Source: https://www.railfreight.com/railfreight/2024/02/15/eu-may-break-up-db-cargo-due-to-losses/

Author: Dennis van der Laan

EU may break up DB Cargo due to losses

The European Union may break up DB Cargo due to the rail operator’s large losses, which have reached nearly 500 million euros. Company sources reported to Reuters that the EU may consider the figures and subsequent government support to be distorting the market.

The Deutsche Bahn subsidiary incurred losses that were twice as high as anticipated. According to Reuters, the losses can largely be ascribed to single-wagon traffic, which does not generate profits for DB Cargo. Illustratively, DB Cargo’s market share has been declining in recent years, with private rail freight operators taking 59 per cent in 2022.

The German government supports DB Cargo financially to mitigate the financial pain incurred by its large losses. However, the EU may now consider the government’s financial aid to amount to market distortion. The EU has launched a probe into DB Cargo, which ultimately could lead to the EU breaking up the company.

Not a unique case

The potential EU measures against DB Cargo are not a unique case. In January 2023, the European Commission also opened an investigation into French Fret SNCF for excessive and illegal state support measures after it, too, had been making losses for years. In the French case, Fret SNCF was forced to abandon over 20 rail freight routes to level the playing field. The main beneficiary of the partial breakup of Fret SNCF is notably DB Cargo France, which will take over some of the traffic.

Neither the EU nor representatives from DB Cargo wanted to comment publicly on the matter. The German ministry of transport stated that a ‘constructive exchange’ was ongoing with the European Commission.