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ARTICLE · 26 JULY 2019

Don't Count Your Efficiencies Before They Hatch: Exploring The Factors That Impact A Railway's Operating Ratio

McMillan LLP
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Canadian Pacific Railway ("CP") has significantly reduced its operating ratio in the past few years.

CanadaTransport
Ryan Gallagher
Ryan Gallagher
François Tougas
François Tougas
Lucia Stuhldreier
Lucia Stuhldreier
Grace Shaw
Grace Shaw
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Canadian Pacific Railway ("CP") has significantly reduced its operating ratio in the past few years. From an investor's perspective, this is a good thing: a lower operating ratio means CP is incurring less operating cost per $ of revenue (i.e., "Operating Ratio" = Operating Costs/Revenue).

While commentary has attributed CP's operating ratio decrease to an increase in the company's efficiency (more specifically, operational improvements), our analysis identifies other significant drivers of the operating ratio decrease from 2012 to 2016. We discuss our findings and support for our conclusions in a recent paper presented by Ryan Gallagher to the Canadian Transportation Research Forum entitled " Operating Ratio As A Measure of Railway Operating Efficiency".

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The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

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