Posted 14th January 2019 | 2 Comments

DB may sell Arriva to plug 4bn funding gap

GERMAN state rail operator Deutsche Bahn may be set to sell Arriva, according to reports in Berlin.

An urgent meeting has been called for tomorrow (Tuesday) between DB management and German transport minister Andreas Scheuer, said a source quoted by Reuters. It is also said that government-sponsored members on the DB board have clashed with fellow directors over proposals to shed both Arriva and DB Schenker, with the state officials sounding notes of caution.

DB, which has been struggling with falling domestic passenger rail performance, has declined to comment on the reports. It needs to plug a funding gap estimated to be at least four billion Euros, but the present uncertainty over Brexit is said to be making a valuation of Arriva difficult.

DB has operated Arriva as its international subsidiary since 2010, and currently has rail and bus operations in the UK and thirteen other countries, although it remains based at Arriva’s headquarters in Sunderland.

The origins of Arriva were a Sunderland-based vehicle leasing company, Cowie, which was founded in 1938 as a dealer in motorbikes. Cowie later moved into vehicle leasing and entered the bus market in the 1980s, adopting the Arriva brand in 1997.

When DB bought Arriva in 2010 it acquired three National Rail franchises – Arriva Trains Wales, Chiltern Railways and CrossCountry – as well as Tyne & Wear Metro, open access operator Wrexham and Shropshire, a chain of bus companies in Britain and numerous bus and rail operations in other European countries. In 2011 Arriva acquired open access operator Grand Central but wound up Wrexham and Shropshire.

Arriva had also won the London Overground concession in 2007 in partnership with MTR. More recently, Arriva signed the next Overground concession as sole operator in 2016, but decided to withdraw from the competition for the next Welsh franchise in October 2017.

Reader Comments:

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  • Chris Jones-Bridger, Buckley Flintshire

    Be interesting to see how this plays out. Is Arriva an asset or a liability to DB? Setting aside the question of valuation the current trading conditions faced by it's UK franchises will certainly be raising serious doubt from DB over it's long term participation in the UK market especially the continued difficulties faced by Northern after the botched May 2018timetable, delayed introduction of new rolling stock & the as yet unresolved dispute with RMT. With Tyne & Wear Metro set to return to direct Nexus control and Cross Country on borrowed time perhaps only the mature Chiltern franchise & Overground concession are offering any real positive contribution to the DB parent company. Similarly the Arriva bus operation must be facing a cash flow reduction as subsidies for supported services have been progressively eroded during the austerity years.

    As National Express's withdrawal from the UK rail market has already shown should DB also withdraw, either by sale, franchise expiry or default, the pool of likely bidders for franchises will be further diluted. It would appear the days of positive guaranteed cash flow are over and perhaps the franchise model is now irretrievably broken. While our increasingly detached & distracted Transport Secretary is pinning his hopes on the Williams review to offer a solution I fear this will be too late to avoid a year of business turmoil in the industry acting as a further distraction from restoring performance & customer confidence.

  • David C S Bartlett, LONDON

    Interesting politically. The calls for restraint on precipitate action shows the hesitancy over Brexit outcome by German government in Berlin; while the total uncertainty over value of assets in the UK points to complete inaction.

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