# Are two major railroads sufficient, nationally?



## railiner (Dec 6, 2020)

I was wondering if just two railroads would be sufficient nationally in the United States, competitively and efficiently?
While there are other Class One's, basically you have just the CSX and NS in the East, and the BNSF and UP in the West. What would happen if they were allowed to merge, end to end?
And which combination would work better? CSX-BNSF, NS-UP; or CSX-UP, NS-BNSF?


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## jiml (Dec 6, 2020)

It's a fascinating thing to consider, although I'm not sure CP and CN would be idle in this discussion. They've both aggressively reinforced their US footprints and it wasn't that long ago that CP made their most recent attempt to buy CSX outright, while also eyeing NS.



https://www.cbc.ca/news/business/cp-rail-norfolk-southern-csx-1.3472207



CN also tried to buy BNSF in 1999, but was denied by the US government.


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## Bob Dylan (Dec 6, 2020)

You left out KCS, it would probably fit with either BNSF or UP.


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## WWW (Dec 6, 2020)

Then the government steps in and "You all are TOO BIG TO MERGE we will have none of that" - Monopoly and Anti-Trust issues !

Now if you want to entertain that then we will just nationalize the whole darn thing - then watch it FAIL BIG TIME !


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## bratkinson (Dec 6, 2020)

Business mergers are considered 'good' if they both add to the business and make economic sense. Starting in the late 40s, railroad mergers generally added new territory and offered a significant reduction in costs primarily due to laying off much of the hourly workforce (in the name of duplicated facilities, etc) and a modest reduction in salaried workers. 

Then came Penn Central. What had been two 'too-big-to-fail' railroads that were on the skids (due to a myriad of reasons, mostly crew sizes and taxes, in my opinion) merged. The much hoped-for 'savings' in numbers of employees, facilities and equipment were hindered by government red tape and numerous state laws regulating crew sizes, etc, never materialized. Then bankrupt New Haven was forced on them and the biggest bankruptcy of all time (up until then) happened. 

Then we come to the '80s and '90s mergers, mostly adding new territories while removing some duplicative routes (BN and CSX come to mind) and facilities. The question in my mind is: "did these mergers succeed because they were wise business moves or that the prior and current laws let them shed excess mileage, equipment and employees play a bigger part in their success? Powder River Basin coal was 'perfectly timed' for BN's success as well. 

So, what is there to gain from the end-to-end mergers of 'east meets west'? Lots of new territory, reduction of HQ staff, and perhaps less paperwork and screwing around to get a through train from one railroad to the other. On the other hand, the 'us vs them' mentality in PC and, I'm sure, other mergers, not only railroads has to be dealt with. Additionally, vast differences in operating strategies might cause problems as well. And lastly, unless Berkshire Hathaway (Warren Buffett) which owns 100% of BNSF stock decided to fully buy out either NS or CSX, it's not going to happen. In my opinion, for Berkshire Hathaway to want to purchase one of the eastern railroads, the stock price would have to be quite low compared to 'value', stability, and most of all, long term growth. Maybe they have $10 Trillion (I have no clue about their current cash position) laying around looking to buy something good. Should they 'toss around' the idea of spending that bundle to buy an eastern RR, one can guarantee that a battle similar to when CSX tried to buy all of Conrail would ensue.


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## railiner (Dec 6, 2020)

bratkinson said:


> . Should they 'toss around' the idea of spending that bundle to buy an eastern RR, one can guarantee that a battle similar to when CSX tried to buy all of Conrail would ensue.


Not quite the same...if the BNSF tried to buy one of the Eastern roads, the government wouldn't let the other Eastern road get into a bidding war for it...they would only let the other Western road buy the other Eastern road (or vice versa). That way competition would be preserved.


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## DevalDragon (Dec 7, 2020)

Rumors have been flying about KCS being bought out or merged for more than 50 years. Everyone thought they'd be gone by now but they're still alive and well. They would compliment any of the 6 Class I railroads and everyone has decided it's easier just to let them be. And with there massive holdings in Mexico, buying them would quite a daunting task.

As far as having only 2 transcontinental railroads in the USA, I don't see what the advantage would be from a business or a customer standpoint.


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## MARC Rider (Dec 7, 2020)

bratkinson said:


> Then came Penn Central. What had been two 'too-big-to-fail' railroads that were on the skids (due to a myriad of reasons, mostly crew sizes and taxes, in my opinion) merged. The much hoped-for 'savings' in numbers of employees, facilities and equipment were hindered by government red tape and numerous state laws regulating crew sizes, etc, never materialized. Then bankrupt New Haven was forced on them and the biggest bankruptcy of all time (up until then) happened.


I always thought that the main reason for the failure was incompatible corporate cultures, and the fact that the less efficient/less progressive PRR management team was the one that took over. I'm sure that having to absorb the New Haven didn't help. It should also be remembered that these two railroads served the part of the country where long-distance superhighways were first developed, and I suspect that competition from time-competitive long-haul trucking hit them hard and before it really hit the other railroads.. The lack of ability to raise rates and some of the labor inflexibility may have also been an issue, but failing management always likes to blame government and their lazy workers who make too much money, even while they're making large salaries running the company into the ground.


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## MARC Rider (Dec 7, 2020)

WWW said:


> Now if you want to entertain that then we will just nationalize the whole darn thing - then watch it FAIL BIG TIME !


Why should nationalized railways necessarily fail? Look at the UK, they privatized it, and then they needed to re-nationalize it. The rest of our transportation system is nationalized, at least on the infrastructure side. Put the rails under public ownership and then have a larger number of smaller private and public operating companies have proper competition for the business.


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## railiner (Dec 7, 2020)

DevalDragon said:


> As far as having only 2 transcontinental railroads in the USA, I don't see what the advantage would be from a business or a customer standpoint.


More “seamless” for customers. Only have to deal with one provider, for most movements.
For railroad, less top administration. And greater economy of scale for purchasing.


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## jiml (Dec 7, 2020)

redacted


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## jiml (Dec 7, 2020)

railiner said:


> Not quite the same...if the BNSF tried to buy one of the Eastern roads, the government wouldn't let the other Eastern road get into a bidding war for it...they would only let the other Western road buy the other Eastern road (or vice versa). That way competition would be preserved.


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## sttom (Dec 7, 2020)

DevalDragon said:


> Rumors have been flying about KCS being bought out or merged for more than 50 years. Everyone thought they'd be gone by now but they're still alive and well. They would compliment any of the 6 Class I railroads and everyone has decided it's easier just to let them be. And with there massive holdings in Mexico, buying them would quite a daunting task.
> 
> As far as having only 2 transcontinental railroads in the USA, I don't see what the advantage would be from a business or a customer standpoint.



Funny story about Kansas City Southern, they wanted to buy the Southern Pacific back when the Santa Fe/Southern Pacific merger was denied and the desiccated corpse of the SP had to be sold off. The only reason the Rio Grade got them was they offered more for it. Then a decade or so later KCS got part of NdeM. It would have been and interesting bit of alternate history had that gone through instead of the Rio Grade getting the SP.


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## jiml (Dec 7, 2020)

sttom said:


> It would have been and interesting bit of alternate history had that gone through instead of the Rio Grade getting the SP.


Especially from an Amtrak perspective. Has an Amtrak train ever run on KCS rails?


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## sttom (Dec 7, 2020)

jiml said:


> Especially from an Amtrak perspective. Has an Amtrak train ever run on KCS rails?



I think there are brief stints around Kansas City and St Louis, but not for any significant distance. But I don't think Amtrak would be excluded from running since the railroads are still common carriers and from what I have read Amtrak is only really excluded from places where there is already a private rail operator. So the FEC is a no go, but the KCS is a maybe. But I'd wager that if Amtrak ever wanted to revive their service from KCS to New Orleans, they'd ask for a hefty sum for track work. I know Amtrak tried to get the Western Pacific to let them run passenger trains over the Feather River route, but other than the status of the tracks, I don't think there is a legal reason for KCS to decline passenger service from Amtrak should their be a plan to do so. But I'm not a lawyer and you'd have to find one that deals with transportation law for a better answer.


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## railiner (Dec 7, 2020)

IIRC, Amtrak under its original law, was entitled to operate on any suitable track owned by its original "member" railroads, even on routes that were freight only. Railroads that did not "join" Amtrak, to relieve themselves from passenger train common carrier obligation, had to keep running for at least 5 years, (when they could then reapply to discontinue (or to "join" Amtrak). Examples were the Rock Island, the Southern, the Rio Grande, and a couple of others.


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## railiner (Dec 7, 2020)

Since the Southern Belle ended KCS service a couple of years before Amtrak started, I don't think they had to "join"...


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## Seaboard92 (Dec 26, 2020)

From my understanding of the Amtrak law which isn't that great because I am not a lawyer I believe the KCS is excluded. I want to say it is for railroads that handed their passenger services over to Amtrak which would exclude the KCS because they dropped passenger service in 1969 two years before Amtrak was founded, and one year before the legislation that made Amtrak possible was written. 

Fun fact the last Pullman-Standard private railroad order was for the KCS in 1965 for new coaches. You can ride these cars today on NCDOT's Piedmont. 

Of the other railroads that didn't join Amtrak in 1971 there were varied reasons for their refusal. 

Georgia Railroad: They continued to operate a mixed service using one or two Budd coaches (with two Budd Sleepers in reserve) in their freight train until 1983. The reason they kept the service up was because they did not want to potentially lose their tax exemption on the rail line. While passenger services weren't mandated for the tax exemption there was ambiguity in the wording of the Georgia State law so they decided the best course of action was to let sleeping dogs stay asleep. So they continued to run daily except Sunday mixed service on their mainline, and branch lines. When Seaboard came offering to buy the Georgia Railroad they no longer needed the exemption so the trains came off. 

Rock Island: The reason they didn't join Amtrak was because they couldn't afford the initial buy in for Amtrak which was 4.7 million. So they were mandated to keep their trains running until 1976 and somehow kept them running till I want to say 1978. 

Southern Railway: This one is rather interesting because at Amtrak Day they fully controlled the much smaller Central of Georgia. Central of Georgia joined Amtrak and discontinued their services while the parent was left with their remaining services. Southern ran until 1975 the Southern Crescent, Salisbury-Asheville, the Piedmont (Day Train DC-Atlanta), and a remnant of the Tennesseean (Lynchburg-DC). They continued running the Southern Crescent until 1979 which in itself was really a merger of the well known Crescent Limited (originally via Montgomery and the L&N), and the Southerner (All Southern route via Birmingham). The Southern Crescent was Tri Weekly west of Birmingham and included a transcontinental sleeper to Los Angeles. The Southern Railway saw the value in passenger trains as public relations as well as they thought they could run a far better train than Amtrak. Claytor also didn't want to allow another entity onto their tracks from what I have read. 

Rio Grande: I believe the reason the Rio Grande Zephyr stayed on the timetable is because they did not want another operator running on their railroad. At one point that line was a mainline before the UP/DRGW/SP Merger when most traffic shifted to the easier line over the Rockies in Wyoming. 

Soo Line: They operated a mixed train until 1987 or 1989 between Sault Sainte Marie, MI and Neenah, WI strictly because they were required to by the states it operated thru. The Soo Line did the best to discourage passenger traffic though as it made a nocturnal trip leaving at the wee hours of the morning, and only allowing one ticketed passenger per day. 









SEEING AMERICA OF OLD ON RIDE IN SOO CABOOSE







www.chicagotribune.com





Reading System: The Reading would have been permitted to enter Amtrak and off load the Crusader (Newark, NJ-Philadelphia, PA) but chose not to because they couldn't afford to join. All that is left of this service now is the West Trenton line of SEPTA. 

Railroads that almost stayed out of Amtrak

Santa Fe: It has been widely reported that had the Santa Fe been allowed to discontinue the San Fransisco Chief, and the Grand Canyon that they would have stayed in the passenger business. They did not like the idea of another company taking over their branding. Santa Fe even took the name Chief away from Amtrak so the Southwest Chief became known as the Southwest Limited for a long period of time till the Santa Fe was pleased with the standards Amtrak was using. The plan was for the Super Chief/El Capitan and the Texas Chief to continue operating. The Texas Chief and the Super/El would have departed and ran together until Kansas City ala the City of Everywhere on UP. It is rumored that the government had it's eyes on Santa Fe's well maintained coaches and cars for Amtrak and prevented this future from happening. Santa Fe was perfectly fine with running it's own trains till the very end and maintained their standards. 

Seaboard Coastline: Seaboard like the Santa Fe also had very high standards until the end and their ridership did decline towards the 60s but not at the same rate as the rest of the class one railroads. Had Seaboard kept their trains they might still be running today. The Florida market has always been a very strong market for passenger trains and up until the 1990s the trains were regularly running 18 cars. 

The railroads that desperately needed Amtrak were the Penn Central, Southern Pacific, Rock Island, and a few of the smaller operators.


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## railiner (Dec 27, 2020)

Seaboard92 said:


> Santa Fe: It has been widely reported that had the Santa Fe been allowed to discontinue the San Fransisco Chief, and the Grand Canyon that they would have stayed in the passenger business. They did not like the idea of another company taking over their branding. Santa Fe even took the name Chief away from Amtrak so the Southwest Chief became known as the Southwest Limited for a long period of time till the Santa Fe was pleased with the standards Amtrak was using.


IIRC, "Uncle" John Reed, Santa Fe CEO, did allow Amtrak to use the "Chief" moniker for several years, until Amtrak in his opinion, downgraded the train's, and sent some of the Hi-Level cars to other routes. That was when he withdrew permission to use those names. When service improved (new Superliner's) a few years later and the railroad granted permission again, I believe Mr. Reed was retired, and his successor was not so passionate about this...

Like Reed, and Southern's W G Claytor, SCL's William Rice also languished over yielding their passenger service to Amtrak, but his first responsibility was to his stockholder's, hence SCL did join Amtrak.

As for the Grande, Bill Holtzman was very much opposed to joining Amtrak. Besides not wanting a "foreign" carrier on his rails, he feared that Amtrak would increase the RGZ to daily service, and maybe even more often than that. He thought that the additional traffic would be a serious impediment to their freight train operation, while the competing triple track UP wouldn't have any. The higher and higher red ink of the RGZ eventually made the Grande give in.


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## jiml (Dec 27, 2020)

What would have happened if even one of those mentioned in the two prior posts had hung onto passenger service?


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## jis (Dec 27, 2020)

As far as building and maintaining the infrastructure of tracks and control systems for their use is concerned it is not clear why any private company is needed. How many companies are needed to build and maintain the highway system? How about the air traffic control system?


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## railiner (Dec 27, 2020)

jiml said:


> What would have happened if even one of those mentioned in the two prior posts had hung onto passenger service?


Well we know what happened to the Rock Island...it went bankrupt, and was liquidated. And the Southern, and Rio Grande did for a while, before they threw in the towel and joined Amtrak.
If you are asking about if the Santa Fe and SCL had also held out....I am pretty sure they would also have finally done the same.


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## railiner (Dec 27, 2020)

jis said:


> As far as building and maintaining the infrastructure of tracks and control systems for their use is concerned it is not clear why any private company is needed. How many companies are needed to build and maintain the highway system? How about the air traffic control system?


Not sure what you mean by this...
Even though 'the government' in one form or another 'owns' those, they still deal with a multitude of private companies to build the various components of it.
And perhaps to maintain parts, as well....


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## jis (Dec 27, 2020)

railiner said:


> Not sure what you mean by this...
> Even though 'the government' in one form or another 'owns' those, they still deal with a multitude of private companies to build the various components of it.
> And perhaps to maintain parts, as well....


My assumption was that the opriginal question was in the context of private ownership of railraods the background being possible merger of eastern and western railroads. In that context my point was that it is not necessarily the best thing for privcate railroads to own the infrastructure anyway, so perhaps what we need is zero private railroads as far as infrastructure is concerned. Of course quite a bit of the actual work is done by contractors these days whether it is private or publc railroad, so talking about that is mainly obfuscating around the original issue that I was talking about.


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## Seaboard92 (Dec 27, 2020)

Fun fact the Rock Island actually kept dining car service on their trains because even despite the ridership it was cheaper to operate the diner than lay the staff off due to the labor contracts they had. When the diner was sidelined due to sill corrosion (structural corrosion) they parked them on one of the tracks in La Salle St. and operated them as a diner for passengers waiting on commuter trains to Joliet.


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## Devil's Advocate (Dec 28, 2020)

WWW said:


> Then the government steps in and "You all are TOO BIG TO MERGE we will have none of that" - Monopoly and Anti-Trust issues !


When was the last time a railroad merger was prevented on antitrust grounds?



railiner said:


> Not quite the same...if the BNSF tried to buy one of the Eastern roads, the government wouldn't let the other Eastern road get into a bidding war for it...they would only let the other Western road buy the other Eastern road (or vice versa). That way competition would be preserved.


What competition? Most customers have only one railroad to choose from if they have any at all. We've already merged most of the competition into oblivion but here you are cheerleading another round for some reason.



railiner said:


> More “seamless” for customers. Only have to deal with one provider, for most movements. For railroad, less top administration. And greater economy of scale for purchasing.


Who is asking for this? Past mergers have raised prices, harmed performance, burned customers, and left those that remained with terms and performance that eventually pushed most of their shipping to the trucking industry. The heavy bulk and manifest freight markets are being strangled by the class one railroads. If anything we should try nationalizing one of the private carriers to see if that can bring lost customers and truck freight back over to rail again. Allowing even more mergers isn't going to fix anything the last dozen mergers was unable to solve.


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## railiner (Dec 28, 2020)

Seaboard92 said:


> Fun fact the Rock Island actually kept dining car service on their trains because even despite the ridership it was cheaper to operate the diner than lay the staff off due to the labor contracts they had. When the diner was sidelined due to sill corrosion (structural corrosion) they parked them on one of the tracks in La Salle St. and operated them as a diner for passengers waiting on commuter trains to Joliet.


Yes...the "Quad City Rocket", was a nice "pocket streamliner" for a while...they also had an ex-C&O, ex D&RGW, dome lounge parlor car, the "Big Ben", leased from Deporter-Butterworth Tours for a while. It sometimes ran on the "Peoria Rocket".
Lots of good photo's here...


http://trainweb.org/DOMEmain/picCO1875D.jpg



I too, recall The Rock's so-called "Track One" restaurant in La Salle Street station. Besides the diner, they had a lounge car serving as a bar, and where you would enter, and await a table in the diner. It was an authentic railroad operated dining car, even down to the traditional requirement to write out your order on a check. Food was pretty good on the two times I tried it...


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## Seaboard92 (Dec 28, 2020)

railiner said:


> Yes...the "Quad City Rocket", was a nice "pocket streamliner" for a while...they also had an ex-C&O, ex D&RGW, dome lounge parlor car, the "Big Ben", leased from Deporter-Butterworth Tours for a while. It sometimes ran on the "Peoria Rocket".
> Lots of good photo's here...
> 
> 
> http://trainweb.org/DOMEmain/picCO1875D.jpg



Ben Butterworth the son of the original owner of the Big Ben still owns the car. If I remember what he has said about it correctly it is in a warehouse somewhere in Iowa. It is still in good condition from my understanding.


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## railiner (Dec 28, 2020)

Seaboard92 said:


> Ben Butterworth the son of the original owner of the Big Ben still owns the car. If I remember what he has said about it correctly it is in a warehouse somewhere in Iowa. It is still in good condition from my understanding.


Interesting history to that car.


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## sttom (Jan 3, 2021)

If the government was going to do something to change how the rail industry worked in this country, buying up their rights of way and actually allowing competition would do more in that regard than just letting there be only 2 railroads. A duopoly that has few overlapping markets isn't competition, especially given that most railways are in a managed decline mentality. At best it would put off one of them dying for a decade or two without trying to solve the problem of them having to maintain their own infrastructure, for the the public good, while paying taxes on them.


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