=============================================== | | | Earnings | | | --per mile-- | | |------------------- | | Mileage | Gross | Net -----+-----------+---------+---------+--------- 1907 | July | 223,900 | $1,022 | $304 1907 | August | 224,100 | $1,079 | $345 1907 | September | 224,300 | $1,045 | $314 1907 | October | 224,700 | $1,116 | $337 1907 | November | 224,800 | $981 | $261 1907 | December | 224,400 | $861 | $197 1908 | January | 198,700 | $746 | $148 =============================================== This table shows that whereas under full prosperity, up to and including the month of October, the net revenue was about thirty per cent. of gross; after the sharp decline in traffic, it dropped in November to twenty-six per cent., and progressively thereafter to twenty per cent. in January. In other words, a decline of about one-fourth in the gross revenue within four months, entailed a loss of over fifty per cent. in net earnings. Higher operating expenses in the winter may have exaggerated this tendency, but, on the other hand, drastic economies were put into effect, which would more than offset the difference. The urgent need of at once meeting any loss of business by prompt reduction of operating expenses is apparent. But there is comfort to be found at this point in the fact that each one per cent. saved in operation at any given time, results in saving two per cent. for the net earnings. According to our estimates, and as a rule practically, operating expenses equal about two-thirds of gross revenue, leaving one-third to meet charges and pay dividends. Every reduction from this two-thirds of gross revenue, therefore, transferred to the balance, increases the latter proportionately twice as much. This fact in turn explains the urgent pressure always brought to bear at such times to effect economies all along the line. These are too often indiscriminately made.[54] Such paring down of expenses should always be made with an eye to their ultimate effect upon the operating efficiency of the property in the long run. To postpone much-needed repairs of equipment during a period of depression, like that of 1907-1908, when repair shop costs are at a low ebb, only to hamper operations and to effect repairs under pressure when business revives, is an instance of such wasteful economy.