The article investigates how personnel costs and employment situation in the railway sector affect the financial performance of the main railway companies operating in the German railway sector, specifically in regional transport. It shows analyzing companies´ annual reports and other publicly available data that most companies face a lack of qualified operating staff, that their personnel cost annually increased but labor productivity has been reduced. The shortage of available employees is the main obstacle to new transport contracts or even to continuing existing activities. The only solution is to train new train drivers, customer service representatives, operations planners, control center staff and other personnel which can lead to a much better availability of operational staff at the railway companies. The power of labor unions including the possibility to affect wage negotiations should be reduced. The German railway reform enabled many companies to enter the passenger railway market, leading to an increase in the number of passengers, better customer services and other improvements. However other positive development can be achieved only if personnel cost and employment structure do not threaten the profitability and positive financial performance of railway companies.