Railroads
Overview of RailroadsRailroad ProblemsCauses of Railroad ProblemsSolutions to Managerial ProblemsResolution of Labor ProblemsDeregulationGovernment PromotionMergersOperational Issues
Railroads
Overview of Railroads
Number of Class I RR (2010) 7
ResourcesMiles of Road
95,700Miles of Track
161,926Miles of High-Density "A" Track
65,119(20 million gross T-M/track mile/year)
Locomotives in Service 23,893
Freight Cars in Service (January1, 2011)
Class I397,730Other RR101,755Shipper & Car Companies 809,544
Railroads
2011 2012Number of Railroads 7 7ResourcesMiles of Road Operated Less Trackage Rights 95,514 95,391Miles of Track Operated Less Trackage Rights 162,393 162,306Miles of High-Density "A" Track Maintained * 65,745 66,213Locomotives in Service 24,250 24,707Freight Cars in Service (Class I) 380,699 364,025Other Railroads 90,502Car Companies and Shippers 792,100
EmploymentNumber of Employees 158,623 163,464Average Wages $76,574 $78,085Average Total Compensation Including Benefits $111,968 $112,600
* High-Density track has a freight density of at least 20 million gross ton-miles per track mile per year.
Railroads
Overview of Railroads
Traffic 2009 2010Carloads Originated (million) 26.01 29.21Intermodal Units* (million):Containers 8.24 9.60Trailers 1.64 1.68
Total 9.88 11.28 Tons Originated (billion) 1.668 1.851Ton-miles (trillion) 1.532 1.691
Operating StatisticsFreight Revenue Per Ton-Mile 3.011¢ 3.330¢Average Tons Per Carload 64.1 63.4 Average Tons Per Train 3,546 3,585 Average Length of Haul (miles) 918.5 913.6
Railroads
Traffic 2010 2011 2012Carloads Originated (million) 29.21 30.00 28.37 *Intermodal Units (million):Containers 9.60 10.19 10.73Trailers 1.68 1.70 1.54Total (see notes) 11.28 11.89 12.27Tons Originated (billion) 1.851 1.885 1.760 *Ton-miles (trillion) 1.691 1.729 1.713Operating StatisticsFreight Revenue Per Ton-Mile 3.330¢ 3.760¢ 3.961¢Average Tons Per Carload 63.4 62.9 62.0Average Tons Per Train 3,585 3,538 3,458Average Length of Haul (miles) 913.6 917.2 973.2 *
Overview of Railroads
Railroads
Financial 2010 2011 2012Freight Revenue (billion) $56.3 $65.0 $67.8Operating Revenue (billion) $58.4 $67.4 $70.1Operating Expense (billion) $42.7 $49.3 $50.6Net Income (billion) $9.2 $11.0 $12.0Operating Ratio 73.1% 73.2% 72.1%Return on Average Equity 11.23% 11.13% 11.57%
* Part of the decrease in originated tons and carloads was caused by new treatment of certain rebilled shipments, where traffic is now considered received instead of originated. The shift in traffic classification is responsible for the large increase in average length of haul.
Overview of Railroads
Railroads
Overview of Railroads
Operating Statistics 2009 2010Freight Revenue Per Ton-Mile 3.011¢ 3.330¢Average Tons Per Carload 64.1 63.4Average Tons Per Train 3,546 3,585Average Length of Haul (miles) 918.5 913.6
FinancialFreight Revenue (billion) $46.1 $56.3Operating Revenue (billion) $47.8 $58.4Operating Expense (billion) $37.2 $42.7Net Income (billion) $6.4 $9.2Operating Ratio 77.8% 73.1%Return on Average Equity 9.79% 11.23%
RailroadsType of Freight Carried for Year 2010
Tons Gross Originated % of Revenue % of
Commodity Group (000) Total (millions) TotalCoal 814,467 44.0 $13,914 24.2Chemicals & allied prod. 187,388 10.1 8,178 14.2Farm products 158,705 8.6 5,281 9.2Non-metallic minerals 122,525 6.6 1,817 3.2Misc. mixed shipments* 109,895 5.9 7,121 12.4Food & kindred products 109,320 5.9 4,794 8.3Metallic ores 71,446 3.9 605 1.1Metals & products 45,028 2.4 2,081 3.6Waste & scrap materials 42,673 2.3 1,206 2.1Petroleum & coke 42,369 2.3 1,771 3.1Stone, clay & glass prod. 39,831 2.2 1,424 2.5Pulp, paper & allied prod. 30,558 1.7 1,883 3.3Lumber & wood products 24,616 1.3 1,252 2.2Motor vehicles & equip. 21,353 1.2 3,402 5.9All other commodities 30,822 1.7 2,708 4.7Total 1,850,996 100.0% $57,438 100.0 %
Railroads
30.9%
42.7%
0.4%
13.1% 13.0%
Trucks RRs Air (Dom) Oil PL Water
U.S. Revenue Ton-Miles - 2007
Source: Bureau of Transportation Statistics
Railroads
Railroad Problems
Return on InvestmentCost Recovery IndexAbility to Attract InvestmentBankruptciesCost to the Public
Railroads
Causes of Railroad Problems
Historical PerspectiveManagementLaborRegulationPromotionChanges in the Economy and Competition
Railroads
Causes of Railroad Problems
ManagementLaborRegulationPromotionChanges in the Economy and Competition
Railroads
Causes of Railroad Problems
Management
Deferred MaintenancePayment of Large DividendsPoor Equipment UtilizationPoor Customer ServiceFailure to Respond to ChangePoor Labor RelationsPoor Business Knowledge
Railroads
Managements’ Solutions Hiring Business Graduates and MBALess Promotion from withinMore Innovative ManagementElimination of Holding Companies
Railroads
Causes of Railroad Problems
ManagementLaborRegulationPromotionChanges in the EconomyCompetition
Railroads
Causes of Railroad Problems
Labor
Number of Unions More than 20 Different UnionsVirtually Every Craft RepresentedConstant Labor Issues
Railroads
Causes of Railroad Problems
Labor
Obsolete Work Rules Yard Crews vs Road Crews100 Mile Rule Crew Consists
Typically 4 or 5 Person CrewsConductors, Engineers, Brakemen, Switchmen, Firemen“Lonesome Pay”
Railroads
Resolution of Labor Problems
Elimination of CaboosesChanges in Crew ConsistsChanges in Pay Scale
Railroads
Resolution of Labor Problems
Changes in Crew Consists
1990: Less than 10% had 2 Person Crews About Half had 3 Person Crews Remainder (40%) had 4 Person Crews
Now: Mostly 2 Person Crews 8-10% 3 Person Crews
Fought to Eliminate Firemen well into the 1990s
Railroads
Resolution of Labor Problems
Changes in Pay Scale100 Mile Rule Eliminated in Late 1980sWent to 108 miles/dayThen to 114 miles/daySince 1995 it has been 130 miles per day
Railroads
Engineers $57,577 $53,681 $66,042 $68,936 $67,200 $73,900Conductors 55,002 50,897 63,403 62,211 61,100 67,100Brakemen 48,186 45,767 52,840 57,306 58,100 58,700
Resolution of Labor Problems
Average Wages 1990, 1996, 1999
1990 1996 1999Through Local Through Local Through Local
Railroads
Resolution of Labor Problems
Average Wages 1990, 1999(Yard Crews)
1990 1999Engineers $41,574 $17/hr $61,400 $25/hrConductors 40,411 16/hr 53,500 22/hrBrakemen 35,589 14/hr 40,800 17/hr
Hourly assumes 15% overtime.
Railroads
Resolution of Labor Problems
Average Wages February 2009
Average all 25th Percentile Median 75th PercentileRail Workers $35,627 $39,345 $43,083
Conductors/Yard Masters $33,825 $41,664 $50,592
Locomotive Engineer $50,292 $60,878 $74,872
Average Compensation 2010Average Wages $73,843Average Total Compensation with Benefits $105,948
Railroads
Causes of Railroad Problems
ManagementLaborRegulationPromotionChanges in the EconomyCompetition
Railroads
Causes of Railroad Problems
Regulation
Inflexible Pricing Abandonments Regulatory Delay Passenger Deficit
Railroads
Solutions to Railroad Problems
4-R Act (1976) Rates
Zone of Reason Market Dominance Merger Decisions (2.5 years)
Railroads
Solutions to Railroad Problems
Staggers Act (1980)
Entry Exit (Abandonments) Exemptions Rates Zone of Reason Notice of Change Contract Rates No ICC Compelled Rates No Single Line Discussions San Antonio
Railroads
Causes of Railroad Problems
ManagementLaborRegulationPromotionChanges in the EconomyCompetition
Railroads
Causes of Railroad Problems
Promotion Too Little Help Too Late Unfair Promotion of Other Modes
Railroads
Solutions to Railroad Problems
Promotion
Amtrak Conrail 3-R Act (1973) USRA 4-R Act (1976) Other
Railroads
Solutions to Railroad Problems
AMTRAK (Rail Passenger Corporation Act of 1970)
Benefits of Joining AmtrakRelieved of Common Carrier Obligation to Serve the PublicDeduct Portion of 1969 Deficit from Taxes orAccept Stock in Amtrak
Cost to Join AmtrakPay CashProvide EquipmentProvide Future Services
Railroads
Causes of Railroad Problems
ManagementLaborRegulationPromotionChanges in the Economy and Competition
Railroads
Causes of Railroad Problems
Changes in the Economy Shifts in Industry to Sunbelt Inflation Demand for Smaller, Faster Shipments
Railroads
Causes of Railroad Problems
Competition
Intramodal Excess Capacity (Overbuilt System) Excessive Use of Differential Pricing
Intermodal
Motor Carriers Pipelines Barge Operators Passenger Services (Private Auto/Airlines)
Railroads
Solutions to Railroad Problems
Attempts to Recapture High Value Traffic
IntermodalDouble StackingDedicated TrainsImproved PerformanceReturn of the Boxcar
Railroads
Solutions to Railroad Problems
Mergers
Economics of Mergers
Side-by-SideEnd-to-EndEconomies of ScaleEconomies of DensityEconomies of Distance
Recent Mergers
Railroads
Solutions to Railroad Problems
Recent Mergers
Penn Central (Conrail)BN-Frisco (BN)UP-MP-WP (UP)Chessie-Seaboard (CSX)NW-Southern (NS)SF-SP (Proposed - Not Approved)BN-SF (BNSF)UP-SP (UP)Conrail Carve-Up (Parts to CSX and NS)BNSF – CN (Withdrawn)
Railroads
Solutions to Railroad Problems
Conrail Created by Merging Bankrupt Railroads in the Northeast
Penn CentralLehigh Valley,Lehigh and Hudson RiverReadingCentral of New JerseyErie LackawannaBoston and Maine
Railroads
Other Solutions to Railroad Problems
Total Nationalization of the Rail IndustryNationalization of RoadbedsOpen Access
Railroads
Nationalization of Railroads
Advantages
Greater Source of Capital Works on Public Need Rather than Profit Better Planning and Coordination Elimination of Duplicate Facilities May Lead to Lower Rates for Shippers May Lead to Improved Service