What will happen to DB Cargo if it fails to break even?

Time is ticking for the German national rail freight operator DB Cargo. It needs to implement its restructuring programme by 31 December 2026 under a deal with the European Commission. If the operator fails to do so, it could be in serious trouble. The goal is to break even financially. The DB Cargo case in short DB Cargo, loss-making since 2012, received financial support from its parent company Deutsche Bahn to stay afloat for many years. This happened through a so-called profit and loss transfer agreement (PLTA). In total, DB Cargo obtained €1.9 billion through this scheme.

The problem: Deutsche Bahn is a state-owned company. As a result, the European Commission considers the €1.9 billion to be state aid, which is only compatible with EU law under certain conditions. Ultimately, the Commission cleared the state aid through a deal with Germany. DB Cargo had to implement a restructuring programme to become profitable by 31 December 2026, or face consequences for receiving illegal state aid through the PLTA. If DB Cargo meets the deadline, the state aid remains cleared.

The consequences of not meeting the Commission’s deadline could be detrimental to the company. At least, historical precedent points in that direction. Take, for example, DB Cargo’s former French counterpart Fret SNCF. It too faced Commission scrutiny over state aid (€5.3 billion euros between 2007 and 2019). The end result for the French company was a break-up into two companies and a discontinuation of Fret SNCF. Before that, the operator had to transfer 30% of its operations to competitors, equal to 20% of its revenue.

This story was originally published by RailFreight.com. Read the full story at RailFreight.com →