ÖSTERREICHISCHE BUNDESBAHNEN GmbH History

Company History:

Österreichische Bundesbahnen, the company that maintains and runs the Austrian railway network, is a state-owned enterprise with its headquarters in Vienna. Its railway network consists of track with a total length of 5,624 kilometers--nearly 60 percent of this track is electrified--and about 1,500 stations. In 1990 the company carried a total of 168.4 million passengers and 62.6 metric tons of goods. Its income from passenger operations was S 8,871 million and S 1,2194 million from goods transport; a subsidy of S 9,310 million from the Austrian government was needed to make up the difference between income and expenditure.

The officially accepted year of the company's foundation is 1837, yet projects and plans to establish a rail network in Austria had been under way for some time before that. As early as 1807, Franz Josef Ritter von Gerstner, a mathematics professor at Prague University, was the first to suggest that rail transport should be used to connect the Danube with the Moldau--numerous previous plans to create a waterway for this purpose had been fruitless. It was some time, however, before his suggestion was followed up. In 1822 his son Franz Anton was sent to England by the government to study the railways being constructed there. Following this visit work was begun on the construction of tracks for horse-drawn vehicles; when Gerstner proposed in 1827 that the tracks should be constructed for use by steam locomotives, the shareholders in the enterprise dismissed him. The first section of track--131 kilometers in length, between Linz and Budweis--was completed in 1832.

The next notable personality in the development of the Austrian railway system was Franz Xaver Riepl, a geologist and mining specialist who in 1829 proposed to the government the construction of a 450 kilometer railway between Vienna and Bochnia, linking a coal producing area with an industrial area. He got support from the banker Salomon Freiherr von Rothschild, and a joint-stock company was founded to finance the enterprise. Riepl, like Gerstner, visited England and decided that the railway should be constructed for the use of steam locomotives. Riepl's proposals were accepted, however, and the project became Austria's first steam railway, the Kaiser-Ferdinands-Nordbahn. Shares were sold to finance the first stretch to be completed, contracts were signed with suppliers and builders, and locomotives were ordered from England. November 1837 saw the first trial journey of a locomotive-driven train in Austria, which ran along the stretch from Floridsdorf to Deutsch-Wagram.

The first railway in Austria had thus been brought about through private funding. Yet even at this stage the state kept a close eye on the enterprise, reserving for itself the right to authorize the construction and operation of railways. In 1839 a concession was granted to the Wien-Gloggnitzer Eisenbahngesellschaft for the construction of railways to Raab and Gloggnitz, using the southern axis of Riepl's railway. Construction of the track to Gloggnitz was completed in 1842, and further railways were built from Vienna to the Hungarian border via Bruck in 1846 and from Wiener Neustadt to Hungary via Ödenburg in 1847.

Investors in these first railway enterprises had hoped for a high return on their capital. However, the profits turned out to be disappointing and most of the early railway companies underwent financial difficulties--generally due to costs exceeding the initial projections--which discouraged further private investment. A trade crisis in 1841 exacerbated the situation and the government decided to intervene, seeing that the development of railway networks in neighboring countries made the extension of the Austrian railway system an economic and social necessity.

In December 1841 a state resolution was published ordering the provision of railways at the public expense and elaborating upon an ambitious program of railway construction centered on public requirements rather than commercial viability. Railway expansion in the decades following this was impressive: by 1850 the total length of railways on Austrian territory had reached 1,357 kilometers; by 1870 this had risen to 6,112 kilometers and by 1890 to 15,273 kilometers.

Initially, the state did not take over the operation of railway services. However, when the leasing contracts on the principal lines ran out in 1851 the state did take over running these businesses. In 1853 the state bought the Wien-Gloggnitzer-Eisenbahn. Through the second half of the 19th century, state railway operations and private railway operations existed side by side. A law passed in 1854 attempted to encourage the private funding of railway construction by guaranteeing rates of return. In the same year, another new law permitted the sale of the state railways--although the state reserved the right to future re-purchase--and the main northern and southeastern lines were sold to the Österreichisch-Ungarische Staatseisenbahngesellschaft effective January 1, 1855.

In 1880 a 'Local Railway Law' made it easier to build and run local railways. This led to the establishment of considerable numbers of local railway enterprises--many of which, however, ran into financial trouble and were then purchased cheaply by the large railway companies.

Beyond this corporate and legislative activity, the period also saw some other landmarks in the history of the Austrian railways. In October 1882 the first 'Blitzzug' or 'train éclair' arrived in Vienna from Paris: this was the forerunner of the Orient Express. In the same month, a restaurant car was included in a luxury train for the first time. The first pension fund for Austrian railwaymen had been founded in 1843; in 1892 the first union organization was established. 1892 also saw the coordination of European timetables, and in 1895 a new system of prices was introduced on the Austrian state railways, whereby the rates became lower as journey distance increased.

By the turn of the century, the total length of the Austrian railway network had risen to 19,229 kilometers. The state railway company, the k.k. Staatsbahnen, was operating 7,896 kilometers of its own track and 3,743 kilometers of leased track, with nearly 3,000 locomotives, around 6,000 passenger carriages, and 50,000 goods wagons. The next decade saw tremendous expansion in the state network: all these figures had more than doubled by the end of 1910. This growth was brought about by acquisitions of private railway companies: the state railways acquired the Kaiser-Ferdinands-Nordbahn--1,309 kilometers--in 1906 and the Bohemian Nordbahn in 1908, as well as a number of other significant lines. By this stage all the main railways leading to the North, West, and East of the empire were under state control. In 1910 the k.k. Staatsbahnen's total revenues were 755 million Kronen, and its total expenditures were 601 million Kronen. Despite this operating profit, however, interest payments and the cost of acquisitions meant that the state budget subsidized the railway system to the tune of 95 million Kronen that year.

Before the outbreak of World War I, the Austrian state railway network had reached a total length of 22,981 kilometers. The Austro-Hungarian monarchy at this stage had the third largest railway network in Europe, after Germany and Russia. The years after World War I brought with them considerable territorial changes, and the peace treaty of Versailles broke up the united Austrian transport network. With the foundation of the Czechoslovakian Republic in October 1918, the section of the k.k. Staatsbahnen on this territory was lost. In the remaining Austrian territories, the railways were first renamed in 1918 as the Deutsch-Österreichische Staatseisenbahnen and then as the Öster-reichische Staatseisenbahnen in 1919. In 1920 the name of the railway organization changed again to the Österreichische Bundesbahnen (BBÖ). Much of the rolling stock was in need of modernization and repair. Furthermore, the new territorial configuration of Austria meant that internal traffic now moved predominantly on an east-west rather than a north-south axis, requiring expensive alterations to stations in Vienna and the construction of new facilities at a time of great financial difficulty. The new borders also required a re-organization of Austria's largest private railway company, the Südbahn, whose lines were finally taken over by the state networks of the appropriate countries--the Austrian lines were acquired by the BBÖ in 1923.

For social reasons staff levels at the time were raised beyond what was economically justifiable. These circumstances, along with the postwar collapse of the national currency, led to a dramatic fall in profitability.

As part of the program for the economic reconstruction of Austria laid down in the Geneva convention of 1922, the reform of the railway system was given special prominence. The railways were to be given independent economic status and administered along commercial lines. If they could not be run profitably on this basis the state was to be empowered to sell or lease them. Accordingly, the independent company Österreichische Bundesbahnen was created by the first Federal Railway Law in 1923. However, the move to the private sphere was not a complete one. The state remained the owner of the railways and determined railway policy. The company was obliged to run the railways with regard to public requirements, and price changes required government permission, as did capital raising measures.

Despite these contradictions between independence and accountability, the period following this privatization saw sweeping reforms and technical improvements. Rolling stock was brought up to standard and locomotives were replaced or adapted, leading to significant savings in coal consumption. The gradual improvement in the economic situation after the difficulties of the immediate postwar period allowed for technical advances, too; by 1930 all the main lines to the Swiss, German, and Italian borders were electrified. Economic crisis brought a sudden end to these developments, however. The company's operational revenues fell from S 603 million in 1929 to S 392 million in 1936. Only through staff reductions could the company achieve a reduction in expenditure from S 634 million to S 455 million over the same period.

In 1937 it appeared that the economy was recovering slightly, but in 1938 Austria was annexed by the German Reich and the BBÖ was incorporated into the Deutsche Reichsbahn. When Russian troops moved into Austria in April 1945, 40 percent of the rail network was unusable; 75 percent of locomotives and 50 percent of passenger and goods wagons were destroyed or in need of repair. When the Austrian state railway system was re-established in 1945, it was initially given the name Österreichische Staatsei-senbahnen. Careful consideration had been given as to whether the railways should again be given the independent commercial status they had from 1923 to 1938. Yet the government decided to defer privatization. In 1947 the company's name was changed to Österreichische Bundesbahnen (ÖBB).

It took some time for rail services to reach prewar levels. Reconstruction work on track, bridges, stations, and rolling stock absorbed considerable efforts and expense. The accounts for 1948 record an operational deficit of S 354 million as well as investments to the value of S 408 million. During that year the railways carried 124 million passengers and 27.4 metric tons of goods.

Electrification, which had been started after World War I as a way of avoiding dependence on foreign coal supplies, was resumed in the years following World War II--S 110 million was spent on this in 1948, for example. Further modifications to the ÖBB's network and services took place in subsequent decades. In 1962 the Wiener Schnellbahn, an express local train service for Vienna, was opened; the first section of the Vienna underground began operations in 1974. A new railway line, the Jauntalbahn, which ran from St. Paul to Kärnten, was opened in 1964.

When the Österreichische Volkspartei gained a majority in the elections of March 1966, it took up plans to move towards the privatization of the railway system. Long, difficult negotiations with the railway unions led to a compromise agreement enshrined in the Railway Law of 1969. The aim of the compromise was to establish the railways as a transport service that would both be profitable and serve the public interests. The new General Management initially consisted of a management board with four members and an administrative council with 15 members. Reforms to the railway law in 1973 gave greater prominence to the public responsibilities of the ÖBB, and in 1975 workers' representatives were given one-third of the votes in the administrative council--increased to 18 members.

But the problems remained--and remain still--the same as they had. Investment in infrastructure, as well as the maintenance of railway services required for social or political rather than purely commercial reasons, have consistently resulted in operational deficits. Official statistics for the years 1950 to 1973 show government revenues from the railways exceeding expenditure only in the years 1959 to 1961. More recently, as the railways suffered increasing competition from road transport this situation worsened. ÖBB's operating income covers only 48 percent of its expenditure, though as the company is not required to publish full accounts this underlying situation is not always clear from official records.

Apart from suffering from competition with road transport--which is indirectly subsidized by the taxpayer--ÖBB also has to bear the burden of heavy pension costs. Austrian railway workers have long benefitted from a special status enabling them to retire at a relatively early age. As a result the company now has 74,000 pensioners on its books--compared with its 67,000 employees--and pension payments account for nearly ten percent of its annual expenditure. Attempts to reform this situation have met with opposition from the unions.

A new general manager, Heinrich Übleis, was appointed in 1987, and in 1990 further reforms of the ÖBB were announced. These reforms--and the contradictions they present--reflected the conflict between commercial viability and public interest that has determined the history of the Austrian railways since their foundation. The aim of the reforms of the early 1990s was to establish the ÖBB as an independent commercial entity, able to manage its own investments, go to the capital markets for funding, and determine wage levels. However, as the sole owner of this independent enterprise will continue to be the government, true commercial independence cannot be attained, but the division of the company into a commercial sector and a public service sector has been proposed, as has the selective privatization of certain lines.

The future course taken by the ÖBB will be in large measure determined by developments in the European Economic Community (EEC) and Europe as a whole. It has been suggested that the maintenance of infrastructure would have to be separated from the operation of rail services in order for the Austrian railway to function effectively as a business. This conforms with the general policy of the EEC on railways, although such a policy raises many questions, such as whether the rail service operator should pay the provider of the lines and facilities. The ÖBB is similar to other national railway systems in Europe in finding the path towards commercial independence anything but smooth.

Further Reading:

• Vorschläge zur Förderung des Ausbaues der Österreichischen Eisenbahnen, Vienna, 1865.
  Die Österreichischen Eisenbahnen und die Dampfschiffahrt mit Bezug auf den Welthandel, Leipzig, 1868.
  Österreichische Eisenbahnstatistik, Vienna, 1904-1911.
  Die geschichtliche und rechtliche Entwicklung der Österreichischen Eisenbahnen, Vienna, ÖBB, 1989.
• 'Voriges Jahrhundert,' Profil, November 19, 1990.
• 'Begrabene Reformen,' Profil, December 17, 1990.
• 'Streicher-Finale,' Profil, November 25, 1991.

Source: International Directory of Company Histories, Vol. 6. St. James Press, 1992.

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