Melbourne–Brisbane Inland Rail Alignment Study - Australian Rail ...

The logit model used elasticities obtained from ACIL
Tasman’s surveys of customers, potential customers
and freight forwarders. The model coefficients were
then calibrated to the observed market shares for road
and rail. This enables the interaction between prices
and different aspects of service to be modelled and
estimates of market share to be made for Inland Rail,
coastal railway and road alternatives. Appendix B
contains details about the logit model and its operation.
Analysis showed that the strongest determinant of
market share is the price of the service, with changes in
price leading to a greater than proportional increase in
demand. There is also demand for reliability of service
with greater sensitivity to reliability than to the speed of
the service. This would imply that it would be beneficial
to use transit time improvements to increase reliability
by increasing the slack in the schedule.
A generally low sensitivity to transit time was identified
through customer interviews and surveys. Despatch
at the end of the day, and arrival early the second day
afterwards (i.e. two nights and a day) was seen as
satisfactory by most respondents. A much faster time,
e.g. 15 hours, would be needed to get significantly
more rail freight, and even then the additional
quantities would not be large. Some anecdotal
evidence from freight forwarders suggested that
some users of rail used the mode as a form of secure
inventory storage, and did not pick up their goods
immediately after the promised delivery time. In one
case, the average pick up was 1.8 days after delivery,
when the maximum permitted storage at the terminal
was 2 days.
Rail operators expressed a preference for a faster transit
time to enable faster turnaround of their train assets,
resulting in greater operating efficiencies. This is relevant
to the choice of route which is discussed in Chapter 5.
Faster transit times could result in lower train operating
costs and therefore freight rates, which would affect
demand, though part of the efficiency gain would be
taken as increased profits.
The demand analysis was conducted in consideration of
two scenarios: a base case and a scenario that included
Inland Rail. The scenario that included Inland Rail was
incorporated into the demand analysis by using the logit
model of market shares. The model enabled an estimate
to be made of the market share for Inland Rail, given
the price and level of service being offered by Inland Rail
and its competitors. Parameters to this estimate were
derived from survey results and calibrated to current
market shares.
3.2.1 Price and service attributes assumed
The table below presents the expected price and service
attributes of the intercapital freight market that form the
basis of the demand analysis. These attributes have
been determined in line with the corresponding capital
expenditure forecasts, (Chapter 7), and are included
in the financial and economic analyses (Chapters 10
and 11). It was assumed that it takes, on average,
three years for a change in a service attribute to be fully
reflected in demand. Longer lags of up to 10 years have
been suggested by some stakeholders because of the
required investment in infrastructure and reorganising
logistics chains on the part of customers.
However, the Melbourne–Brisbane traffic is just part
of the total flow that uses customer infrastructure,
and the required adaptation would be incremental.
Not all customers would wait for the development of the
inland railway before instigating significant investments.
They would plan these investments in concert with the
development of an inland railway and would be able
to roll out revised logistics arrangements soon after it
began operation.
Price and service attributes are discussed further below.
The survey indicated that generally, customers are
indifferent to the route, and are more focused on price,
followed by reliability, availability then transit time.
Table 8 Characteristics of Melbourne–Brisbane intercapital market
Relative price*
(vis-à-vis road)
Reliability
Transit time
(door-to-door)
Availability
Road 100% 98% 23.5 hours 98% (declining to 95%)
Coastal railway 57.6% (declining to 53.6%) 77% (after 2015) 32.5 hours (after 2015) 93% (after 2015)
Inland railway 52.2% (declining to 48.8%) 87.5% 25.5 hours 95%
Note: *Price varies by commodity. Relativities have been shown here to preserve confidential price information.
This relativity includes pick up and delivery costs for rail freight and is the relative price estimated for non-bulk goods in 2020.
Relative rail price in 2008 is approximately 72% of road, and this declines by 2020 because of increased fuel and labour costs
which affect road more strongly than rail.
The basis of price assumptions is analysis undertaken for ARTC annually. This analysis indicates there are different fronthaul
and backhaul prices, with rail backhaul approx. half fronthaul (55%). for road backhaul prices are approx. 49% of fronthaul.
3. Demand for Inland Rail
ARTC • Melbourne–Brisbane Inland Rail Alignment Study – Final Report
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