The European Commission has approved a $644.37m (€550m) German support measure aimed at compensating Deutsche Bahn for damages suffered by its subsidiary DB Fernverkehr due to the Covid-19 pandemic.

This measure, which has been approved in accordance with EU State aid rules, will be provided in the form of an equity injection.

The commission stated that the compensation will help the rail services operator to adjust the losses suffered between 16 March and 7 June 2020 with respect to domestic travels and between 16 March and 30 June last year in connection with international travels.

DB Fernverkehr witnessed a dip in passenger traffic due to the coronavirus-induced travel restrictions.

As a result, the company faced high operating losses and a drop in revenues.

Under the profit and loss transfer agreement between Deutsche Bahn and DB Fernverkehr, Deutsche Bahn covered the losses of its subsidiary at the end of last year.

The measure was evaluated by the commission under Article 107(2)(b) TFEU.

This article permits the commission to sanction State aid measures granted by Member States to reimburse specific firms or sectors for losses directly caused by unusual occurrences.

The European Commission said in a statement: “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, a claw-back mechanism will be activated in case the German public support exceeds the losses actually incurred due to the coronavirus outbreak.

This means Deutsche Bahn will be required to return the received public support in excess of the actual damage to Germany.

Therefore, the risk of the State aid exceeding the damage has not been included.

The European Commission recently approved two German schemes worth over $2.97bn (€2.5bn) to support the rail freight industry and the long-distance rail passenger sector, which have taken a hit due to the Covid-19 pandemic.