Armenian Railways: Five Year Business Plan
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- 4.3.1Transportation CJSC
- 4.3.2Passenger Freight Lines of Business
- 4.3.2.1Passenger Business
4.3Rollingstock CJSCIn the Base Case Scenario, the Rollingstock CJSC is forecast to have revenues of 3.0 billion ADM in 2000, increasing to 4.3 billion ADM by 2005. This represents a significant increase over the Rollingstock CJSC, revenue in 1999. It is based on the forecast Transportation CJSC demand for Rollingstock services and the price for those services contained in the recommended charging mechanism.17 A  s shown in the graph material expenditures reduce from 22% of operating expenses in 1999 to 15% in 2000, as the railway attempts to preserve cash. We forecast materials expenditure to be restored to a more normal level in 2001 and subsequent years. Depreciation expense also decreases in 2000. This is because life used for calculating depreciation expense changes in 2001. Over the next few years, depreciation starts to increase, as very modest capital expenditures enter that historical asset base as current prices. Fuel expense increases in 2000 because of an increase in the world price of fuel. Cash flow from operations starts at 1.3 billion AMD in 2000 and increases to 1.7 billion in 2005.
In the Cost Reduction Case, the Transportation CJSC operates more efficiently and demands less service from the Rollingstock CJSC. This is reflected in the Rollingstock CJSC’s revenue, which is 13% less by year 2005. (Total revenue difference is 1.5 billion AMD over the forecast period.) Cost reductions measures allow the Rollingstock CJSC to reduce operating expenses commensurately with the reduction in revenue. By 2005, operating expenses are down in every category except depreciation.
Cash flow from operations starts at 1.3 billion AMD in 2000 and increases to 1.6 billion in 2005. Cumulative cash flow is lower by 474 million AMD. Pro Forma financial statements for the Rollingstock CJSC are contained in Table 4-6 at the end of this chapter. 4.3.1Transportation CJSCIn the Base Case scenario, the Transportation CJSC is a loss-making enterprise. It revenues are forecast to increase from 4.5 billion AMD in 1999 to 6.8 billion AMD in 2005, considering both traffic growth and inflation. (No real increases in price are forecast.) It pays nearly its entire revenue to the Rollingstock and Infrastructure CJSCs as service fees. What remains in insufficient to cover its operating expenses. Cash flow from operations is negative and no funds are generated to support capital investment. T  ransportation operating expenses increase almost 50% between 1999 and 2000 because 2000 – 2005 figures include wagon hire (net) for use of foreign wagons. After 2000, operating expenses increase with inflation and traffic growth. Employment is steady in the range of 1300 – 1375 employees.
Rollingstock service charges increase almost 50% between 1999 and 2000 as the new charging mechanism is put into place. After 2000, the charges increase with inflation and with increased use of rollingstock. Infrastructure charges increase steadily over the period with inflation and with increased use of the track. I  n the Cost Reduction scenario, the Transportation CJSC earns the same revenue from customers as in the Base Case. Transportation operating costs increase in 2000 from the recognition of wagon hire costs. After 2000, operating costs start declining despite inflation because of cost saving measures. Introduction of a computer operations management system allows stations to be closed/downgraded and the number of employees to be reduced from about 1350 to 900.
Payments to rollingstock increase in 2000 because of the change in charging mechanisms. Improvements in how efficiently it uses rollingstock, keep fees from the Rollingstock CJSC from increasing as rapidly as in the Base Case scenario. Fees from Infrastructure grow slightly slower than in the Base Case, because efficiency measures reduce train-km and the Infrastructure CJSC eliminates some unneeded track. In the Cost Reduction case, the cash flow from operations turns positive in 2004 and operating income turns positive in 2005. Pro Forma financial statements for the Transportation CJSC are contained in Table 7-11 at the end of this chapter. 4.3.2Passenger & Freight Lines of BusinessThe loss-making results of the Transportation CJSC mask important differences between the profitability of freight and of passenger business. The revenues and costs of these lines of business can be separated, based on revenue and cost causality. Appendix C describes this methodology. 4.3.2.1Passenger BusinessT  he passenger business is significantly loss making, with operating losses of nearly 2 billion AMD (US$ 3 million) per year. Fares from passengers cover about half of the Transportation CJSC’s direct operating expenses for passenger, about 15% of the Transportation direct expenses plus Rollingstock fees and less than 10 percent of all operating expenses including Rollingstock and Infrastructure fees. The passenger business’s loss making profile does not alter significantly between the Base Case and the Cost Reduction scenarios. Many of the cost saving measures recommended will have a larger impact on freight service than on passenger service. For example, the introduction of a computer operations management system will allow better management and utilization of wagons and will allow commercial functions at stations to be centralized and performed more efficiently. A comparable improvement for passenger will not be realized from this investment. Given the fixed schedule of the passenger trains equipment utilization is not likely to improve. Nor is staffing at stations likely to decrease, since stations staff need to be located at the places where passengers board trains. Directory: ECA -> Transport.nsf -> ExtECADocByUnid ECA -> Phonetics and phonology ECA -> Brightspace Platform Requirements 1 Document Change History 1 Brightspace Platform Requirements 2 Brightspace Apps 5 About D2L 9 ECA -> Microservices in the Brightspace Cloud ECA -> Brightspace Assignment Grader for Android 6 ECA -> - ECA -> Brightspace Platform Requirements 1 Brightspace Apps 4 About D2L 9 ECA -> My Course series objective ExtECADocByUnid -> Review of sector transport, infrastructure and communications in bulgaria ExtECADocByUnid -> Review of the sectors transport, infrastructure and communications in romania Download 0.9 Mb. Share with your friends:
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