Even more passengers and an encouraging net profit – but rising debt.
SBB fared well in 2010, moving 951,000 people a day – more than ever before. Passenger numbers were six percent higher than in 2009. SBB Cargo also increased its output in a difficult environment, carrying 200,000 tonnes of freight a day. Rail passengers' satisfaction with safety and punctuality increased further. Consolidated profits totalled an encouraging CHF 298.3 million, but heavy capital expenditures and a contribution of CHF 938 million to the restructuring of the SBB pension fund led to negative free cash flow of CHF 1,371 million. This had the effect of raising SBB's total interest-bearing debt by CHF 763 million to CHF 8.068 billion.
SBB achieved an impressive level of services on behalf of the nation again in 2010: 951,000 customers used its trains every day, while the 2009 figure was six percent lower. International passenger traffic grew at an above-average rate, and the overall rail traffic volume in 2010 was 17.5 billion passenger-kilometres (five percent up on the previous year). Demand for freight services was also higher than in 2009: SBB Cargo carried some 200,000 tonnes a day, increasing its transport output by 12.3 percent year on year to just over 13 billion net tonne-kilometres. The capacity utilisation of the SBB network had already been high, and the increase in demand made it even higher. An average of 95.4 trains a day travelled over each kilometre of SBB track in 2010 (2009: 94.4). This figure is unequalled anywhere in the world.
The continuing increase in demand for passenger services enabled SBB to enlarge its market share versus other transport modes to 25.2 percent (2009: 24.6). Passenger numbers rose during both peak and off-peak hours. SBB carried about 50 percent of its customers during morning and evening peak hours in 2010, and its market share in this segment is correspondingly high: one employee in every three goes to work by train at present.
High punctuality and safety, even more satisfied customers
SBB continued to stand for reliable, safe and comfortable mobility in 2010. 87 percent of all passengers reached their destinations on time, i.e. with no more than a three-minute delay. This result was slightly below the previous year’s figure of 88.2 percent because of the early onset of winter. SBB ran about 190 special trains in December to alleviate the operating problems in neighbouring countries, some of which were very serious. 98.2 percent of SBB's domestic freight services were punctual in 2010 (2009: 94.4 percent). In the transit freight segment, however, punctuality remained unsatisfactory – though SBB has only very limited scope for improving it.
Customer satisfaction with SBB's passenger services improved again, rising to 75.9 points (2009: 75.6). Passengers awarded better marks in the areas of safety, customer information and punctuality, but there was a slight decline in their sense of well-being while travelling by train. This can mainly be attributed to heavier capacity utilisation at peak hours, which means that trains have fewer seats available. Customers were more satisfied with the products and services on offer at SBB stations than they were in 2009, whereas they gave services in the cargo field a rather poorer rating than in the previous year.
In 2010, SBB again suffered no major accidents in which passengers died or were seriously injured. But an employee lost his life in an accident in Zurich in October, and over the course of the year there were several minor or medium-to-serious accidents involving injuries. SBB's comprehensive safety management system reduced the number of violent incidents in the vicinity of SBB premises and of aggression against railway staff. On the whole, safety figures were at a very high level in 2010 - if marginally below those of 2009.
Encouraging net profit – but rising debt
At CHF 298.3 million, consolidated net income in 2010 was down on the previous year's figure of CHF 369.8 million. Funds received under the service level agreement with the federal government were insufficient to provide adequate network maintenance, so SBB had to appropriate supplementary funds. Even so, the number of speed restrictions increased to 60 (26 more than in 2009). Unlike the previous year, SBB was unable to conduct any major sales of real estate in 2010.
The Passenger segment posted a surplus of CHF 292.6 million (2009: 280.6 million), while Real Estate generated operating income of CHF 246.7 million (2009: 361.9 million). Of this, CHF 79.2 million was channelled into the restructuring of the SBB pension fund, while compensation payments to Infrastructure accounted for a further CHF 150 million. Despite its increased output, SBB Cargo has not yet turned the corner: it posted a loss of CHF 64 million (2009: 62.5 million). Its financial result was hit especially hard by the weakness of the euro. Nonetheless, SBB Cargo achieved its financial objectives in a difficult environment. In the coming years, however, it must demonstrate that its strategic reorientation is viable, and that it is capable of breaking even in the medium term. Infrastructure generated a profit of CHF 4.8 million (2009: loss of 6.5 million).
The continuing rise in debt is worrying. As against operating income of CHF 846.3 million, capital expenditure totalled CHF 2.629 billion. Taking account of the infrastructure investments funded by the Confederation, this brought free cash flow to CHF –1,371 million (2009: 375 million). The main factors were capital expenditure of CHF 965.8 million on new rolling stock, which will come into service on a staggered basis from 2011, and a contribution of CHF 938 million to the restructuring of the SBB pension fund. Total interest-bearing debt rose by CHF 763.2 million to CHF 8.068 billion (2009: 7.304 billion).
The rail system needs sustained funding
The demand for mobility in Switzerland will continue to grow. The number of people travelling on SBB trains will have risen significantly by 2030, and this will require capital expenditure of some CHF 20 billion in new rolling stock. Current proposals for investment in network maintenance and the continuing infrastructure upgrades total more than CHF 40 billion. Given the mechanisms currently available, there is clearly going to be a substantial funding gap.
SBB must further improve its productivity and efficiency, as well as turning round loss-making operations. In the freight segment in particular, the spin-off of SBB Cargo International is expected to lead to appreciable cost reductions – and in the medium term to profits. In profitable areas such as long-distance national and international passenger services, SBB will invest in new, even more efficient rolling stock. If the company is to continue to develop on a selective basis, it must be able to generate the required funds in the market. As the owner of SBB, the Confederation has set it the strategic objectives for the period from 2011 to 2014 of generating profits and substantial positive cash flow, particularly in long-distance passenger services, in order to place the company as a whole on a firm financial footing. If this is to happen, the Confederation must create the right conditions for SBB and give it the commercial scope it needs, for example in the area of fare structuring. Furthermore, SBB – along with the commissioning federal, cantonal and municipal authorities – need greater planning security and a reliable schedule of service upgrades, as well as clarity about how these upgrades are to be funded. In regional services, heavy investment is required in customer-friendly rolling stock, which requires long-term agreements with the commissioning authorities.
Infrastructure funding is another area in which the enormous challenges can only be faced by all stakeholders working together. SBB supports the Federal Council's proposal for the creation of a rail infrastructure fund, not subject to any time limit, that would finance maintenance, operations, and also the staged expansion of the network. From the viewpoint of SBB, the top priority must be to deal with the most urgent bottlenecks. Moreover, all investments must be designed to increase customer benefits and efficiency while keeping follow-on costs to a minimum. For SBB it is essential to create a long-term planning mechanism with which the federal government, the cantons and SBB can jointly forecast funding requirements for the upgrading, operation and maintenance of the rail infrastructure and enter into binding agreements on the financing of unmet follow-on costs.
Differentiated fare increases to be phased in
The Federal Council is also calling for users of the rail system to make significant contributions to its sustainable financing. From the viewpoint of SBB, fare rises are unpalatable – but given the constant improvement in services and their rising cost, they are inevitable. Fare increases should, however, be implemented on a differentiated basis that reflects the quality and cost of the service and the demand for it. They should also serve to even out peaks in capacity utilisation. The additional infrastructure costs for passenger services alone come to around CHF 500 million per year until 2017: significantly more than SBB's current net income. But the proceeds of fare increases cannot all go on infrastructure spending. SBB also needs these funds to pay for new rolling stock, and to ensure that the company can continue to develop on a sustained basis.
A year of breakthroughs
Together, Switzerland and SBB made progress in 2010 towards the goal of sustainable mobility. The breakthrough in the Weinberg tunnel was a milestone in the huge improvement in rail services in the Greater Zurich region, and the Gotthard breakthrough was the most important stage prior to the quantum leap that will transform the North-South axis for passenger services and freight alike. The conclusion of the new collective employment contract marked a further step in SBB's development into a modern, well-managed company. The Group's new and comprehensive sustainability strategy will enable it to meet its economic, environmental and social obligations under the headings of nine separate and transparent Group targets. In 2010, SBB received the Sustainability Award of the UIC, the International Union of Railways, for consistently incorporating considerations of sustainability in its strategic planning and in its agreements on objectives with all SBB managers. And with the assistance of the Federal Council and the Swiss Parliament, SBB has made significant progress with the restructuring of its pension fund.
Last year SBB placed the largest order for rolling stock in its entire history. At a cost of CHF 1.9 billion, the 59 new double-decker trains will bring distinct improvements to long-distance services. SBB continued and reinforced cooperation on international services with Deutsche Bahn in Germany and SNCF in France. And SBB welcomed the first-ever woman to join its Management Board when Jeannine Pilloud was appointed as the new Head of the Passenger Division.
SBB thanks all its customers for their trust, and its more than 28,000 employees for their tremendous commitment, reflected every day in their service to the Swiss rail system.