DSB in a
competitive market
November 2013
Trends &
Facts
ƒ
Further liberalization
in the EU is to be expected
ƒ
Political ambition to
double public transport
2010-2030
ƒ
Rail is important for every society, but in isolation
not a
good business case
ƒ
Network- and scale
economies are important
Further liberalization
in the
EU is to be expected
ƒ
EU-legislation is
shaping the liberalisation
of the EU rail
sector
ƒFree infrastructure and services ƒRatification by mid 2015 ƒSafety regulations ƒInfrastructure access ƒ Liberalization of freight (2007) ƒCommon access to rail safety ƒLiberalization of international passangertraffic and cabotage (2010) ƒLicences ƒInfrastructure fees ƒInteroperability for changes to existing or procurement of new rolling stock
ƒOptions for competition on urban and regionaltraffic ƒDefinition of financing of rail passenger transport (2009)
EU-regulations are shaping the
liberalization of the rail sector
Directive 91/440/EØF Directive 96/48/EF Railway package 1 (infrastructure) Railway package e 2 Railway package 3 2001 2004 2007 2019?
ƒ Separate budgets, accounts and
asset ownership
ƒ Separate accounts for
infrastructureprovides and rail operators
ƒ Access to transeuropean rail network ƒ Complete access to the freightmarket
ƒ Cross borders offerings liberalized since January 2010
ƒ Regulation simplification and free access
to transeuropean railnetwork
ƒ Higher level of unified demands to rolling
stock to ensure international competition and interoperability
ƒ Liberalization to also include national
passenger traffic 2012 2017 Revision (recast) of Railway package 1 TSI requirements Railway package 4
Soruce: AT Kearney; EU Commission; DSB; BCG
Regulation 1370/2007 (PSO regulation) Directives 95/18/EF og 95/19/EF 1996 1991 1995
Level of implementation varies
1. Model refers to setup of rail operations and infrastructure is organised 2. Infrastructure is in most cases controlled by governement owned company, albeit a private company (Network Rail) in Great Brittain 3. Separation of nfrastructure into seperate company is ongoing 4. Rolling stock owned by Infrastructure provider OSE and not the operator TrainOSE S.A.
Source: BCG "The 2012 European Railway Performance Index; Understanding what drives high performance by European railways" (2012); "Rail Liberalisation Index 2011" IBM Global Business Services 2011); BCG analyse
Fit for
Estonia Latvia Litauania3 Denmark Norway Sweden Finland Austria Slovenia Romania Bulgaria Hungary Slovakiet Chezh Republic Poland Italy France Switzerland Germany Holland Luxembourg Belgium Spain Portugal Great Brittain Ireland Greece4Model
1Liberali-sation
transparency
Financiel
Cohesion of
public
transport
Integration with
holdingcompany
X
X
Separated with
operator as
responsible for
maintainance
X
X
Fully separatet
2X
X
Political ambition to
double public transport
2010-2030
ƒ
Robust
customer growth in the rail sector is expected
and is supported by
significant infrastructure
investments
ƒ
Public transport will cater for main part
of the future
Rail operation is important
for every society, but seen
in isolation
not a good
business case
ƒ
Rail operations are
dependant on government subsidies
and is in most cases a natural monopoly
ƒ
Denmark is only large enough to attract
competition for
the tracks
, not on the tracks
ƒ
Cherry picking is easy
, but a minimum of service is
required and
unprofitable routes also needs to be
Rail operation is dependant on
governments subsidies
1. UK accounting (2010/2011) 2. Subsidy for Holland 2009 3. Passenger income in Denmark is for DSB per passengerkm i 2010 4. Austria og Switzerland excluded due to missing data Note: Subsidy (inclusive infrastructure) og passenger income from 2010 is normalised relative to PPP (baseline = Danmark)
Soruce: "EVES-Rail, Economic effects of Vertical Separation in the railway sector" (2012); European Commission (Competition – State Aid); Office of Rail Regulation (UK); UIC 'Railisa' Database; Eurostat; Danmarks Statistik; BCG
Kr. per passenger km
(PPP)
Comparable countries
4
in Western
Europe all receive subsidies
2,5
0,5
1,5
Passenger
1,0
0,82
2,0
2,25
11,38
1,39
0,86
D
K
Subsidy
1,97
1,06
0,83
1,11
1,14
1,83
2,17
21,17
0,66
2,20
30,0
#
Route
travellers
# of
1(mill.)
IC & R
trains
(#/day
2)
Freight
trains
(#/day
2)
# of
Tracks
Difficulty
level
Odense-Middelfart
7.1
51-100
44
2
Lejre-Vipperød
4.1
24-50
<1
1
Næstved-Vordingborg
1.7
24-50
0
2
Randers-Hobro
2.0
24-50
<1
2
Cherry picking is easy, but a minimum of
service is required and unprofitable routes
also needs to be serviced
1. 2010 2. Weekdays both directions
Source: "Trafikplan for den statslige jernbane 2012-2017" Trafikstyrelsen (2012); DSB; BCG
Level of difficulty of
selected routes
... is dependant on capacity and utilzation
1
3
4
2
Odense
Vipperød
Randers
Hobro
Lejre
Middelfart
Ringsted
Vordingborg
2 4 1 3Næstved
Copenhagen
Bottlenecks with high level
of dependency increases
compexity, f.i. "Røret"
Kbh-H to Østerport and Ringsted
Network- and scale
economies
are significant
ƒ
Significant network synergies
in IC and Regional
amounting to 36 train sets and
~
250 mill. kr. p.a.
ƒ
Network synergies achieved
through varying peaks
ƒ
Network synergies for
personnel
estimated at 90-110
mio. kr. for IC, Regional and Øresund
ƒ
Scale economies
estimated at
~
160 mill. kr. compared
Competition
is mainly
between
state owned
operators
Industry consolidation mainly by state
owned operators
Consolidation of
rail industry in the EU
... driven by the large state owned operators
0
NS
B
D
S
B
Turnover bill. kr. (2011)
7Re
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9Go
-ah
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ad
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re
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it
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e
o
lia Tr
an
sd
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v
F
irst
G
ro
u
p
SN
C
F
/K
e
ol
is
8D
B
/Arri
v
a
CP
50
100
150
200
250
300
State
owned
operators
Acquisitions
DB
ƒLiyell Ltd - UK (2012)
ƒGrand Central - UK
(2011)
ƒD&G Bus - UK (2011)
ƒArriva - UK (2010)
ƒLaing Rail - UK (2007)
ƒPan Bus - DK (2007)
ƒUnibus - DK (2007)
1ƒ
…
SNCF
ƒSyntus - NL (2012)
ƒKeolis - FR (2012)
2ƒ
WestBahn - AT (2011)
3ƒ
NTV - IT (2008)
4 ƒEurobus - BE (2008)
5ƒ
City-Trafik - DK (2007)
ƒBuslink - SE (2003)
6ƒ
Via GTI - FR (1999)
ƒ…
NS
ƒAbellio - DE (2008)
ƒProbo Bus - CZ (2008)
ƒTravel
London - UK (2009)
1. Acquired by Arriva 2. SNCF becomes majority shareholder with 70% 3. SNCF acquires 26% of Westbahns parent company.
4. SNCF acquires 20% of NTV 5. SNCF becomes majority shareholder 6. Acquires 70% 7. Includes all income 8. SNCF owns 70% of Keolis 9. 2010 Turnover Source: Deutsche Bahn; Arriva; Keolis; Railgazette; Fundinguniverse; Abellio; Renfe; CapitalIQ; Bloomberg; DSB annual report 2011; BCG analysis
Veolia
Environnement
put up share
(50% ) for sale
“Healthy DSB”
– preparing
for fair competition
ƒ
The transformation journey
ƒ
Status
“Top 25%
in Europe”
Economy in balance ƒ IFO 13/Savings ƒ Pricestructure ƒ Benchmarking ƒ Segment/line results ƒ One DSBTrains you can rely on
ƒ Trafficinformation/One app ƒ Punctuality/reliability ƒ IC4/2
ƒ Rejsekort
On target, every time
ƒ Managing the DSB way ƒ A common approach ƒ IC4/2 delivery/settlement Preparation tracks ƒ New contract ƒ Future trains ƒ Infrastrukturprojects ƒ IT-infrastruktur EBITDA Net Result Train km-cost Punctuality F&R S-tog Customers DK I alt Customer satisfaction F&R S-tog Image DSB S-tog Index EBITDA Net Result Train km-cost Punctuality F&R S-tog Customers DK I alt Customer satisfaction F&R S-tog Image DSB S-tog
2011
2014
2025/30
“Split and out
of balance”
“Healthy DSB”
Less DSB
Deserves a new
contract
More DSB
The transformation journey
Source: DSB 1.693 -694 158 kr. 90,6% 94,8% 165 mio. 219 mio. 7,7/6,6 7,8/7,2 54/51 60 140/140 2.650 350 142 kr. 94% 95% 180 mio. 186 mio. 8,0/7,0 8,0/7,5 +60 +60
DSB in a
competitive
market
ƒ
One company –
one strategy
ƒ
Customer focus
and expectation management
ƒ
Top quartile
amongst comparable operators in Europe
ƒ
DSB as a business
- able and willing to compare on
One company –
one strategy
ƒ
Focus on core
– train operations in Denmark
ƒ
“The greater context”
ƒ
Basic story
ƒ
Common value set
ƒ
Cohesion – not only DSB, but in public transport
ƒ
“The common approach”
ƒ
One strategy for DSB
Customer focus
ƒ
Customer Value Proposition
ƒ
Safe
ƒ
Punctual
ƒ
Easy
ƒ
Convenient
ƒ
Polite
ƒ
Expectation Management
Danes are the most satisfied with train
operations, but expect improvements
through liberalization
Danes are generally
satisfied with train
operations...
... but still want
liberalisation ...
... with an expectation
of better conditions
4
Improved
management
66%
17%
1
Lower prices
77%
12%
2
Impr. punctuality
74%
12%
3
Frequency
67%
16%
5
Service quality
66%
60%
19%
6
Comfort &
Cleanliness
60%
22%
7
Increased security
42%
28%
Positiv
Negativ
76%
20%
DK
75%
18%
DE
71%
21%
UK
71%
21%
EU
66%
27%
FR
46%
52%
NL
Positive
Negative
67
%
64%
21%
DK
67
%
45%
34%
DE
67
%
55%
27%
UK
67
%
46%
36%
EU
67
%
59%
22%
FR
64%
23%
NL
Positive
Negative
Source: "Rail Competition, Special Eurobarometer 388" European Commission (2012); BCG
DK
Could be an indication of missing
Top quartile
in Europe
ƒ
Benchmarking
DSB as
a business
ƒ
Comparable terms
for relevant parts of the business,
i.e. benchmarking of train operations excluding
historically determined costs such as special terms for
civil servants, rail museum, stations and other
functions performed for the sector
ƒ
Result oriented culture
characterized by customer
focus, openness and transparency
2
1