Home
»
Trains Magazine
»
Forums
»
Passenger
»
Amtrak's FY 2008 Key Performance Numbers

Edit post

Edit your reply below.

Post Body
Enter your post below.
[quote user="HarveyK400"] Here's what gets me about revenue per passenger-mile: if the total revenue stays the same with a lower fare that attracts more passengers and passenger-miles, the revenue per passenger decreases which implies a failure; but is it?  Is this a valid metric?  [/quote] The key financial number for Amtrak's management is the contribution (loss) per passenger mile.  It is a measure of the productivity of its trains.  Revenue per passenger mile is not a key Amtrak metric.  The first step in a pricing model for a business that is not dependent on government subsidies is to determine the total cost of the service.  Amtrak follows the same procedure except it factors in federal and state government subsidies.  Once these numbers are known, management turns to market factors to price the service, i.e. what is the demand for it, how much will people pay for it, when will they use it, etc.? If passenger revenues remain the same whilst passenger miles increase, the revenue per passenger mile will go down.  Passenger revenues are not likely to stay the same with an increase in passenger miles, unless the ticket prices were lowered to offset the increase in passenger miles, thereby producing the same revenues.  But the point is moot.  It is not included in Amtrak's reported numbers, or if it is I cannot find it.  If a decreased in ticket prices increased sales volume enough to offset the decrease in sales returns, revenues would increase.  But if lowering the price did not result in enough incremental volume to offset the decline in ticket prices, revenues would decline.  A train carrying 250 passengers 226 miles for an average ticket price (revenue) of 76 cents per passenger mile would have revenues of $42,940.  The same train carrying 300 passengers (20 per cent increase due to lower ticket prices) at 68.4 cents per passenger mile (10 per cent reduction in ticket prices) would have revenues of $46,375.     If the operating cost per passenger mile was 50 cents in the first scenario, and the operating costs stayed the same in the second scenario, the cost would be 41.6 cents per passenger mile because of the greater number of passengers.  And the operating profit would be $18,171 as opposed to $14,690.  If Amtrak had to add capacity to handle the additional passengers, it could turn out badly.  If the operating costs under the reduced ticket pricing scenario only fell to 47.5 cents per passenger mile, because of an increase in operating costs, the operating profit would be $14,170 or $520 less than the first scenario.  In this case lowering the ticket prices would not be a good deal. This is an over simplification of what happens in the real world.  Amtrak has sophisticated pricing models that help it predict the outcomes for a variety of pricing strategies, i.e. they have years of price and cost point data that can be used to project a range of outcomes using different inputs.  At the end of the day, however, an effective pricing strategy pricing requires a thorough knowledge of the business and an intuitive feel for the market.     Amtrak uses a yield per seat mile model to determine the appropriate pricing.  The model surveys frequently the reservations for a train, sometimes as frequently as every hour or two, and moves the pricing points based on the anticipated load, i.e. the ticket prices increase as the load factors go up.  However, if the train is not selling well, the prices can actually go down after having gone up to sell the marginal space.
Tags (Optional)
Tags are keywords that get attached to your post. They are used to categorize your submission and make it easier to search for. To add tags to your post type a tag into the box below and click the "Add Tag" button.
Add Tag