European Commission approves €550 million German support to compensate Deutsche Bahn for damages suffered by its subsidiary DB Fernverkehr due to the coronavirus outbreak
The European Commission has found a €550 million German support measure in favor of Deutsche Bahn AG (“Deutsche Bahn”) to be in line with EU State aid rules. The measure, which will take the form of an equity injection, aims at compensating Deutsche Bahn for damages suffered by its subsidiary DB Fernverkehr due to the coronavirus outbreak between 16 March and 7 June 2020 with respect to domestic travels and between 16 March and 30 June 2020 in relation to international travels.
Executive Vice-President Margrethe Vestager, in charge of competition policy, said: ” With this measure, Germany will compensate Deutsche Bahn for damages suffered by its subsidiary DB Fernverkehr between March and June 2020 due to restrictions imposed to contain the coronavirus outbreak. We continue working closely with Germany and all other Member States to ensure that national measures to support all sectors that were hit by the crisis, including the rail sector, can be implemented as quickly as possible, in line with EU rules.”
DB Fernverkehr, a subsidiary of Deutsche Bahn, is a German rail services operator, which provides national and international long distance rail passenger services in Germany. DB Fernverkehr, as other companies active in the rail sector, experienced a significant drop in the number of long distance rail passengers, due to the measures that Germany and other Member States had to implement to limit the spread of the coronavirus. Between March and June 2020, the number of long distance rail passengers of DB Fernverkehr reached only approximately one third of the passenger numbers for the corresponding period in 2019. This resulted into high operating losses and a significant decline in revenues for the company during that period. These losses were covered by the mother company Deutsche Bahn at the end of 2020 pursuant the profit and loss transfer agreement between Deutsche Bahn and DB Fernverkehr.
The German support measure
Gemany notified to the Commission, under Article 107(2)(b) of the Treaty on the Functioning of the European Union (TFEU), an equity injection of €550 million into Deutsche Bahn to compensate the company for having covered the losses suffered by its subsidiary DB Fernverkehr in the period between 16 March and 7 June 2020 for domestic travels and between 16 March and 30 June 2020 for international travels due to the travel restrictions that were necessary to limit the spread of the virus.
The Commission assessed the measure under Article 107(2)(b) TFEU, which enables the Commission to approve State aid measures granted by Member States to compensate specific companies or specific sectors (in the form of schemes) for damage directly caused by exceptional occurrences.
The Commission considers that the coronavirus outbreak qualifies as an exceptional occurrence, as it is an extraordinary, unforeseeable event having a significant economic impact. As a result, exceptional interventions by the Member States to compensate for the damage linked to the coronavirus outbreak are justified.
The Commission found that the German measure will compensate damages, which are directly linked to the coronavirus outbreak. It also found that the measure is proportionate, as the foreseen compensation does not exceed what is necessary to make good the damage.
In estimating the amount of damage to be compensated, the measure also takes into account of track access reductions for long-distance passenger transportation that DB Fernverkher is expected to receive on the basis of a German scheme that the Commission approved on 30 July 2021 (SA.63635).
Furthermore, should the German public support exceed the damage actually suffered due to the coronavirus outbreak, a claw-back mechanism will be activated. In other words, the public support received by Deutsche Bahn in excess of the actual damage suffered will have to be returned to Germany. The risk of the State aid exceeding the damage is therefore excluded.
The Commission therefore concluded that the measure is in line with EU State aid rules.