The European rail barrons

Here is a perspective on the high speed rail boom across the pond from a Canadian publication. It deals with the German rail company, Deutsche Bahn (DB), which is about to go through a partial privatization. Fear not. It’s no fiendish plot to destroy ground transport at the behest of all-powerful airline and highway interests. It is the natural outcome of good management, and adequate capitalization.

The rail scene is even hotter in Europe, where Deutsche Bahn (DB), the German national rail company, is on the verge of partial privatization. The German government wants to sell about 25 per cent of DB some time next year by way of initial public offering or direct placement to investors. The government says the 25 per cent stake is worth at about ?3-billion, the equivalent of $4.3-billion (Canadian).
DB is a huge transport company. In 2006, it had revenue of ?30-billion and an operating profit of ?2.5-billion. It owns and operates 34,000 kilometres of track and almost 4,200 rail stations. It has 80 subsidiaries and sea, trucking and air freight operations around the world. Freight accounts for half of its sales. It has 229,000 employees and last year carried 1.85-billion passengers.
Why does DB want to join the stock market? Partly, it appears, because it can. For years, DB was a chronic money loser. Under CEO Hartmut Mehdorn, it has become profitable and is turning into a powerful international business. Another reason is rail liberalization. In 2010, the European rail market will be opened to competition. DB needs access to capital to fight this war. It wants to spread its high-speed trains, known as ICE, all over Europe before SNCF, the French national railway company, gets a chance to do the same. Both DB and SNCF know they are vulnerable to cheap competitors. Rail versions of discount airlines like Ryanair and EasyJet could emerge.

It is a burning commentary on how far behind modern technology North American has fallen.

Filed under: International High Speed Rail