Abellio’s strategy helps NS to achieve its objectives and has three pillars: prepare, learn and earn, whilst effectively balancing risk and reward.

Prepare

In the early 2000s, NS decided to enter the deregulated railway market to prepare for the liberalisation of European markets, in line with legislation such as the EU’s Fourth Railway Package. Since then, Abellio has built up a strong position in the United Kingdom and Germany. At the same time, other European rail companies such as DB and SNCF are active in the Dutch public transport market. With its clear focus on the key rail markets in Northwest Europe, NS is developing a strong position in the European market through Abellio.

Learn

NS is learning from Abellio’s experience operating in highly competitive and commercial environments. At the same time, Abellio incorporates best practices from the Netherlands in its bids and when running its operations. This means that both NS and Abellio learn from the experience of bidding for tenders and franchises, as well as through operating franchises. By benchmarking ourselves with Abellio in certain business areas, we ensure that we learn from each other.This helps keep our operations competitive in all our markets, including the Core Network in the Netherlands.
In addition, in 2015, ScotRail began procuring the new Hitachi AT200 fleet with a small team of agile fleet procurement specialists. This team shared its learnings with NS at an Abellio UK best practice session, enabling NS to integrate the learnings into its own fleet procurement activities in 2016.

Earn

Abellio’s third strategic priority is to achieve positive, sustainable financial results through effectively managing risks and keeping investments at an acceptable level. The ultimate objective is to create a diversified portfolio of long-term sources of income, and to maintain solid levels of profitability. In 2016, Abellio recorded profits (EBIT) of €55.6 million, of which €36.8m has been achieved abroad. The profits achieved in the Netherlands have been positively impacted by €9.5m following the classification of Qbuzz as ‘held for sale’, since July 2016.
We aim to maintain financial performance at this level in the years ahead, although this will be challenging given the nature of bidding for business.

Growth strategy

All of Abellio’s franchises in the United Kingdom and Germany are expected to be profitable over their contract periods. This is a result of our targeted approach to achieving growth, and effective balancing of risk and reward.
In the UK, passenger railway contracts are tendered as net contracts, meaning that passenger revenue risk is taken by the operator and any subsidy received is calculated on costs net of revenue. In Germany, most passenger railway contracts are tendered as gross contracts, meaning that passenger revenue risk is retained by the tendering Transport Authority and any subsidy received is based on the gross costs of the contract.
In 2016, NS finalised the agreements with its shareholder regarding the overall financial means for its international activities with Abellio. This allows Abellio to continue pursuing its targeted growth strategy in the UK and Germany.