Deutsche Bahn gets cash boost

Deutsche Bahn (DB) and the German government announced Thursday that a total of 4 billion euros ($5.1 billion) annually would be earmarked for each of the next five years to renew the state-owned railway operator's infrastructure.

That's 1.5 billion euros per year more than what has been set aside in each of the past few years for railway improvements, German Transportation and Infrastructure Minister Alexander Dobrindt said.

The fresh funding will boost railway infrastructure investment to an "absolute record," Dobrindt added.

The investment program includes sticks as well as carrots: The government will levy steep penalties against Deutsche Bahn if it fails to meet government targets such as a reduction in delays. A disruption in service due to a dilapidated bridge, for example, will incur a fine of two million euros.

An urgent need for infrastructure renewal

Deutsche Bahn has been demanding for years that its only owner should earmark more for bringing the national railway grid - parts of which date back to the 19th Century - up to modern standards. About 1,300 bridges out of a total of some 25,000 are in urgent need of repair, DB Chief Executive Rüdiger Grube said recently. Except for the modern high-speed ICE train routes, he added, the tracks and signals of most regional lines are in a sorry state.

Grube welcomed the five-year investment plan, saying it would give Deutsche Bahn the means to "increase service quality and overcome the investment backlog."

Rail equipment manufacturers also rejoiced, with the industry lobby group VDB calling the plan "a step in the right direction" that would give "an impetus to long overdue rail modernization."

Profit squeeze and passenger pains

Rising maintenance outlays for the rail grid have been posing a mounting threat to DB's profits in recent years, most of which end up in government coffers anyway.

According to the news agency Reuters, higher grid costs have already forced the company to slash its internal profit estimate for the next two years by 2 billion euros.

Moreover, DB's rotting infrastructure, including its outdated rolling stock as well as vulnerable track and signaling technology, is frequently causing delays for passengers.

A harsh winter in 2010, for example, brought commuter rail traffic in and around Berlin almost to a standstill as the heating systems in many trains collapsed and track switches froze.

uhe/nz (Reuters, AFP)