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ERIE - LACKAWANNA MERGER STUDY

APPENDIX C

Out-of-Pocket Costs of Handling Freight Traffic

In certain studies the estimated effect of merger upon freight train operations has been measured by the increase or decrease in gross ton miles handled by the merged company. The resultant increase or decrease in operating expenses has been estimated by applying out-of- pocket unit costs of handling to the changes in gross ton miles. The out-of-pocket costs used include only direct freight train locomotive and car expenses, together with casualties.

In Study IV, Carload Freight - Effect of Rerouting Freight Traffic, Study V, Possibility of Soliciting Carload Freight for Longer Hauls and Study XIII, Effect of Merger upon System Freight Revenues, The three most important studies concerned with the use of out-of- pocket costs, almost all of the changes in volume of traffic handled would occur on main lines. In developing unit costs to apply to these changes, therefore, it was necessary to exclude the higher cost branch line traffic.

Out-of-pocket costs per thousand gross ton miles excluding and including freight car costs were developed by districts for the portion of each road being studied as well as for all of the main line of the Erie west of Buffalo and Hornell.

The following table summarizes the 1956 out-of-pocket costs used in the various studies:

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