Keywords: urban rail transit; modern tram; operational cost; sensitivity analysis Abstract: Operational cost of modern tram consists of the wage, maintenance cost, power consumption cost, management cost and other cost. This paper subdivided the influential factors of traction energy consumption and maintenance cost according to fixed cost and variable cost, and a method is proposed to analyze operational cost. Taking a tramline for example, the sensitivity of passenger volume and the frequency are analyzed. Results show that a double increase of ridership rarely raises annual operational cost by 5.1% while sharply reduces operational cost per capita by 47.5%; an additional 100% increase of the frequency raises the operational cost by 22.7% while reduces operational cost per capita by 38.6%. Consequently, this paper recommends increasing the frequency to enhance competitiveness of modern tram in case of large passenger flow volume, and vice versa.