2017 Integrated Report – Departure into a new era

Chairman’s
letter

Dr. Richard Lutz

CEO and Chairman
of the Management Board of
Deutsche Bahn AG

»We stand for growth and future viability. We are investing, modernizing and digitalizing.«

Dr. Richard Lutz

CEO and Chairman
of the Management Board of Deutsche Bahn AG

Dear
ladies and gentlemen,

2017 was a financially successful year for Deutsche Bahn. With revenues of about 42.7 billion euros and an operating profit that has increased over the previous year by 10.6 percent to 2.15 billion euros, we have a tailwind for 2018. The main drivers for this positive performance were DB Long-Distance and DB Netze Track as well as our international business units DB Arriva and DB Schenker, which were heading for a record in 2017. We are not satisfied though with simply being financially successful. Our multi-year Railway of the Future quality program did achieve a great deal in 2017 for our customers but still not enough. And so in 2018 we are striving more than ever for improved quality, punctuality and reliability.

One highlight during the year under review was undoubtedly the commissioning of our new high-speed line between Berlin and Munich. The 3 hour 55 minute travel time between Spree and Isar gives us our greatest edge in the competition with other modes of transport. And our customers are taking to the new line very well. We are therefore optimistic that we will double the number of rail passengers between Berlin and Munich in 2018.

Passenger numbers are on the rise not just on this line but throughout Germany. In 2017, we welcomed over 142 million passengers onto our long-distance trains. That is a new record and is very gratifying, particularly when it comes to climate protection in Germany.

Since January 1, 2018, passengers using long-distance transport have been traveling with 100% eco-power. This is green. And forward-looking. And it’s necessary if we are to successfully implement our new climate goals: we intend to more than halve our specific emissions of greenhouse gases by 2030. We as DB Group will continue to work on the major goal of shifting more traffic to environmentally friendly rail, since traveling by rail is climate protection in action. The importance of this for our planet is shown by the extreme weather events of 2017. According to scientific findings, in the future we will have to be prepared for even more extreme weather situations as a result of climate change.

What does that mean for us? We are bracing ourselves for corresponding capital expenditures. With Railway of the Future, we are improving our quality so that we can provide an even better cushion against disruptions. We still have to do a better job for our customers, particularly when it comes to punctuality and travel information in the event of a problem. We are firmly convinced here that Railway of the Future is the right approach and our formula is applicable more than ever. Product quality is the basis for customer satisfaction and this is the basis for sustainable success.

DB Regional successfully held its ground in the German market in 2017 and won just short of two-thirds of all service contracts awarded in regional rail transport. There is still the major goal of defending existing networks and winning new ones. In addition to competitive costs, the decisive success factor is our innovative strength. DB Regional therefore continues to work on innovations such as the Idea Train that was developed in 2017. We are of the firm belief that things such as work, family and sports compartments can enrich the lives of millions of commuters.

Also in the international world of logistics, we have established innovative business models that we will be further developing on a systematic basis. 2017 was the first time that DB Cargo and DB Schenker transported over 80,000 standard containers on the world’s longest railway line between Germany and China. A new record in intermodal logistics solutions, and one we intend to build on.

Since 2017, DB Schenker has also been partnered with MAN and Fresenius University in innovative work relating to platooning. Our logistics division’s pilot, which is supported by the Federal Ministry of Transport and Digital Infrastructure, will reach a further milestone in 2018: digitally linked trucks will take on live journeys between Nuremberg and Munich with real cargo shipments. We will be the first company in the world to break new ground in this way. And not only that: we have heralded the new age of autonomous driving in Germany. The first driverless local public transport bus in Germany is now operating in Bad Birnbach, Bavaria.

It’s becoming clear – we are innovatively configuring the mobility and logistics of tomorrow. We are also standing for growth and future viability. We are investing, modernizing and digitalizing. 2018 will be a prime example of this three-way approach.

With the Federal Government’s masterplan for rail freight transport and our Rail Freight Transport Initiative, our goal is to put rail freight transport back on a successful track and bring more transport to rail. In passenger transport, we are convinced that with new on-demand offerings and our Group program smart cities we can make local public transport in future, both in cities and rural areas, more flexible, more personalized and therefore significantly more attractive.

For instance, we signed a Memorandum of Understanding with the Hanseatic city of Hamburg for interlinked mobility, attractive stations and smart city logistics. Our goal now is to further advance the individual projects for the city of the future. In concrete terms: in Germany’s second-largest city we are this year implementing a driver-based, on-demand offering with up to 100 vehicles, which is integrated into local public transport.

The next big thing is the digitalization of the entire German rail network, our strongest lever for increased capacity on the railway. We are working here on a fundamental technical change in the railway sector. The go-ahead has been given for this with our Digital Rail for Germany program. The centerpiece of digital rail is the European Train Control System (ETCS). At the end we will have a smart network with digital command and control technology and digital interlockings, allowing for denser spacing and hence significantly better use of the infrastructure.

Our major goal? Up to 20 percent more network capacity. Digitally, reliably and securely. Our aim here is to achieve improved performance, better quality, greater efficiency and more growth for rail. Digital rail is also boosting Germany as an industrial location. Our rail industry will be able to export its know-how worldwide following the example of DB Group. Our goal for digital rail is to partner with the Federal Government and the industry as a whole to attract large capital expenditure volumes.

This is because infrastructure drives growth and growth drives prosperity. And as DB Group, we have a particular responsibility here: toward sustainable infrastructure but above all toward the people in this country. In the year under review we have taken on almost 20,000 new employees and young professionals in Germany alone. As far as 2018 is concerned, we are continuing at a record level. Of the 19,000 envisaged new hires, our digital expansion is also creating attractive jobs in the IT sector and is providing opportunities for new career entrants. This year alone, we are at the same time looking to hire over 1,000 train drivers and vocational trainee drivers.

In many respects we are departing into a new era, and we are doing so with a powerful DB team and many new employees. We’re working together to achieve sustainable success for DB Group. In 2018, we are well on the way with a strong management team and will improve quality for our customers and modernize the rail system to enable us to take the lead in the innovation race with other modes of transport. As a growing industry and as the most environmentally friendly mode of transport, we have a huge asset and are a byword for mobility that meets the challenges of the 21st century: safely, reliably, comfortably and in a way that respects the climate.



Sincerely,

Richard Lutz

Dr. Richard Lutz
CEO and Chairman of the Management
Board of Deutsche Bahn AG

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