Germany Freight Transportation Report 2008

The German government faced regional opposition in late July 2007 to its plans to partially privatise rail operator Deutsche Bahn, putting the draft bill on course for a rough ride in the upper house of parliament. State politicians said the plan could result in uneconomical regional railway lines being closed. Chancellor Angela Merkel's coalition government was also facing public concern that private equity or hedge funds could take a stake in Deutsche Bahn. Merkel's cabinet endorsed the long-delayed plan to partially privatise Deutsche Bahn - Europe's largest rail operator - by 2009. The plan, which foresees the sale of a 20 to 25% government stake in Germany's largest state-owned company, still had to be approved by both houses of parliament later in 2007. The head of Merkel's Christian Democrats (CDU) in parliament, Volker Kauder, told reporters earlier in July that the coalition expected to draft a law to protect German firms from acquisitive foreign state-controlled funds by the end of 2007. Deutsche Bahn's initial public offering (IPO) timetable had been delayed by fears of a possible erosion in service, quality and safety, along with worries about price hikes and a row over track ownership. If approved, the initial public offering was likely to be Germany's biggest since Deutsche Post was floated in November 2000 in an IPO that raised EUR5.8bn (US$8bn). The railway operator wanted to use the capital to finance further expansion. Although conscious of the risks we believe after an initial transition period the prospects for a part-privatised Deutsche Bahn are encouraging. BMI's newly-released Germany Freight Transport Report 2008 concludes that rail freight traffic (measured in million tonnes/kilometre, mntkm) will grow at an annual average of 1.7% during 2008-2012. This is a shade slower than the economy as a whole, which we expect to expand by 2.0% per annum over the same period.

Reforms and structural change will be important issues facing the industry. The pace of change will be relatively measured, however. Under approved plans, rail freight is expected to take some of the strain off the roads, through a variety of mechanisms and initiatives including increased reliance on road pricing, encouragement of inter-modal transport hubs and development of intelligent traffic systems (ITS). BMI predicts, however, that road haulage will grow by 1.8% per annum and actually increase its share of total freight traffic to 72%. Rail freight will grow by 1.7% per annum and maintain its share of the total fairly constant at 16%. Among the other modes, sea cargo will grow by 2.2%, supported by Germany's strong international trade, while airfreight will expand by 2.9% per annum, thanks to a steady performance by Deutsche Lufthansa.

The operating environment for transportation companies will evolve favourably, and will set the scene for a fairly positive period going forward. We score the overall freight industry operating environment at 45 (out of a theoretical total of 70 and above the average for the G-7 economies which stands at 41). That said, Germany's regulatory and competitive environments, important components of the overall rating, still present scope for improvement, given the plethora of taxes and regulations that add to operating costs. Despite this, the German freight industry can continue to count on world class companies with a deserved reputation for quality and attention to detail.

Across all modes the scene is set for moderate growth and development. With Germany acting as a key European manufacturing and trading hub, BMI forecasts that its transport and communications sector will grow to a value of US$270.8bn by 2011, equivalent to 7.5% of GDP.