Rail operator Deutsche Bahn back in the black

German rail operator Deutsche Bahn is back on the success track. After the first loss in more than a decade last year, new CEO Richard Lutz announced a decent net profit for 2016. But many challenges remain.

Publicly-owned German rail operator Deutsche Bahn (DB) said it had returned to profitability. After it booked a loss of 1.3 billion euros ($1.4 billion) in 2015, DB's new chief executive (CEO) Richard Lutz on Thursday announced a 2016 net operating profit of 716 million euros.

Write-offs, a problematic freight division and the company’s large-scale restructuring had driven the balance into the red in 2015, the first time in more than a decade.

"We have managed a turnaround," said CEO Richard Lutz, just one day after formally taking reins from former boss Rüdiger Grube, who had surprisingly resigned over disputes surrounding the extension of his contract. Lutz, DB's former chief financial officer, described 2016 as a "good year" for clients and the corporation alike. This year, DB estimates revenue to total 41.5 billion euros.

Richard Lutz und Rüdiger Grube

Deutsche Bahn CEO Richard Lutz (left) with predecessor Rüdiger Grube

Since mid-2015, Deutsche Bahn has been tightly focused on quality as it fends off low-cost competition from long-distance bus operators. "We've clearly increased the quality of our products and our punctuality," Lutz said, with "a record number of passengers on main-line trains" last year.

The return to positive financial territory wasn't the only good news for DB: 2016 also saw a new passenger record with 2.37 billion, a five-percent increase over the previous year, when the number of travelers had slightly dipped. The long-distance segment registered a slightly above-average growth of 5.4 percent, reaching an unprecedented 139 million passengers last year. CEO Lutz attributed the peak to a larger number of punctual train journeys, more thorough cleaning of rail cars and an improved relay of information to clients.

While the rail operator was indeed able to increase punctuality - which it defines as arriving with less than six minutes' delay - to 79 percent in 2016 and 84 percent so far in 2017, it remains the butt of frustrated but fond jokes among the German public.

The new year has also seen Deutsche Bahn install free WiFi service on all of its high-speed ICE trains. Across Europe, the rail company transported people on some 4.4 billion journeys by train and bus last year, an increase of 81 million over 2015's figure.

Freight traffic remains problem child

DB hasn't been able to put an end to the crisis of its rail freight operations DB Cargo, which has logged an operating loss of 81 million euros ($87 million) due to inefficiency and failure to modernize its outdated fleet.

Another problem is the lack of capital investments: The flotations of DB subsidiaries Arriva and Schenker, which were supposed to inject new money into the corporation, were called off in late 2016. An estimated 4.5 billion euros needed for investments are now sorely missing. According to DB, the cancellations were due to uncertainty over Brexit.

"I can't promise to our customers and employees that all the Bahn's problems will vanish at a stroke," Lutz declared from a podium between two ICE trains at a Berlin maintenance site. "But I and my colleagues on the board promise to work with all our might to make Deutsche Bahn more attractive day by day."

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Looking ahead to this year, Deutsche Bahn aims to bring in revenues of 41.5 billion euros - around one billion more than 2016 - for an operating profit of at least 2.1 billion euros.

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Back in the black

The rail operator's 2015 figures were in negative territory. Write-offs and the company's large-scale restructuring had driven the balance sheet into the red. A bottom-line profit of 716 million euros ($772 million) put Deutsche Bahn back on the success track last year.

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The new boss: Richard Lutz

New head train driver Richard Lutz (left), formerly chief financial officer, has taken over the company's reins from Rüdiger Grube (right). Grube had surprisingly resigned over disputes surrounding the extension of his contract.

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Constant change

The fundamental restructuring of Deutsche Bahn started two decades ago and is to continue under Lutz. Since 1994, the Deutsche Bundesbahn (German Federal Railway), which used to burn through billions each year, has transformed into a global mobility enterprise. The DB corporation now has 300,000 employees in over 140 countries.

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Impossible tasks?

Restructuring remains a balancing act, as DB needs to meet political demands and turn a profit. Even the most remote village is to be connected to the railway network, regardless of the number of passengers. Moreover, trains are supposed to be punctual and comfortable, all while keeping ticket prices affordable.

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Not confined to tracks

Trains don't suffice to be mobile on a global level. DB Arriva, for instance, operates buses on top of trains in several European countries. Logistics service provider DB Schenker, which employs 66,000 people in over 2,000 locations, manages DB's freight transport.

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Freight traffic remains problem child

DB intends to put an end to the crisis of its rail freight operations. In recent years, DB Cargo has logged losses due to inefficiency and failure to modernize its outdated fleet, Only around 17 percent of Germany's freight traffic is handled by rail.

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Costly prestige projects - a neccesity?

Large-scale projects like the major modification of Stuttgart's main train station (photo) have caused a big stir. Many residents of Stuttgart have protested against the mammoth project, and costs have exploded. DB is forced to contribute 3.5 billion euros out of its own pocket.

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Initial public offerings canceled

The flotations of DB subsidiaries Arriva and Schenker, which were supposed to inject new money into the corporation, were called off in late 2016. An estimated 4.5 billion euros needed for investments are now sorely missing. According to DB, the cancellations were due to uncertainty over Brexit.

bb/uhe (AFP, dpa)