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

This 50% cost pass through assumption was made
because the main competitive constraint on the rail
freight rate is the road freight rate and it is understood
that rail profit margins in the corridor are not high.
Train operators would make a choice between
passing on cost savings to their freight customers
by way of a lower rail price and increasing their
profit margins. For the purpose of the market share
analysis, it was therefore considered that the pass
through of cost savings would be less than 100%,
with 50% being the working assumption (where cost
savings are shared equally between train operators
and customers). This reflects a balance between
passing on all gains (unlikely if margins are low) and
passing on none (unlikely due to road and other
competition). A higher degree of pass through would
lower the inland railway freight rate and increase the
forecast uptake of the railway by 8–10% if 100% cost
pass through were assumed rather than 50%. In the
economic appraisal presented later in this report, the
full saving is captured to reflect that either the train
operators or freight customers will benefit.
As shown in Figure 6, coastal rail train operating
costs account for 83% of total rail linehaul (terminalto-terminal)
costs. The linehaul price offered for freight
carried on Inland Rail would therefore be 13.6% lower
than the coastal route with 50% pass through of a 33%
reduction in operating costs. 9 By 2020, pick up and
delivery costs were assumed to account for 35% of the
door-to-door price on rail, and these were assumed to
be unaffected by above-rail operating efficiencies –
the overall reduction in door-to-door rail prices is
therefore 9.2%.
Table 8 shows that when pick up and delivery costs are
incorporated in the inland railway door-to-door price,
the price of freight carried on Inland Rail is estimated
to be 52.2% of that applying to road transport. This
compares with 57.6% for the coastal railway. These
relativities reflect the expected increases in road freight’s
costs due to fuel and labour cost movements in the
years to 2020.
Transit time
The survey confirmed that, other than for express freight
customers, delivery between Melbourne and Brisbane
or vice versa, between early evening one day and early
morning 2 days later, is satisfactory. This is readily
achieved by the optimum route developed in Chapter 5
which has a 20.5 hour terminal-to-terminal transit time
– or 25.5 hours door-to-door once an assumed pick up
and delivery time of 5 hours is added.
ARTC aims to achieve a time of 26.5 hours, terminalto-terminal,
on the upgraded coastal railway. However
discussions with the technical consultants and operators
suggested that it may be challenging to achieve both
shorter journey time and improved reliability. Therefore,
a 27.5 hour terminal-to-terminal time has been assumed
for the coastal railway. With 5 hours for pick up and
delivery, this gives a total transit time of 32.5 hours.
Very little freight was identified which was sensitive
to transit time on its own. Most customers would
prefer faster transit times to improve reliability, and this
preference has been captured in the parameters. The
types of commodities which require fast transit are
usually perishable in nature, such as some agricultural
products. For these goods there was an inherent
preference for road freight because of its reduction
in double handling as well as its faster door-to-door
transit time.
Further discussion on the transit time identified
for Inland Rail is presented in Box 3.
Reliability
In this study, reliability is defined as the percentage of
trains that arrive within 15 minutes of their scheduled
arrival time (e.g. 87.5% reliability suggests that 87.5%
of trains arrive within 15 minutes of timetable).
In the past, rail reliability has been poor. In 2004 only
45% of trains arrived within 15 minutes of scheduled
arrival time. In 2007–08 62% of scheduled services
on the interstate network entered the ARTC network
on time and 58% exited on time. 10 However ARTC
aims to achieve 75% when current track upgrading is
completed in 2010. In its assessment of the Stage 1
Northern Sydney Freight Corridor, the Northern Sydney
Freight Corridor project team estimates the coastal
railway will achieve 77% reliability from 2015. On this
basis, 77% reliability has been assumed for the coastal
railway, alongside a reduction in linehaul transit time
to 27.5 hours. 11 It has been assumed that an inland
railway, being less congested and avoiding Sydney,
would achieve 87.5% reliability (and reliability of 95%
could be achieved if up to 3 hours slack was built into
the timetable).
Rail operators and customers have indicated reliability
has already improved since 2006 and 2007, although
recent history is only just beginning to be reflected
in observed market shares because of the lead time
customers require to implement a change in mode.
Trucks are extremely reliable at around 90–98%.
9
50% pass through of a 33% reduction in 83% of the components of linehaul rail price (so reduction in linehaul price is
50%*83%*33%=13.6%). Similarly, the effect on door to door price is a 50% cost pass through of a 33% reduction in
63% of the cost components of door-to-door price (so reduction in door-to-door price is 50%*33%*56%=9.2%)
10
ARTC 2008, ARTC Annual Report 2008, p 18
11
Northern Sydney Freight Corridor project team
3. Demand for Inland Rail
ARTC • Melbourne–Brisbane Inland Rail Alignment Study – Final Report
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