MITROPA AG

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MITROPA AG

Michaelkirchstrasse 17
D-10179 Berlin
Germany
Telephone: (49) (30) 3024744-5
Fax: (49) (30) 3024744-999
Web site: http://www.mitropa.de

Wholly Owned Subsidiary of DB Reise & Touristik AG
Incorporated: 1916 as Mitteleuropaische Schlafwagen und Speisewagen AG
Employees: 6,500
Sales: DM 805 million ($410 million) (1998)
NAIC: 72211 Full-Service Restaurants; 722211 Limited-Service Restaurants; 722213 Snack and Nonalcoholic Beverage Bars; 72231 Food Service Contractors

German-based MITROPA AG is Germany’s fourth largest restaurant chain and one of Europe’s leading caterers for people on the road. MITROPA operates throughout Europe in three major market segments: catering services on trains; snack bars, restaurants and convenience stores in train stations; and highway restaurants. For Germany’s national railroad company Deutsche Bahn AG MITROPA operates 750 sleepers and dining cars and serves snacks and beverages to train passengers. In train stations MITROPA operates various brand name restaurants and stores such as InterCity Treff and nimm’s mit, as well as international franchises such as Segafredo and Pizza Hut. Located mostly in eastern Germany, MITROPA owns and operates highway restaurants in 30 locations. MITROPA Schiffs-Catering GmbH provides food and other product sales on board of the big ferries between Germany and Denmark or Sweden for Scandlines Deutschland GmbH. MITROPA has foreign subsidiaries in Switzerland, Austria, and France. The company is wholly owned by DB Reise & Touristik AG, a subsidiary of Germany’s privatized railroad company Deutsche Bahn AG.

World War I Origins

Before World War I there was only a handful of regional operators of railroad dining cars in Germany. Most of Europe, however, was served by one company, the Compagnie Internationale des Wagons-Lits et des Grands Express Europeens. Founded in 1876 by George Nagelmacker, Wagons-Lits was legally registered in Brussels, Belgium, but in fact was managed from its headquarters in France. Wagons-Lits’s sleepers and dining cars ran from western Europe to the Balkans, Constantinople, and Vladivostok. The company also had long-term general con-tracts with the railroad authorities of many German states.

An exception was the Prussian railroad authority, the Koniglich Preussische Eisenbahn-Verwaltung (KPEV), which, after a wave of nationalization of private Prussian railroad companies, was the largest organization of its kind in Germany. KPEV did not renew its contracts with Wagons-Lits in the mid-18 80s and began setting up its own sleeping and dining car operations. To gain access to the Prussian dining car market Wagons-Lits founded a subsidiary in Berlin—the Deutsche Eisenbahn-Speisewagen-Gesellschaft (DESG). Before World War I the Prussian-Hessian railroad administration operated sleepers on 49 lines, while Wagons-Lits served on 38 long-distance lines in Germany. Wagons-Lits also catered on 43 German lines, while its DESG subsidiary served 41 lines with its 116 dining cars. The five private dining car companies served on 37 lines with 70 dining cars.

Four weeks after World War I started, in September 1914, Wagons-Lits’s manager in Berlin sent a letter to the Prussian minister for public works proposing transferring all WagonsLits’s assets to a German public company with a maximum share of 30 percent retained by Wagons-Lits. In the following months all contracts with Wagons-Lits were canceled. Then, after German troops occupied France and Belgium, WagonsLits was put under German administration. In August 1915 the Prussian minister wrote to the German chancellor Theobald von Bethmann Hollweg, describing as an “intolerable situation” the fact that a company of Belgian-French origin dominated the German, Austrian, and Hungarian market for catering and sleeping car services. He suggested forcing Wagons-Lits out of Germany, Austria, and Hungary. Not only were France and Belgium at war with these countries, he noted, but the likely expansion of the German Empire eastwards meant good growth potential in the Balkan states, which were connected with western Europe only by some major railroads.

After long negotiations between the German, Austrian, and Hungarian governments, ten railroad authorities, and several banks, the parties agreed to transfer rights to operate sleeping and dining cars in their territories to a German company. Deutsche Bank and Dresdner Bank used the Akt. Ges. Kaliwerk Neu-Bleicherode, a company founded in 1905, as a vehicle for the transaction. First the company was renamed Mitropa AG für Erwerb und Verwertung von Eisenbahnmaterial in May 1916. Then, the Mitteleuropäische Schlafwagen- und SpeisewagenAktiengesellschaft (MSG) was officially founded on November 24, 1916, at a meeting held in Berlin by the two banks. Soon abbreviated as MITROPA from “mitteleuropaisch” (middle European), the company was to be engaged in buying and operating sleepers, dining cars, and luxury coaches and trains. Two-thirds of its capital was held by German banks, one-fifth by Austrian banks, and the rest by Hungarian banks.

According to the plan that had been worked out, WagonsLits would surrender all dining car and sleeper lines in Germany and in the occupied territory to MITROPA by January 1, 1917. Wagons-Lits was also obliged to sell its sleepers and dining cars to MITROPA, which also took over Wagons-Lits’s staff and lease agreements, as well as its stock of food, beverages, tobacco products, and other supplies in the coaches and ware-houses. The five regional operators of dining cars in Germany were also merged with MITROPA.

Progress and Setbacks Until 1925

In its first year of business MITROPA operated about 250 sleepers and dining cars throughout Germany and areas occupied by German troops. However, because of the war, securing food supplies was becoming more and more difficult. Finally, at the war’s end in November 1918, Germany signed the Versailles Treaty which went into effect on January 10, 1920. Article 367 of this treaty stipulated that Germany reimburse Wagons-Lits for all losses and damage by the war and surrender all international rail lines to Wagons-Lits.

Germany’s defeat, the political unrest after the war, and the restrictions of the Versailles Treaty were a major setback for MITROPA. All foreign rail lines which the company served during the war—including Austria and Hungary—were lost. By June 1920 all Austrian and Hungarian shareholders returned their MITROPA shares to the Deutsche Bank and left the company’s board of directors. At the same time its competitor Wagons-Lits tried successfully to win back the German markets it lost during the war. Wagons-Lits refused to communicate with MITROPA directly, claiming that MITROPA was a war creation and hence illegal. Wagons-Lits also filed about 20 lawsuits against the German Reich and its railroad administration, demanding that MITROPA be dissolved, that all WagonsLits’s prewar contracts within Germany from 1914 be reactivated, and that MITROPA reimburse Wagons-Lits for all losses and damages it had suffered. Later, in June 1922, a court ruled that the liquidation of Wagons-Lits’s German subsidiary DESG was not considered an act of war but had been based on legal business agreements. That meant that MITROPA was not required to return the 116 DESG dining cars it had purchased from Wagons-Lits.

While these lawsuits made their way through the legal system, MITROPA sought a way to establish itself on a solid foundation and start expanding once again. In November 1919 MITROPA director Hermann Witscher met with Sir Henry Worth Thornton in London. Thornton, an American by birth, was general manager of England’s Great Eastern Railway Company (GER) and also represented Canada Trust Limited, a consortium of GER, the Canadian Pacific Railway (CPR), and Barclay Bank. GER was interested in expanding to continental Europe while the trust envisioned controlling the sleeping and dining car business in Europe by means of a holding company based in England. As a result of ongoing negotiations between the parties, in October 1921 the Socité Anonyme Transcontinent—based for political and tax reasons in Geneva, Switzerland—was founded. Prior to that transaction, Canada Trust had secured the rights to MITROPA’s foreign contracts, and these were then transferred to the newly founded London-based Trans-European Company Limited. Trans-European also acquired 40 percent of MITROPA’s share capital. Trans-European held 80 percent of the Swiss holding company’s share capital while MITROPA was issued 20 percent. However, the deal finally went against MITROPA’s interests. By 1924 there were no leading figures of the Canadian Trust left on MITROPA’s board of directors. In that year Swiss banker Felix Somary joined the board. He represented Blankart, a financial group which by that time owned the other 80 percent of the Transcontinent shares.

Article 367 of the Versailles Treaty was scheduled to expire on January 10, 1925, and Wagons-Lits had a vital interest in settling its yet outstanding issues with MITROPA. In early 1925, when negotiations had almost been finalized, Somary offered Wagons-Lits the Transcontinent shares of the Blankart group. This would have given Wagons-Lits 40 percent of MITROPA’s share capital and 26 percent of the voting rights. The German railways company Deutsche Reichsbahn-Gesellschaft had already acquired a 17 percent share in MITROPA in 1921. MITROPA itself would have owned only a 43 percent minority share.

Company Perspectives:

MITROPA bears its destiny in its name: Middle European Sleeping and Dining Car Company. This description is, we admit, a bit too narrow, considering our many activities in addition to the railroad. But it shows that MITROPA was already seen as an internationally active enterprise when it was founded more than 80 years ago. Today we continue to emphasize our presence throughout Europe. Our newly founded subsidiaries, thus far successful, demonstrate that, reaching to the stars, we are on the right path.

In April 1925 the “Peace Treaty” between Wagons-Lits and MITROPA was finally reached. It regulated the relationship of the two companies concerning international railroad traffic with and through Germany. In general, Wagons-Lits served in all transit trains through Germany from all other European countries and from Germany to other European countries, with some exceptions. MITROPA served on all domestic trains in Ger-many, as well as on trains from Germany to the Saar, Danzig, Scandinavia, the Netherlands, and popular destinations in Switzerland, Austria, and Bohemia.

After Wagons-Lits’s agreement with MITROPA went into effect, Wagons-Lits announced that it had no interest in buying the Transcontinent shares. However, in November 1925 Deutsche Reichsbahn wrote to MITROPA’s board of directors that they had acquired the shares and thereby owned a 57 percent majority in MITROPA. Transcontinent tried to bring MITROPA new business abroad, for example in Italy, Spain, and even the Soviet Union, but failed. As a result of this adventure, MITROPA lost its independence to the growing influence of its new parent company, the Deutsche Reichsbahn.

The 1920s through World War II

MITROPA initiated several attempts to modify the terms of the agreement with Wagons-Lits during the second half of the 1920s. However, just the business it was allowed to conduct enabled the company to experience a remarkable upswing. Deutsche Reichsbahn, which owned almost 90 percent of MITROPA’s share capital, transferred a large part of its sleeping car business to MITROPA but requested the company to not expand into foreign countries. Due to the growing transportation needs in Germany, MITROPA ordered new sleepers and dining cars. By the end of 1926 MITROPA was operating 565 dining cars and sleepers. To maintain these cars it established a second repair and maintenance workshop in Berlin-Falkensee. From 1928 on, MITROPA’s railroad cars featured a new red and gold corporate logo.

MITROPA also became involved in several side businesses. The company acquired vineyard Franz O. Klein in TrabenTrarbach and served its own MITROPA Gold, MITROPA Silber, and MITROPA Kupfer brands of wine. MITROPA also provided catering services on a ferry line from Sassnitz, Ger-many, to Trelleborg, Sweden, as well as on cruise ships on the Danube and Havel rivers. In 1927 MITROPA acquired a majority share in Elite Autofahrt GmbH, a company that organized sightseeing trips through Berlin and to popular destinations nearby, such as Potsdam, Wittenberg, and Wörlitzer Park. A year later MITROPA bought Siesta GmbH from Deutsche Reichsbahn; this company rented travel pillows at train stations for one German Mark. In addition, MITROPA started operating train station restaurants, and in 1928 MITROPA also landed a catering deal with two-year-old German airline Luft Hansa. The first meal on a Luft Hansa plane was served by a MITROPA waiter on a flight from Berlin to Paris in that year. The catering deal included a supply of white table cloths, china, silverware, and fresh flowers. In 1931 MITROPA became responsible for the telephone service on Deutsche Reichsbahn trains. In the late 1930s the company equipped baggage wagons with kitchens, for catering on trains without dining cars.

When the National Socialists came to power in Germany, they began exploiting MITROPA for their own aggressive expansion plans. MITROPA’s board of directors was aware of this “favorable situation” and declared that the company could be a “valuable propaganda tool for the German economy.” The Nazis were open to this idea and used MITROPA’s services for their subsidized “Kraft-durch-Freude” (Strength through Joy) holiday trips for low income residents, as well as for the 1936 Olympic Games in Berlin, where MITROPA served over 700 special rail lines. Before the outbreak of World War II in July 1939, MITROPA operated about 298 dining cars and 244 sleepers daily.

However, once World War II began, the situation changed completely. At first, the whole business came to a halt. Later, after all contracts with Wagons-Lits were canceled once again, MITROPA served on all trains traveling into the countries occupied by the German army. Purchasing food and supplies became more and more difficult, and the German military requested a increasing part of MITROPA’s capacity. In the early 1940s MITROPA was asked to run a growing number of restaurants in train stations in and outside Germany. However, when the fronts were pushed back, and the war came back into Germany, over 40 percent of MITROPA’s staff was called to serve in the German army. In May 1944 bombs destroyed MITROPA’s central food warehouse in Berlin. As Russian troops were approaching Berlin, MITROPA’s headquarters was moved in the dead of night, April 12, 1945, from Berlin to Hamburg on a train with 14 sleeping and dining cars.

Key Dates:

1916:: MITROPA is founded in Berlin, taking over many of the dining cars and assets of French-Belgian con-cern Wagons-Lits.
1924:: MITROPA sets up headquarters at the “Hermes” trading house in Berlin.
1925:: A “Peace Treaty” between Wagons-Lits and MITROPA is reached; Germany’s public railroad company becomes MITROPA’s majority share holder.
1944:: MITROPA’s central food warehouse is completely destroyed by bombs.
1949:: DSG is founded in Frankfurt/Main.
1954:: Agreement between MITROPA and DSG concerning “Inter-Zone Travel” is reached.
1990:: MITROPA and DSG sign cooperation agreement after Germany’s reunification.
1994:: The two German service companies are reunited as MITROPA.
1997:: MITROPA’s subsidiaries in Switzerland and France are founded.

Divided and Reunited after 1945

By the end of World War II, 50 percent of MITROPA’s cars had been destroyed. Like Germany itself, the company was divided into four, with one division for each of the sectors occupied by the Allied Powers of France, Great Britain, the United States, and the Soviet Union. After the Federal Republic of Germany was established in 1949 in the three Western German sectors, the former MITROPA divisions were merged into a new company, the Deutsche Schlafwagen- und Speisewagen-Gesellschaft (DSG) headquartered in Frankfurt/ Main. In 1954 an agreement between MITROPA and DSG went into effect, regulating the so-called “Inter-Zone Travel” between the two German states. MITROPA, in the meantime, maintained the legal form of an Aktiengesellschaft, which was very unusual in East Germany. However, the company was more and more integrated into the centrally planned economy of the German Democratic Republic (GDR). As such, MITROPA’s CEO received orders from the GDR’s Minister for Transportation, including an annual plan for sales and profits, a percentage of which was transferred to the government budget.

In the following years MITROPA was able to significantly expand its business again. In 1954 MITROPA was awarded a catering contract for the Weisse Flotte, a fleet of pleasure and sightseeing ships, first in Berlin and two years later in Dresden. From 1958 onward, MITROPA operated all the airport restaurants in East Germany and three years later the highway restaurants as well. In 1969 MITROPA’s first hotel opened in Sassnitz on Germany’s biggest island Rügen. In the meantime DSG was expanding in West Germany. In 1972 the company opened its first InterCity restaurant in Frankfurt/Main. Two years later it took over the catering on the ferries from Germany to Scandinavia. In the early 1970s the relationship between the two German states improved, resulting in several agreements on transit travel, including the Berliner Abkommen of May 24, 1973, which regulated the relationship between the two railroad companies and their caterers on the basis of international law. The relationship between MITROPA and DSG remained cooperative through the 1970s and 1980s.

In 1989, the year when the Berlin Wall came down, MITROPA employed 15,000 people, and DSG employed 5,000. On January 24, 1990, MITROPA and DSG signed an agreement of cooperation. Four years later the two German service companies were reunited under the name MITROPA, headquartered in Berlin. In the first years after its reunification, the company reorganized and streamlined its business. In 1994 a new wage agreement was reached, cutting wages by about 14 percent. At the same time, the number of MITROPA’s employees was reduced by over 7,000. In 1995 the subsidiary of the also reunited Deutsche Bahn AG employed 6,393 people and served about 25 million travelers in 760 dining and sleeping cars. In addition to its core business, MITROPA also operated 270 restaurants and convenience stores in train stations, catered on seven ferries, and ran 27 highway restaurants.

In the late 1990s MITROPA started focusing on international expansion again. In 1997 it founded subsidiaries in Switzerland and France and won international catering contracts from the Swiss and French railroad companies Schweizerische Bundesbahnen (SBB) and Société Nationale de Chemin de Per Fran£ais (SNCF). Another subsidiary was founded in Austria. Looking back at MITROPA’s history it seemed that—finally— the company was in a position to reach its goal to become a European player—in times of peace.

Principal Subsidiaries

MITROPA Schiffs-Catering GmbH; MITROPA Suisse SA (Switzerland); MITROPA France S.A.S. (France; 99.9%); MITROPA Austria Handels- und Gastronomie GmbH (Austria); EURO-MOTEL Rheinische Hotel GmbH (50%); Werkstätte Neuaubing OHG (50%); ComforTable Gesellschaft fur Catering und Logistik GmbH (33%); ICHG-InterCityHotel GmbH (4.5%).