Economic evaluation of old and new locomotives

Abstract: Like any other business, a train operator is expected to make a profit and to make that profit as large as possible. The transportation market is highly competitive and it is therefore hard to increase the price of the transportation service. In order to maintain the profit margins focus needs to be on keeping the costs down. Therefore, in this thesis the cost side of freight train operation will be investigated. The main focus will be on the costs inflicted by the choice of locomotives. Locomotives are expensive and the capital cost usually makes up a significant portion of the total cost. It can therefore be tempting to buy older locomotives with lower capital cost. However, even though reducing the capital cost, using older locomotives might inflict other costs, such as higher maintenance costs. The aim of this thesis is to find the main cost drivers in freight train operation that is related to the choice of locomotive and to use that information to build a software tool that calculates if using old or new locomotives is more cost efficient for different scenarios. In order to identify the different factors that affect the cost of the railway operation, interviews were conducted with experts in different railway transportation fields. To complement the information from the experts, a literature survey was performed. Also, statistical data of the actual costs related to different locomotives was used. It was found that capital cost, energy, maintenance and repair, planning and administration, delays, infrastructure and drivers were important factors that affect the cost. Whether it is more cost efficient to use old or new locomotives depends mainly on the transportation service that should be provided. The marginal cost per kilometre is lower for new locomotives, however their capital cost is higher. This makes modern locomotives more suitable for transportation tasks that require that the locomotive runs long distances every year, whereas older locomotives are more suitable when shorter transportations are needed. Since the newer locomotives have higher tractive force and better slip control they can pull heavier trains. Therefore, depending on the mass of the train, fewer new than old locomotives can be used to pull the trains. In those cases it will be more cost-efficient to use new locomotives.