According to DB, the cancellations were due to uncertainty over Brexit.

"I can't promise to our customers and employees that all the Bahn's problems will vanish at a stroke," Lutz declared from a podium between two ICE trains at a Berlin maintenance site. "But I and my colleagues on the board promise to work with all our might to make Deutsche Bahn more attractive day by day."

Looking ahead to this year, Deutsche Bahn aims to bring in revenues of 41.5 billion euros - around one billion more than 2016 - for an operating profit of at least 2.1 billion euros.

bb/uhe (AFP, dpa)