2000

Tervonen, Juha; Seneviratne, Prianka; Kilpala, Heli

This report addresses the performance measurement of railway enterprises from two perspectives. First, the on-going separation process of European railway companies into infrastructure companies and operating companies allows a clearer identification of stakeholders and their expectations, according to which performance targets should consequently be set. Second, based on an extensive review of empirical research on railway productivity, a set of performance strategies likely to be meaningful in the future of European railway enterprises has been formulated. In the past, European railway enterprises have aimed at satisfying public perceptions, policy makers and community goals. In addition, performance measurement in scientific literature has concentrated more on describing the differences in market geography, rather than pure economic efficiency. Due to the now granted managerial autonomy and exposure to competition, railway companies are formulating their business and operational strategies according to commercial lines. Therefore, there is a need for setting goals and selecting indicators for monitoring the success of these strategies. There exists a timely opportunity to adopt strategies for significantly improving railway performance. Such strategies can be formulated, e.g., based on the experiences gained from deregulation in North America. The North American railway companies were granted more pricing freedom and the freedom to choose their markets, which they serve by government deregulation acts in both the US and Canada in the 1970s and 1980s. Such managerial autonomy resulted in abandoning unprofitable lines, mergers and exposure to competition, which resulted in significant decreases in the costs of production and prices of services. However, the impacts of deregulation are not indefinite. Other cost, pricing and market strategies are required for sustaining competitiveness. According to the authors of this report, the performance strategies of European railway enterprises should focus more on revealing the differences in relative cost and revenue ratios of different parts of the network and on the different types of services provided. Furthermore, diversified pricing, marketing and quality-of-service strategies should be developed for capturing higher value segments in the transport markets. A set of indicators for highlighting the importance of cost, revenue and profit orientation and quality of service are proposed. Suitable long-term productivity measurement techniques are also discussed.