Railway profitability and station closures

Abstract

At present there is considerable debate on railway ownership, with privatizations occurring in a number of countries. Against this background, the management of London Underground Limited (LUL) wished to understand the likely behaviours of possible future owners, particularly any following a strategy of profit maximization. This paper is concerned with the network or geographical implications of any such strategy. Two elements of the network were examined — first, branch termini, and secondly, surburban stations on core routes. Although one might wish to close branch termini, operational reasons such as the location of depots prevent this in some cases, but analysis was carried out for the remainder. Poorly-used suburban stations were also examined; a simplified linear programming approach was used to identify those stations where traffic levels were insufficient to cover operating costs and the disbenefits to through passengers. These calculations were carried out for a number of scenarios, including short- and long-term, and benefit maximization and profit maximization. Although much of the network is sustainable in the short term, or under benefit maximizing conditions, it was shown that only around half of it is financially profitable in the long term.