Towards rail freight profitability in Australia: Fid-Bau Portal

Towards rail freight profitability in Australia

Ferreira, Luis / Otway, Neil

Australian rail transport is well placed to acquire a significant share of land transport for freight movements given the nature of demand, i.e. relatively long average hauls, and the existence of large volumes of bulk commodities such as coal and other minerals. This paper discusses the performance of rail freight business and its potential for productivity and service level gains in the short and medium terms. As a case study, the small freight rail system of Tasmania, AN Tasrail, is examined in detail. AN Tasrail's past financial performance is highlighted, and the strategies required to move to profitable operations are discussed. This system, although suffering from diseconomies of scale, difficult terrain and limited markets is well on the way to profitable operations. Rail in Australia has shown significant improvements in financial performance and productivity over the last ten years. Compared with the manufacturing industry figure of 1‐7% per annum, the total factor productivity growth rate of Australian railways has been exceptionally high with average annual figures between 3% and 7%. Rail's achievement reflects, in part, a very low level of initial productivity in the use of resources such as labour. Tasrail has already made major gains in productivity over the last decade with a workforce of 1686 in 1978 reducing to 695 in June 1991. At the same time, the task increased by 50%. The deficit for Tasrail has also reduced in real terms over the same period from $A43 millionf in 1977/78 to around $A18 million in 1990/91.