Study shows dark sides of rail privatization

It’s no secret that competition between the ÖBB and the private Westbahn has had a positive effect on the western route – especially in terms of quality.

“The ticket prices for second class are no longer cheaper on the Westbahn,” claimed Olivia Janisch, deputy head of the vida union and the ÖBB group works council, at a study presentation on Thursday.

vida and the Chamber of Labor have commissioned a study from Cologne university professor Tim Engartner on the effects of privatization in the rail network. “It is a myth that competition and lowest bidders lead to better rail price performance,” explains Engartner. He comes to the conclusion that the privatization of the railways led by the EU Commission has often had a negative impact in recent decades. “With a comprehensive supply of rail transport services, competition cannot be said to have any promising effect,” says the professor.

Failure in Britain

For example, the number of bidders in tenders in Germany is declining. There were 1.41 applicants for one advertisement (2022). In Germany, private railways have a market share of ten percent. From a business perspective, private providers would have to give up connections that are not profitable. Unless they are subsidized by the state. A prime example of the failure of rail privatization is Great Britain, where Prime Minister Keir Starmer is gradually planning to re-nationalize the ailing railway.

While rail contracts in Germany are largely advertised publicly, Austria awards 80 percent of connections directly. In the case of direct awards, the federal and state governments order the connection from the ÖBB and the state railways. Direct awards also affect routes that are not economically viable but serve the common good.

Turn the adjusting screws

According to ÖBB, the revenue from ticket sales only covers around a quarter of the costs of local and regional transport. “Direct awarding is a successful model in Austria,” says trade unionist Janisch. According to the study, direct awards are also cheaper because there are fewer costs. “We need a clear investment commitment to rail as a mode of transport,” says the study author. “This is the guarantee of rail success. The railway sector is characterized by high fixed costs and immense long-term investments.”

The railway is also in intense competition with road and aviation. This also applies to freight transport. “One lever would be for the EU to end the anti-rail tax burden. There is an urgent need to readjust the tax burden and relief for all modes of transport,” says the expert. “There are adjustment screws that you could turn.”

Swiss railway successful

Trade unionist Janisch doesn’t believe in the privatization of the railway. “The system costs of railway companies are so high that the only savings can be made in personnel,” says Janisch. “This sets a downward spiral in motion.” However, she admits that in “Austria it was very wise for politicians to finance the rail infrastructure in the long term.”

Engartner also demands that the national carriers must be unequivocally committed to concentrating on the domestic rail sector. “Deutsche Bahn is a negative example of this. “It operates in 130 countries worldwide, especially in the logistics market,” says the expert. “It is strongly recommended to follow the Swiss railway system. The Swiss Federal Railways operate very successfully.”