Supervisory Board gives go-ahead for far-reaching restructuring

Multi-year program launched to improve quality, customer focus and economic performance in DB Group's rail operations in Germany.

DB Group aims to secure competitiveness by improving the punctuality of its trains, providing reliable traveler information and offering stable wireless internet and cell phone reception

(Berlin, December 17, 2015) On Wednesday evening, the Supervisory Board of Deutsche Bahn AG approved a multi-year program proposed by the DB Group Management Board for a fundamental restructuring of rail operations in Germany. As CEO Dr. Rüdiger Grube said, DB Group had worked to examine every possible option in recent months. The result, said Dr. Grube, is: "First, we're going to clean house. Second, we're going to improve our follow-through, particularly with a view to customer satisfaction. And third, we're going to roll up our sleeves and get down to business by improving punctuality and quality."

"Cleaning house" will include personnel and structural changes, as well as the elimination of excessive complexity. DB Group's restructuring program and medium-term planning will be noticeable on the Group's balance sheet. Dr. Grube expects special items totaling EUR 2 billion in the 2015 and 2016 financial years. Of this total, EUR 1.3 billion will result from impairments in rail freight transport. An additional EUR 700 million in provisions will be formed for restructuring measures. These figures will be finalized as the respective financial statements for 2015 and 2016 are completed.

On the second point, Dr. Grube said that DB Group would be incorporating even more accountability for punctuality, quality and service targets into its managers' performance reviews.

On the third point, Dr. Grube said DB Group will take a proactive approach in its markets. "We're going to go on the offensive here," he said, adding that this applied to both passenger and rail freight transport. Grube said DB Group also wants to grow in its international business at DB Schenker Logistics and DB Arriva. That was one of the reasons why DB Group plans to invest EUR 55 billion across all its business units over the coming five years: for better quality, more customer focus and greater economic success. As in the past, the focus of capitel expenditures is in Germany, with some EUR 50 billion invested there, including nearly EUR 40 billion invested in infrastructure. The capital expenditures include some EUR 20 billion to be financed by DB Group.

At the heart of this, the most extensive restructuring process since the German Rail Reform in 1994, is a recently launched multi-year program entitled "Zukunft Bahn" (Future of rail operations), which is headed by Vice-Chairman Dr. Volker Kefer and also managed by Berthold Huber, the head of passenger and rail freight transport, and Ulrich Weber, the head of human resources.

DB Group will focus in its core business on improving customer orientation and raising the quality of its products and services. Improvements to processes and structures, made possible in part by new digital technology, will also raise productivity and competitiveness.

Berthold Huber, the head of passenger and rail freight transport, said that the program would focus on ensuring "on-time rail service, reliable traveler information and stable WiFi and cell phone reception – that's what our customers want, and that's what we want to offer them."

DB Group will be restructuring its workflows to make its train service considerably more punctual – particularly in its long-distance passenger services. This will include deploying digital technology and mobile task forces to substantially lower the number of technical defects in rolling stock and infrastructure, designing more reliable timetables and reallocating buffer time. Digital switch diagnostics will be introduced to lower the number of rail switch failures by up to 50%. DB Group will also improve punctuality by deploying a towing service for locomotives in the medium term, improving vegetation management and introducing new digital driver assistance systems for train drivers. Next year, the company plans to raise average punctuality to 80% in long-distance transport in Germany – a considerable increase over 2015.

Starting in 2016, DB Group will introduce a new technical platform to provide all its passengers with on-time, accurate information. Inconsistent or lacking information about platform changes or changes to train car sequence will be a thing of the past. Customers will be able to obtain reliable information no matter if they are using mobile apps, digital information channels or information from DB employees on the train. Starting in 2016, new technology will also enable platform displays at all the major long-distance stations to display more lines of information. And big data analytics will help step by step to further improve projections for estimated times of arrival and departure.

Between now and 2020, DB Group will also be building the largest mobile WiFi network in Germany, setting up a uniform WiFi portal ("WLAN@DB") that will be available at stations and on all the long-distance and regional trains that are equipped for wireless internet. The network will be based on the ICE Portal that was recently introduced, which lets passengers access live travel information and current news updates. Starting in 2016, the ICE Portal will also include a broad selection of movies and music, as well as access to the internet. Going forward, DB Group plans to offer the same types of services for customers at the station, on IC trains and – with the support of public transport authorities – on regional trains. DB will also begin equipping its ICE trains with new receiver technology in 2016, which will improve both cell phone and wireless internet reception.

A far-reaching program to improve comfort and convenience on board DB trains will make noticeable improvements to on-board food service and lavatories starting in 2016. Additional mobile maintenance teams will be deployed, and train crews will no longer be responsible for as many operational tasks, meaning that they can offer additional services to customers on board.

DB Group will also be launching short-term measures in 2016 to make time spent at stations more pleasant. These measures will make elevators and escalators at stations in high-population areas more reliable, and waiting areas at large stations will be modernized and equipped with WiFi access. Additionally, DB Group will be renovating 31 underground S-Bahn stations over the coming years, which will benefit some two million commuters. And the company plans to offer direct rail connections to another two million people living in smaller German cities and towns as an additional 350 stations are built by 2025.

DB Schenker Rail will have a new business model for rail freight transport, which will realign the business. The production system will be simplified dramatically to make it less prone to disruption. The objective is to reach 95% fulfillment of the service commitment made to customers. To this end, a stable quality network, with an annual timetable and set frequencies of service, will be introduced for a large percentage of the traffic operated. DB Group will also continue to offer ad hoc service as well. Higher quality and lower production costs will raise the capacity utilization of the network. Sales and yield management will also be modernized and the European network expanded to help enable DB Schenker Rail to outpace European market growth by 1% starting in 2018.

To reduce competitive disadvantages, DB Group will be focusing more on flexibility throughout the entire Group. There will be more flexible shift schedules, for example to improve train maintenance by deploying mobile maintenance teams. DB Group will also allow its managers and employees to share more in joint business success. Performance-based pay for managers will see a fundamental shift in 2016. Customer satisfaction, along with joint overarching quality and service targets, will receive the same weight as economic targets in performance-based pay.

Ultimately, higher quality in DB Group's service will mean many more satisfied customers, and as a result stable economic performance for the entire DB Group.