“Public transit is a central component of essential public services. Our goal is to ensure that people in the district can count on reliable bus service even in difficult times,” emphasizes District Administrator Dietmar Allgaier.
Since fuel costs account for an average of about 18 percent of total costs in bus transportation, the price increases are having a significant impact on many transit companies.
Goal: Ensuring Reliable Bus Service
Not all transit companies are equally affected by current developments. For bus services contracted by the district, regulations are already in place to temporarily offset exceptional cost increases. This ensures that the companies can continue operations without major restrictions.
The situation is different for companies that provide their transit services on a self-financing basis. These companies bear the financial risk themselves and have no way to offset the increased costs in the short term. “If diesel prices rise sharply within a short period of time, these companies quickly come under pressure. In the worst-case scenario, this could result in a company no longer being able to provide its transportation services,” explains Volker Maus, head of the public transportation division at the Ludwigsburg District Office.
District Focuses on Rapid Support
To prevent this, the district is initially focusing on short-term aid to ensure the solvency of affected companies. “Our primary goal is to stabilize the companies in this extraordinary situation and thereby reliably maintain public transportation services for passengers. The buses should continue to run, and passengers should be affected as little as possible by the economic problems,” says Maus.
The consequences of insolvency would be problematic for passengers and the public sector
If a transit company were forced to cease operations, the district would be obligated to organize replacement solutions on short notice to ensure that bus service is maintained. Experience shows that such emergency and temporary solutions are significantly more expensive than regular transit contracts.
According to the administration’s estimates, the costs of such emergency contracts are between 25 and 60 percent higher than the costs of regularly awarded services, depending on the scope of the affected routes. For larger transit networks, this could result in additional costs in the double-digit millions.
“Insolvency would not only affect passengers. The subsequent reorganization of the transit services would usually be significantly more expensive and time-consuming. That is why it makes sense, as far as possible, to take countermeasures early on and preserve the existing structures,” says Maus.
Emergency Measures Only in Exceptional Cases
Should short-term liquidity assistance prove insufficient and the suspension of transit services become imminent, the district may consider further measures. European law (Regulation (EC) No. 1370/2007) grants the district the necessary leeway to act in such cases. Such support is only an option if a company can demonstrate that it has fallen into financial difficulties and there is a risk that bus services can no longer be provided. One of the requirements is confirmation of the financial distress by a certified public accountant or tax advisor.
A Proven Tool from the 2022 Diesel Crisis
The potential emergency measures are strictly time-limited. They may be implemented for a maximum of two years and serve exclusively to cushion the temporary effects of the crisis. The long-term economic risk remains with the transit companies.
A similar approach was already successfully implemented during the diesel crisis resulting from the war in Ukraine in 2022. The necessary structures and experience are therefore in place. “We have already demonstrated that we are capable of taking action in such a situation. The experience gained in 2022 enables us to respond quickly and effectively should the need arise,” explains Maus.
Developments Will Continue to Be Monitored
The Committee on Environment and Technology took note of the status report. The district administration will continue to closely monitor the development of fuel prices as well as the economic situation of the transit companies and coordinate closely with the partner districts.
“We want to ensure people’s mobility, manage public funds responsibly, and at the same time prevent a temporary crisis from causing long-term damage to local public transportation,” summarizes District Administrator Allgaier.
