As we slowly move out of the COVID-19 lockdown, operators will no doubt have one eye on the future. One area of focus will be on the performance of their networks and the routes within it.
With talk of a 20% reduction in public transport use post-COVID-19, it is likely that the networks previously operated will no longer be commercially viable. Operators will need to react quickly to the shifts in demand to limit the financial impact and to set themselves up for a bright future. Clearly public transport, as always, has an important part to play in the movement of people – perhaps more so than ever if ambitious climate change targets are to be achieved. However, the transport needs to be sustainable in more ways than one.
Regular route profitability analysis should be undertaken to help operators make these decisions about their network. This can help to identify entire routes that should be cut, frequency reductions, vehicle capacity reductions (e.g. double to single decks) or to provide a basis to seek Local Authority funding to maintain unprofitable service levels. Route profitability can also help to inform planning for increases to, or for restructuring, fares.
Where to start?
To get a good feel for the performance of a network, analysing the operating profitability at route or route group level would be a sound place to start. This would help provide an overview of the routes that are not performing well – as well as those that are. Focus can then be placed on the poorest performing routes, in an effort to improve overall profitability.
Looking at the route as whole may not tell the full story.
Decisions cannot be made simply based upon the performance of a route. A ‘poor’ performing route may in fact be a feeder route to a highly profitable route so to take direct action on one may negatively impact the other – with the overall effect not being the desired one.
It may also be the case that a route appears to perform poorly; however, there are certain times of the day when it performs well. This is where a detailed understanding of patronage and capacity can pay dividends.
By reviewing the patronage and capacity down to timebands, or even trips, operators can then start to get a much better idea of the performance of a route. The analysis may highlight specific trips/times of the day where capacity can be reduced or removed to help lower costs, whilst limiting the impact on the top line.
Analysis at this level may be crucial to demonstrate to a local authority of the need to provide financial support to maintain service provision. It would be possible to provide a local authority with a clear picture of the social benefits of the service, against the costs, to allow them to undertake their own cost-benefit analysis – it would give them a clear case to present to their stakeholders too.
By undertaking regular profitability analysis, trending analysis should prove to be useful when it comes to capital expenditure decisions. The data will help to make the case for particular vehicle capacities, and, potentially, the fuel type (gas, electric, hydrogen) or even manufacturer to use.
Clearly there are many variables when undertaking route profitability analysis. For instance, how should revenue for period tickets collected off bus be distributed across the network, or what is the fairest way of distributing engineering labour costs? There is no definitive answer, but consistent, reasonable, models can be devised to manage this by taking some of the characteristics from the routes, for example, the average fares, PVR and vehicle types used. Be careful, over-simplification can lead to the wrong conclusions. For example, concessionary fares reimbursement could be apportioned on the basis of concessionary passengers numbers. But a totally different perspective would be obtained if the apportionment also reflected the average fares by route. Clearly, decisions based on the performance of a route alone could have unintended knock-on effects elsewhere on the network. However, having the data to hand allows operators to take a much more targeted, efficient, approach to network reviews.
It is important to ensure that regular route profitability analysis is afforded the importance it deserves; with actions identified and driven through.
How can EPM help?
EPM has well-established software to facilitate the regular analysis of route profitability, simplifying the process for operators and providing them with the data they need to inform important decisions regarding their network. The software can also be utilised by our experienced consultancy team to help operators undertake detailed analysis and make sense of their data.
To learn more about route profitability analysis and how EPM can help, then please get in touch with Jon Anton at email@example.com or on 01527 556940.