Economics



Commercial Management Actions

Contribution analysis can improve railway financial sustainability. The long-run variable cost schedule generated by costing and financial contribution analysis can help railway managers identify areas of potential improvement in financial performance. Typically, the analysis contains three types of information:
  • amount of each resource attributable over the long run to operating the service or traffic (a)
  • unit costs of each resource (b)
  • total cost of each resource used (a*b)
Knowing the cost structure of a service or traffic enables railway managers to identify potential cost efficiencies for improving financial performance. The analysis highlights where cost efficiency gains can be achieved by reducing the resources used (a) or reducing unit costs of those resources (b), or some combination of the two. of the toolkit identifies many of the ways in which railways can seek to improve financial performance through these means.

Assuming revenue remains unchanged, management action to reduce the cost will increase the positive financial contribution of profitable services and may turn unprofitable services to profitable. Pricing policies can also influence the contribution from the revenue side.

    
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