What is a Revenue Ton Mile

A revenue ton mile is a shipping and transportation industry metric, usually reported by rail companies, measuring the volume of freight transported. It is calculated by multiplying the weight in tons of the shipment being transported by the number of miles that it is transported.

BREAKING DOWN Revenue Ton Mile

A revenue ton mile is an important determinant of profit in the transportation industry. Empty freight cars produce no revenue, so railroad operators focus on increasing revenue ton miles. The financial performance of railroads in large part reflects the state of the economy because railroads, obviously, are essential in moving goods, raw materials and commodities across the country, east to west and north to south. When the economy is growing, revenue ton miles increase; when the economy slows down, revenue ton miles decline.

Take, for example, Union Pacific Corporation. Union Pacific increased its revenue ton miles by 6% from 440 billion in 2016 to 467 billion in 2017, a year when real gross domestic product (GDP) advanced 2.3%, according to the U.S. Department of Commerce. Further analysis is possible with a breakdown of freight type reported by railroad companies. Union Pacific reported modest declines in revenue ton miles in agricultural and chemical products, flat growth in intermodal, incremental growth in automobiles, and significant gains in coal and industrial goods during 2017. These year-to-year trend lines are of interest to management, analysts, investors and even economists.

Revenue ton miles are similar conceptually to revenue passenger miles, the measure employed by the airlines.