Railway Reform: Toolkit for Improving Rail Sector Performance - ppiaf

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Railway Reform: Toolkit for Improving Rail Sector Performance Annex 2: Benchmarking adjust staffing. This would subsequently be evaluated by whether costs and locomotive productivity had improved. Benchmarking against both railways and companies outside the railway industry can be useful. Railway comparisons are more useful for operational issues. External comparisons are useful to examine how competing transport providers and logistics companies handle their markets, corporate culture, and strategic issues. This annex focuses on benchmarking using statistical comparisons between railways. It explains the steps for statistical analysis, provides definitions, highlights data issues, and explains the typical ratios used. The statistical analysis for benchmarking starts with selecting benchmark railways and indicators. 128 Next, data are collected and adjusted to improve comparability. Then indicators are calculated. Finally, results are interpreted. Box 1 Railway Benchmarks 2 Selecting Benchmark Railways Benchmarking is most usefully carried out using high performing railways with fairly similar characteristics and operating conditions. This controls for factors that management or government cannot influence and focuses analyses on factors that can be changed. Thus, to the degree possible, benchmark railways should be similar in the following characteristics: (i) size; (ii) traffic volume and type; (iii) traffic mix and journey types, such as passenger vs. freight, and originated vs. transit journeys; and (iv) traffic density. Other factors, such as having a similar technology level, may be considered. 3 Selecting Indicators Name Definition Interpretation Financial Measures Indicator choices depend on the benchmarking objective. If benchmarking aims for a general review of railway operations, the process would likely begin with key financial indicators and an overall productivity measure for each primary railway resource— labor, track, locomotives, wagons, and coaches—followed by detailed statistical analysis of any areas with large gaps. Typical indicators appear in the table below. Average tariff Freight revenue/ton-km A measure of the railway’s ability to generate revenue from freight traffic. Most tariff level variations are due to competition, commodity, and haul length. But low tariff levels may indicate a tariff policy issue. Average fare Passenger revenue/passenger-km May be calculated by type of service (e.g., commuter vs. intercity) A measure of the railway’s ability to generate revenue from passenger traffic. Most fare level variations are due to competition, type of service, and average distance traveled. But low fares may indicate a fare policy issue. 128 The annex draws heavily on the World Bank Railways Database Update 2007, Users Guide. The World Bank Page 222
Railway Reform: Toolkit for Improving Rail Sector Performance Annex 2: Benchmarking Box 1 (cont.) Railway Benchmarks Name Definition Interpretation Average passenger subsidy Ratio of passenger fares to freight rates Operating ratio Passenger subsidy/passenger-km (passenger revenue/ passenger-km)/ (freight revenue/ton-km) Operating costs/operating revenue May be calculated with and without operating subsidies A measure of railway ability to obtain compensatory revenue from government in exchange for providing loss-making passenger services. Rough measure of the degree to which railway revenue structure depends on freight services to cover fixed costs and/or to cross-subsidize passenger services. This indicator must be used with great caution when comparing railways because either freight or passenger yield can be heavily influenced by traffic mix in each market. A measure of railway ability to cover its costs and generate investment funds. Operating ratios for reasonably profitable US Class I railroads range from 80-85 percent. Limited data available on operating ratio including operating subsidies for EU railways typically show ratios around 95 to 100 percent, indicating inability to cover all costs, even after receiving government PSO payments. Labor share of revenue Total wages/total revenue A measure of the share of revenue from customers that is paid to workers. It excludes subsidies to focus on the direct relationship between wages and revenues. Typically, profitable US freight railways have a ratio of about 0.30 (China is even lower). Many EU railways have ratios approaching 1.00 or higher. Productivity Measures Track density Locomotive productivity (passenger-km + ton-km)/ track-km (passenger-km + ton-km)/ locomotives Passenger-km/passenger locomotives Passenger-km in multiple unit(MU) service/MU powered coaches A measure of the volume of traffic produced with railway infrastructure. Railways are capital intensive and infrastructure is a substantial proportion of total assets. Railways with high utilization of this expensive asset such as those in China, U.S., and Russia, have an advantage in reaching economic viability. A measure of the volume of traffic produced with railway locomotives. High utilization of this expensive asset gives the railway an advantage in reaching economic viability. If data permit, the locomotive fleet should be separated into passenger, freight, and shunting services to calculate separate productivity measures. If a substantial proportion of passenger service is provided with MU equipment, the figures should be adjusted to reflect this. Ton-km/freight locomotives Wagon productivity Ton-km/wagon A measure of how much freight traffic is produced with the railway wagon fleet. High utilization of this expensive asset gives the railway an advantage in reaching economic viability. This measure should be used with caution because wagon ownership practices can differ. In some countries, customers own a substantial proportion of the wagon fleet. In others, the railway may handle substantial traffic moved in wagons owned by other railways. The World Bank Page 223
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Railway Reform: Toolkit for Improving Rail Sector Performance - ppiaf

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