Abellio Germany Abellio Germany is the country’s fifth largest rail passenger transport company with revenue of €195 million in 2016.Description of the German rail marketThe German regional railway market has a volume of around €10 billion per year and a network covering roughly 670 million train-kilometres. The market has been deregulated since 2003, with responsibility for its organisation assigned to the 16 federal states of Germany. Each state has its own way of managing its regional market. This has led to the creation of 27 regional transport authorities, each of which has adopted a different tendering regime, with a substantial flow of potential franchises. There is a constant flow of tenders into the market, and this will continue well into 2017.While the number of players competing with state-owned Deutsche Bahn (DB) AG has continued to grow, and the majority of tenders were awarded to parties other than DB, DB still services 70% of regional rail transport in Germany. It is expected that this number will go down to 60% in 2020. In Germany, Abellio only has gross contracts with the PTAs, which means that Abellio Germany is paid for its service per train kilometre. The revenue / fare box risk is allocated to the transport authority. On top, inflation risk is hedged by appropriate escalation formulas. Thus, the risk profile of gross contracts is low.2016 in a nutshellAbellio Germany is currently the fifth largest train operating company in Germany, with an annual turnover of roughly €195 million in 2016. In recent years, Abellio has built up a strong competitive position in the German railway market and won a number of franchises. With these wins, Abellio Germany will boost its revenues to above €500 million in 2020, and will become the third largest operator in Germany based on train kilometres.Abellio aims for controlled growth. This means we opt for selective and responsible participation in tenders, professional mobilisation and commercial operation. Abellio Germany strengthened its market position in 2016 by winning three tenders; Abellio Rail Nordrhein-Westfalen will take over six lines of the Rhine-Ruhr S-Bahn between Dortmund, Wuppertal, Oberhausen and Haltern am See in December 2019. 2016 was the first time we had to defend one of our franchises: the Ruhr-Sieg Netz (RSN2). We will continue our service between Essen, Hagen, Iserlohn and Siegen until December 2034. In December 2016, Abellio Rail NRW successfully started the domestic part of the Niederrheinnetz on three lines between Düsseldorf / Mönchengladbach and Bocholt to Emmerich. In April 2017, Abellio will start the remainder of the Niederrheinnetz by connecting Emmerich to Arnhem (NL).In 2015, a competitor appealed against the decision to award Abellio the largest lot of Stuttgarter Netze (STN). The high court in Karlsruhe (OLG) ruled in favour of Abellio on 9 May 2016. Abellio will operate STN between Tübingen and Mannheim, starting in June 2019. We will run 6.8 million train kilometres per year along the 480-km route network with 114 stations. Around 250 new colleagues will join the Abellio team in the Stuttgart region, and 43 Talent 2 trains from Bombardier will be operated in the southwest of Germany. The new Abellio office in Stuttgart was opened in 2016.In Mitteldeutschland, the STS franchise went into its first year of operations in 2016. While the overall performance is satisfactory, the many infrastructure works of DB Netz prevented Abellio Rail Mitteldeutschland from reaching its full performance potential.The Regional Transport Association of Westfalen-Lippe (NWL) awarded Abellio the gold medal for quality leadership this year. For the second year in a row, Abellio was the frontrunner in all three categories of punctuality, service performance and vehicle condition. Abellio also received top marks across all categories in the quality rankings of the Rhine Ruhr Public Transportation Authority (VRR). Punctual journeys, good condition of the vehicles and exceptional service were the decisive factors for our customers according to the VRR report.An employee of Abellio Deutschland won the ‘Eisenbahner mit Herz’ [Big-hearted Rail Employee] competition for the first time in the company's history.Outlook for 2017Even after the 2016 wave of tendering procedures, the market is expected to remain buoyant, partly due to the increase in financial support provided for regional rail transport by the federal government. Subsidies were increased from €7.4 to €8.2 billion per year. Abellio will thus continue to bid selectively and responsibly.As of Spring 2017, Abellio will provide cross-border traffic through the Lower Rhine region for the first time. This operation will link both Düsseldorf and Mönchengladbach with Arnhem. In 2017, we will start with mobilisation of the STN franchise out of our new office in Stuttgart. For this network we plan to build a new workshop in Pforzheim. We will also focus on the mobilisation of our other newly-won franchises, such as Rhein-Ruhr Express (RRX), Diesel Sachsen Anhalt (DISA), S-Bahn Rhein-Ruhr (SBRR) and Ruhr Sieg Netz (RSN2).Organisation and staffIn view of the recent growth in our German activities, we have invested in a more robust company infrastructure and a regional substructure with separate directors for each of the three disciplines of bidding, mobilisation and commercial operation. Our new governance structure underlines these requirements. As part of the implemented process, we are strengthening our management and have hired qualified managers for HS&E, Audit and Risk. We are in discussions with the unions Gewerkschaft Deutscher Lokomotivführer (GDL) and Eisenbahn- und Verkehrsgewerkschaft (EVG) regarding a collective tariff agreement. We hope to be able to fully complete the process in 2017. New entity: Abellio Rail Baden-WürttembergAbellio Rail Baden-Württemberg GmbH (formerly known as Abellio Southwest GmbH) will operate Stuttgarter Netz, starting in June 2019. We will traverse 6.8 million train kilometres per year along the 480-km route network with 114 stations. Around 250 new colleagues will join the Abellio team in Baden-Württemberg.New rolling stockAbellio has ordered new rolling stock via an operational lease arrangement: 43 Bombardier Talent 2 trains for Stuttgarter Netz and 52 Coradia LINTs for DISA. Stadler delivered 21 Flirt EMU 5 trains for the cross-border franchise Niederrheinnetz, running from Düsseldorf and Mönchengladbach to Arnhem in the Netherlands.New workshopA two-track combined servicing and washing hall with a total length of 105 metres has been built at the new Abellio site in Duisburg near the main railway station, covering an area of 5,000 square metres. A three-floor administrative and social wing, as well as a high-bay warehouse construction, will be built alongside the hall. Twenty-one electrical multiple units for the Lower Rhine network will be serviced there. Duisburg was chosen as the location for this site because the city and the main station are important transport hubs, and are particularly significant due to their favourable position within the new network.For our STN network we are planning to build a new workshop in Pforzheim. The lease contracts with the railway company Albtal Verkehrs Gesellschaft (AVG) have been signed, and the construction work will be finished in time for operation at the beginning of 2019.