(Berlin, September 18, 2024) The Management Board of Deutsche Bahn AG today presented the Supervisory Board with an overall restructuring program for the structural improvement of DB Group over the next three years. The focus is on three dimensions: the improvement of infrastructure, rail operations and profitability. The aim is to restore rail performance by 2027, significantly improve the customer experience through greater punctuality, reliability and fewer disruptions and ensure DB Group's financial sustainability.
Supervisory Board Chairman Werner Gatzer: "With the overall restructuring program presented to the Supervisory Board today, the Management Board is fulfilling a request made by the Supervisory Board at the strategy meeting in June. The improvement of infrastructure and operations as well as the economic recovery of the company are clearly formulated goals in order to get DB Group back on track. The Supervisory Board expects the overall restructuring program to be specified as part of the budget and medium-term planning for the meeting in December and will continuously monitor progress in its implementation."
The success of the restructuring program is measured by several key performance indicators. Among other things, the number of infrastructure-related delays is to be reduced by 20 percent by 2027 despite continued high construction activity. In operations, punctuality in long-distance transport should be between 75% and 80% again in three years. The operating profit (EBIT) in the Integrated Rail System is set to increase to 2 billion euros by 2027.
"The Strong Rail Strategy has been our North Star since 2019 and has given us guidance during the many crises of the last five years," said Richard Lutz, CEO of Deutsche Bahn. "But it is also true that the infrastructure is now in a significantly worse condition and far more prone to disruption than we predicted in 2019. This not only has an impact on the quality and stability of rail operations, but also affects our profitability. Added to this are the many crises of recent years, which have led to massive cost increases. With the "S3" restructuring program, we will focus on stabilizing the system and significantly improving the customer experience over the next three years. At the same time, we are pushing ahead with the structural improvement of the infrastructure, rail operations and profitability. In doing so, we are creating a stable basis for the continued growth of Strong Rail and our contribution to the Federal Government's transport and climate policy goals."
While the demand for climate-friendly mobility has grown continuously and the Federal Government has decided to invest record amounts and founded the common good-orientated infrastructure company InfraGO together with DB Group, the poor quality of operations and difficult economic situation are jeopardizing the achievement of DB Group's growth targets. In addition to an infrastructure that is too old, too prone to failure and too full, the reasons for this include external shocks such as the coronavirus crisis, the war in Ukraine, high price increases in the value chain and shortage of skilled labor. The S3 restructuring program aims to catch up with the planning of the Strong Rail strategy by 2027, which is geared towards the Federal Government's long-term transport policy sector goals. The aim is to double the volume sold in rail passenger transport, increase the share of rail in freight transport to 25 percent and gradually implement Germany in sync.
Infrastructure - focus on rapid modernization of the existing network
In terms of infrastructure, the focus over the next three years will be on the rapid modernization of the existing network. This includes the general modernization of a total of 1,500 kilometers of track and thus all communicated corridors by 2027, which was successfully launched with the general modernization of the Riedbahn between Frankfurt and Mannheim. Furthermore, fault-prone systems across the entire infrastructure are to be replaced, thus significantly reducing the number of restricted speed sections. The so-called lost units, which occur when a train is delayed by more than 90 seconds due to an event between two measuring points on a section of track, are to be reduced by 20 percent. In addition, 200 old, fault-prone interlockings are to be replaced as part of an immediate action program. The rapid increase in capacity through small and medium-sized measures will also have a noticeable effect, rising to around 200 by 2027. The previously announced program for the modernization of passenger stations is also to be driven forward. The plan is to modernize 100 stations per year.
Within the framework of the existing Federal budget and commitment appropriations until 2027, prioritized requirement plan and digitalization projects will also be continued together with the Federal Government and all necessary measures will be taken to continue implementing the restructuring and modernization offensive from 2028 without delay.
Operation - Innovative construction is a recipe for success
The modernization of the infrastructure is an important prerequisite for improving the quality and stability of rail operations. Stabilizing the schedule is also a top priority. To this end, the entire construction and maintenance system is being transferred to a so-called synchronized system. The aim is for the construction sites to follow the schedule over predetermined time windows in future, instead of the other way round as is the case today. In the first few weeks of implementation, which began in the second half of the year, around 80 percent of maintenance work has already been completed within the specified time slots. A similar concept is also planned for investment measures, but cannot be fully rolled out until 2027 due to regulatory requirements. These measures will significantly reduce the number of trains affected by construction work.
Another focus for the improvement of operations is on relieving congestion at the five most important hubs (Berlin, Hamburg, Cologne, Frankfurt and Munich) in Germany. To this end, short-term operational measures such as changes to passenger guidance to improve operational excellence are to be implemented. At the same time, overly complex operational concepts, particularly in regional transportation, must be simplified. In the medium to long term, a different capacity utilization concept is required for the hubs in coordination with the local transport authorities, as the infrastructural expansion cannot keep pace with the increasing demand.
In addition, the availability and quality of the vehicles is to be improved. The aim is to reduce punctuality-related disruptions. These measures are intended to gradually improve the punctuality of rail traffic and achieve a punctuality rate of 75 to 80 percent again in long-distance transport within three years. In order to further improve the customer experience also on trains, a further focus will be on reducing disruptions that affect comfort, such as broken coffee machines or defective on-board toilets.
By 2027, key digitalization initiatives are also to be implemented for vehicles, scheduling and operations: Over the next three years, the majority of trains are to be equipped with software that allows real-time condition monitoring in order to improve fleet management and maintenance. New high-performance software will support the creation of consistent and conflict-free schedules and enable the automation of the construction timetable.
Economic situation
The infrastructure, which is too old, too prone to failure and too full, has a massive impact on operations and therefore also on DB Group's profitability. The modernization of the infrastructure and improvement of operations are therefore important prerequisites for improving profits over the next three years. In addition, a series of measures will help to make DB Group more efficient. In view of the economic situation, DB Group has set itself the goal of generating an operating result (EBIT) of EUR 2 billion in the system network by 2027. In addition, the so-called debt coverage, i.e. the ratio of operating cash flow to adjusted net financial debt, is to be increased to 12 percent in three years. The personnel expense ratio is to be reduced from 52 percent today to 50 percent. Capital expenditure ramp-ups, particularly in the transport areas, will be adjusted and reduced compared to previous plans.
DB Group will reduce the staffing requirements of the Integrated Rail System in two phases over the next few years. By 2027, DB Group will prioritize reductions in the areas of administration, sales and indirect operational functions. No redundancies are planned and the regulations on guaranteeing employment will continue to apply without restriction. Instead, various instruments such as natural fluctuation, DB Group's internal labor market and voluntary partial retirement will be used. At the same time, DB Group will ensure that the necessary personnel are available for the operating rail business. For this reason, recruitment in many operational functions will continue at full speed. The necessary improvement in profitability must go hand in hand with the structurally necessary modernization of infrastructure and improvement of rail operations.
The measures to improve profitability encompass the entire Integrated Rail System and therefore also the infrastructure, internal service providers and Group management. The business units operating on the market are of particular importance.
DB Long-Distance
In order to meet the increased demand, DB Long-Distance has massively pushed ahead with expansion and modernization in recent years. Never before has so much been invested in personnel, fleet and depots. The range of services will continue to grow in the future. To this end, profitable growth is to be generated with attractive customer offers, including in the business customer segment. Where demand is particularly high, there will be additional services, such as more international connections. In the regions, too, resources will be increasingly deployed in future where the benefits for passengers are greatest. This will increase the capacity utilization of trains. In addition, DB Long-Distance is planning to reduce capital expenditures in its fleet and depots by 2027 in order to improve its economic development. For example, selected long-distance transport depots are to be supported by digital and automated applications so that more trains can be handled in less time. In addition, more vehicles are to be used for DB customers in future by improving processes and interfaces and reducing reserve ratios and turnaround times, among other things.
DB Regional
In recent years, DB Regional has been able to increase passenger numbers back to pre-Covid-19 levels with an attractive range of services. Punctuality was consistently above 90 percent. At the same time, the DB Regional Road line of business was restructured and has since recorded strong performance gains. DB Regional is focusing in particular on integrated everyday mobility, which is being driven forward both operationally and digitally. In order to further improve the financial and economic viability of regional rail passenger transport in particular, staff and vehicle robustness are to be increased. The newly designed portfolio strategy in regional rail passenger transport focuses in particular on strategically relevant transport services with calculable operational risks and stable results. The market share is to be maintained at the high level of around 60 percent. DB Regional Road aims to be profitable again from 2025 by gaining additional traffic, operational improvements of transport contracts including integrated mobility solutions and the reduction of structural costs.
DB Cargo
DB Cargo is already undergoing a far-reaching transformation aimed at making its business model competitive for the future. From January 2025, a new customer- and sector-oriented structure will be created: With the clear allocation and bundling of resources, with a high level of ownership and responsibility for results, teams will be able to focus more closely on customer needs. This entrepreneurial responsibility and more medium-sized structure will ensure long-term profitability. Staff capacities, overhead structures and working conditions will be designed in line with sector standards.