Focus on a « small » railway that wants to make a name for itself in Central Europe: the ÖBB. A decade ago, a director of the Swiss operator SBB Cargo said: « We have to be careful of our Austrian neighbor, he is much bigger than us ». He told in fact of Rail Cargo Austria, whose expansion plans was knew outside the Austrian borders.
The current ÖBB have a history going back to 1947, although the very eventful history of the Austrian rail (end of the Empire, Anschluss), is obviously before that date. In 1992, the ÖBB were broken out of the federal budget and turned into company with its own legal status (a cross between a GmbH and an AG in Austrian commercial terms). The company is 100% owned by the Republic of Austria. In 2004, the ÖBB were reorganised into ÖBB Holding AG and a number of operating subsidiaries. The holding company was to oversee the operations of the companies assigned to it, coordinate a coherent strategic approach and allocate tasks for the whole enterprise. The 1 January 2005, the subsidiaries of ÖBB-Holding AG became autonomous and independent operationally. This model called « German-Alpine » seems to best meet the criteria of Europe Rail without borders, with however a chronic dissatisfaction: the infrastructure, which is still accused of favoring traffics of the incumbent operator. This is the often repeated complaint of the private operator Westbahn.
The ÖBB (Österreichische Bundesbahnen) therefore have several subsidiary activities:
– ÖBB-Personenverkehr Aktiengesellschaft, which manages local, regional and long-distance passenger traffic. This subsidiary manages the branding Cityjet, Railjet and the very popular Nighjet;
– Rail Cargo Austria Aktiengesellschaft (RCA), a logistics subsidiary for freight transport. It holds – and this is the Swiss fear mentioned above – 100% of the former MAV Cargo, the freight division of the Hungarian railways. Some have translated this into a form of return from the old Empire…
– ÖBB-Infrastruktur Aktiengesellschaft, 18,200 employees, is the infrastructure subsidiary sometimes criticized as responsible for the allocation of routes. ÖBB Infra is primarily responsible for the operation and maintenance of the Austrian rail network and the planning, design and construction of the railway infrastructure, which includes 1,061 railway stations and train stops.
These three groups each have their own subsidiaries, but also sometimes shared subsidiaries, such as ÖBB-Technische Services, a cross-functional subsidiary employing 4,000 employees managing and maintaining 22,500 railway vehicles in 25 workshops. More than 270 million passengers and 100 million tons of freight use the 5,000 kilometers of the network every year. 51 railway companies are officially registered, including Westbahn and Regiojet.
A quality railway
The Swiss are right to fear their rail neighbor: Austrian quality can match that of SBB. For example: the trains Zurich-Salzburg-Vienna are operated only by Austrian rolling stock, the beautiful Railjet trainsets.
We can be astonished at the Austrian railway policy: new branding (Railjet, Nightjet), new stations, international expansion, the ÖBB show an proactive and forward-looking face. With a major question: where do they find all this money?
In 2010 the ÖBB led a program of austerity. The public company, a heavily money-losing company, was faced with a loss of 329.8 million euros. Christian Kern, future Austrian Chancellor, took over the executive presidency of the ÖBB and told in conversation at the time: « Our sales network operates like a cheese and ÖBB is in no way prepared for competitors such as the Westbahn. » Kern had, however, had to admit that the austerity package decided in 2003 had resulted in massive losses of synergy, inflated overhead costs and left the network in poor condition. The autonomy of the subsidiaries did not change anything in this disastrous situation. But rather than going backwards as is often suggested in the Latin States, Christian Kern turned the railway dinosaur into a profitable company. He completely overhauled the staff and management structure of the company, brought RCA back to profitability, invested in marketing and image campaigns, initiated improvements in train quality and punctuality, and even managed the project of the century in time and costs : the new station Vienna-Hauptbahnhof.
It is probably here that we can note the difference between some European states that prefer to stay to the statu quo of their railway incumbent, with Austria who decided to transform its railroad into a company that would not increase the public debt. A question of political choice… . It is particularly interesting to note that the turnaround was successful without significant staff reductions. ÖBB employed 42,419 people at the end of 2010. In 2015, there were still 41,150 staff members.
In 2016, Christian Kern becomes chancellor and head of the SPÖ, and that was a « rail veteran » who succeeds him. Andreas Matthä, 53 year old, director of infrastructure, becames CEO of a growing company, heading towards its future. Matthä was able to benefit from a competent and committed management to continue the work of Kern. Since 2017, all the subsidiaries of the group generated positive results again. In 2018, the last year recorded, sales reached € 5.6 billion. Investments were once again focused on rail infrastructure with almost € 2 billion invested in new construction and extensions, as well as in infrastructure maintenance.
Kurt Bauer is responsible for long distance transport at ÖBB Personenverkehrs AG. He previously worked in the department of DB Fernverkehr AG, where he was responsible for the planning processes and, as a senior project manager, for a strategic project in passenger transport. He knows well the sector ‘long distance.’ Although he was not behind the creation of Railjet concepts (2008), he was the prime contractor for the takeover of German and Swiss night trains under the Nightjet brand. In a recent interview, Bauer explained : « I am a hard economist. The failure of the Germans is an opportunity for the ÖBB ». How is it that a ruinous business for Deutsche Bahn becomes profitable for the Austrians? « As a small railway, we also have to adopt unconventional methods, » says Kurt Bauer soberly. Simple…
The cargo sector can only survive if Austrian exports are doing well. The high growth rates of neighboring countries are benefiting Austrian exports. According to the Vienna Institute of International Economic Studies (WIIW), Austrian companies export around € 84 billion annually to major Eastern European countries. The state-owned ÖBB subsidiary Rail Cargo Group is the second largest rail logistics company in Europe after Deutsche Bahn. With its centralized location between the Adriatic and the Baltic Sea, the ÖBB, through the RCA freight subsidiary, can benefit from the traffic on the east side of Europe, where there is less competition than in Germany. Trieste is the first… austrian harbour.
Doctor in theoretical physics and chemistry, Clemens Först is the boss of RCA. The company, which the Swiss fear, has 18 countries located between the Mediterranean and the Black Sea, with an annual turnover of more than 2 billion euros and almost a traffic which raise 30 billion tonne-kilometers. The Rail Cargo Group covers the entire logistics value chain, from the rail carrier (Rail Cargo Logistics brand) to the intermodal operator (Rail Cargo Operator), as traction company (Rail Cargo Austria, Rail Cargo Hungaria, Rail Cargo Carrier) and also terminal operators (Rail Cargo Terminal). « We are the only railway company in Europe that has consistently posted positive numbers over the past five years, » says Clemens Först.
The infrastructure plays a key role. Almost € 2 billion are invested annually. In July 2019, the German consulting firm SCI Verkehr unveiled a top20 of railway investments per capita: Austria was second in the ranking with 218 euros investment per capita. This excercice is however simplified, as political, socio-economic and social data differ between states. Another board from the German Allianz Pro Schiene shows that Austrian rail investments exceed those of the road. This is true in absolute numbers, if we take into account the three railway tunnels that the country is building. But without that, that would be not true…
Although infrastructure is an exclusively national competence, the ÖBB gradually expanded their business throughout Europe. And set an example.
International expansion
For a railway that is not a giant in Europe, the growth goes through international market, which is not possible with the sole domestic market. This is the key to Austrian success, and European rail policy is perfectly suited to this strategy.
In 2016 already, Christian Kern confirmed it plans to focus on the development of its international passenger and freight business as the company’s financial performance continued to improve. Armed with his offensive management staff, Andreas Matthäs continued the work relentlessly. Faced with the stagnation of domestic demand, place on the offensive internationally.
The ÖBB are positioned in Europe without an international subsidiary, but directly with the name RCA, which becomes a brand. RCA has as many latitudes as any private logistics company, while using some synergies of the group ÖBB, such as for pool locomotive and maintenance workshops.
Rail Cargo Austria has, for example, opened an office in the Italian port of Trieste and has logistics warehouses in partnership in the countries around Austria. The enterprise has reached in november 2018 its ambitious goal of handling a total of 400 trains between Asia and Europe in 2018 and should to reach a total of 600 trains between the two continents in 2019, which shows that the company has an offensive policy.
On the passenger segment, Austria differs from Germany in several aspects. On the one hand, the ÖBB know that they will never benefit from high speed rail and therefore can not capitalize on this segment. The new line built in west of Vienna is designed for a maximum speed of 230km / h. The public company can only take account on the quality of its services. On the other hand, the government does not intend to regionalize local transport by a delegation of public service, unlike its big neighbor. Inversely, the country has left the arrival of competitors in the main line segment, managed by … Kurt Bauer. To date, Westbahn and Regiojet operate in open access on Austrian tracks. That did not brought down the ÖBB, as some conservatives thought …
The ÖBB have put a new organization of their various passenger traffic, in order to provide a clear image to the 250 million annual customers. « Jet » branding was applied to the three segments of ÖBB passenger transport: Cityjet for local traffic, Railjet for long-distance daytime traffic, and Nightjet for night trains.
The ÖBB have enhanced the quality of the only types of train they should rely on: the ‘Intercity’. Thus was born in 2008 the Railjets, day trains that replaced all Eurocity and Intercity. The Railjet network has expanded internationally, especially to Munich, to Zürich and to Budapest. He is still absent on the line Munich-Innsbrück-Verona. The Czech Railways, for their part, opted for the same concept, with the same type of trains, on the Graz-Vienna-Prague route. The ÖBB are already preparing to continue their offensive, thanks to orders for rolling stock: to Trieste and to Berlin as early as May 2020.
If we look at the Railjet map, we can already see that Vienna-Hauptbahnhof has become a hub where four Central European traffic intersects. This is a game card that the ÖBB want to play masterfully…
Our latest example entrie largely to the spotlight today: the night train. We can assure you: these trains are particularly silent. Simply, they were suddenly invited into the public debate in favor of the sudden green wave coming from Sweden. Since then, comes the culture of flight shaming and the blessing for the train, « this old slow transport that puts the human back to frontline ». The ÖBB played a very good game card. Not really because of the climate, but for the business.
When Deutsche Bahn abandoned its night trains, Kurt Bauer applied his theory directly: what is a loss for others becomes an opportunity for the ÖBB. At the end of 2016, the Nighjet network was born on the ashes of German night trains. For Bauer, the calculations were good: the Nighjet traffic brings only 3% of the passengers but … 20% of the revenues of the long distance segment in full! The small Central European railway could not miss such an opportunity. The outcome is well known…
>>> To read : Nightjet – renaissance of night trains in Europe
The Nighjets have significantly extended the ÖBB brand and Austrian quality beyond the area of Central Europe, as the night train network reaches Rome, Zurich, Berlin, Hamburg and soon, Brussels in january and Amsterdam (end 2020). In Switzerland, voices climbed to the Federal Council to worry about the absence of SBB in the network of night trains. But SBB does not have the financial base like the ÖBB and the swiss incumbent is concerned mainly with the north-south flows Basel-Milan, the most lucrative.
Despite their large subsidies, the ÖBBs have a twofold mission: to find a place among the big one of the railways and to settle permanently in Central Europe. For this, the strategy has three components:
- – find operational methods that cost taxpayers the least;
- – export Austrian quality to make themselves known;
- – to find out new revenues sources in both passenger and freight segments.
So far, it seems that this strategy is a success …
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