Operating expenses

NS's operating expenses rose by €637 million, from €5,745 million in 2018 to €6,382 million in 2019. Of the increase in depreciation and amortisation, €422 million arises from the application of IFRS 16, according to which the rental and lease costs of lease agreements, which were recognised under other operating expenses in 2018, have been replaced by depreciation, amortisation and interest costs.
Costs have increased as a result of higher personnel expenses (€139 million), higher costs of subcontracted work (€41 million), higher depreciation and amortisation costs adjusted for IFRS 16 (€115 million), higher infrastructure levies and franchise fees (€215 million) and other operating expenses. This increase was primarily due to the start of the new franchises in the United Kingdom and Germany.
Costs in the Netherlands rose by €22 million. When adjusted for the rise in depreciation and amortisation due to investments in rolling stock, the costs decreased by €20 million.
Despite the influx of new trains (higher costs of depreciation) and the wage increase under the collective labour agreement, NS has been able to improve its result due to the increase in sales, a reduction in overhead and indirect costs, and productivity improvements in various processes as a logical consequence of good operational performance. Now that the main performance indicators and customer satisfaction levels are up to standard, the operating result is being given a higher priority, with a view to the need to finance our investments and keep rail fares affordable. This is subject of course to the condition that our operational performance remains solid so that we continue to satisfy the franchise agreements made with the Ministry of Infrastructure and Water Management and meet our passengers’ expectations.

Wages and salaries

Wages, salaries and social security charges rose by €152 million, from €1,973 million in 2018 to €2,125 million in 2019.
Wages and salaries in the Netherlands decreased by 0.4%, as a result of the 5% decrease in the average number of FTEs which, in turn, is a consequence of retail formats having been awarded to third parties as a franchise and the decrease in the number of employees on a permanent contract within the Dutch NS organisation, due primarily to a fall in overhead and indirect staff. Personnel costs increased due to the 2.3% and 1.2% rise in wages and salaries for permanent staff under the collective labour agreement as per 1 October 2018 and 1 November 2019 respectively. The costs of hiring staff fell by €13 million (14%) compared with 2018.
In the United Kingdom, wages and salaries increased by €119 million, an increase of 16% after allowing for exchange-rate effects (€7 million). Of this increase, €46 million is attributable to the launch of the East Midlands franchise. The staff complement at East Midlands amounts to 2,396 FTEs. The wages and salaries item rose due to an increase in FTEs to 13,851 (+689) and a pay rise. At year-end 2019, Abellio UK had 16,247 FTEs (2018: 13,162).
In Germany, wages and salaries increased by €37 million to €109 million. This increase originates primarily from the launch of the DISA franchise in central Germany and the RRX franchise in North-Rhine Westphalia on 8 December 2018, and the STN franchise in Baden-Württemberg in June 2019. The number of FTEs increased by 648 to 2,676 FTEs at year-end 2019. As well as providing for a general pay rise, the collective labour agreement introduced a reduction of working hours combined with planning restrictions, resulting in a significant increase in costs.

Subcontracted work and other external costs

Subcontracted work and other external costs increased by a total of €115 million. In the Netherlands these costs (mainly automation costs) rose by €20 million. The increase in the United Kingdom (€71 million) is attributable to the launch of the East Midlands franchise and to a delay in the delivery of new trains, which necessitated additional maintenance and refurbishment of existing stock. In Germany, costs increased by €25 million due to the launch of franchises.

Infrastructure levies and franchise fees

The access charges for the rail infrastructure (infrastructure levy plus franchise fees) increased by a total of €215 million to €1,495 million. In the Netherlands, this item increased by 3.5% to €408 million (2018: €394 million). In the United Kingdom the costs were €856 million (2018: €741 million). This rise in the infrastructure levy concerns the ScotRail franchise in particular (€73 million), due to the transition to the new Control Period of Network Rail for 2019-2024, which entails a significant increase in costs compared with the previous Control Period. ScotRail is compensated for this by the franchising authority, Transport of Scotland. The infrastructure levy also increased (by €28 million) as a result of the East Midlands franchise, which commenced in August 2019.
In Germany, the costs were €231 million (2018: €145 million). This increase originates from the launch of the Dieselnetz Sachsen-Anhalt (DISA) franchise in central Germany and the Rhein-Ruhr-Expres (RRX) franchise in North-Rhine Westphalia on 8 December 2018, and the Stuttgarter-Netz (STN) franchise in Baden-Württemberg in June 2019.

Other operating expenses

Other operating expenses fell by €308 million in 2019. Due to the introduction of IFRS 16 in 2019, rental and lease costs were no longer recognised under other operating expenses in that year, but under depreciation, amortisation and interest costs. The effect of this is €345 million.