6 RAIL TRANSPORTATION

PRICE, PRODUCTIVITY AND FINANCIAL PERFORMANCE

In 2005, the freight revenues of CN and CPR operations in Canada grew by 15.1 per cent, the second year in a row of strong revenue growth after weak growth over the 2000 – 2003 period. Rail freight rates increased by an average of 9.8 per cent in 2005, while price increases averaged 2.4 per cent over the 2000 – 2005 period. The price increases can largely be attributed to the introduction of fuel surcharges. Output increased by 4.8 per cent in 2005, with growth in all traffic sectors. Output growth was particularly strong in intermodal services and agricultural shipments (7.3 per cent and 8.6 per cent, respectively), while revenue growth was highest in intermodal shipments and other bulk shipments (16.1 per cent and 21.4 per cent, respectively). In 2005, productivity increased by 2.6 per cent, the tenth consecutive yearly increase. Gains in productivity in the industry have averaged 1.8 per cent a year since 2000. Unit costs in 2005 increased for the first time in five years, for an overall increase of 6.7 per cent. Fuel costs were a large contributor to this increase. The combined operating profit of $2.26 billion for CN and CPR in 2005 was a 31.5 per cent increase over 2004, while the operating ratio (operating expenses as a percentage of operating revenues) declined from 77.2 per cent to 74 per cent. The return on assets of the shortline railways increased to 10.2 per cent in 2005, following a decrease in 2004 (see Table 6-7). Addendum tables A2-61 to A2-64 provide more details on the railway industry.

In 2005, VIA Rail’s revenues increased by 5.9 per cent, the ninth increase over the past ten years. The increase was attributed to an increase in output (4.1 per cent) and, to a lesser extent, an increase in prices (1.7 per cent). VIA Rail’s total factor productivity increased by 2.1 per cent during 2005, while unit costs increased by four per cent. Fuel price increases were the major factor in the unit cost increase. The increase in VIA Rail’s overall cost recovery ratio dropped from 48.2 per cent to 47.2 per cent in 2005, due in large part to the increase in expenditures on diesel fuel.

Major Events in 2006

Infastructure

Industry Structure

Employment

Energy

Freight Transportation

Passenger Traffic

Price, Productivity and Financial Performance