In 2012 a typical Class 1 railroad employee generated directly or indirectly an average of 10,765 tons originated and an average of $416,404 of revenue per ton originated. After allowance for an average compensation package of $112,600, a typical Class 1 employee contributed $303,804 to cover other expenses and provide a return to the investors. Comparatively, the average revenue generated directly or indirectly for the rail and road group, which includes trucks, was $405,650. This information can be found at the American Association of Railroads and Fidelity Investments.
Of course, the average revenue generated by an employee is just one ratio in a comprehensive income statement and, more importantly, in a statement of cash flows. Moreover, averages can be deceptive. Nevertheless, these numbers tend to support the notion that the nation's freight railroads are efficient. Another significant number is the return on equity, which as noted in another post, has been outpacing the S&P 500 for the last two or more years.
In 2012 the average gross revenue per ton originated was $38.68. The average for coal was $20.40, which was the second lowest for the commodities hauled by the nation's freight railroads. The lowest was $9.93 for metallic ores, whilst the highest was $254.89 for motor vehicles and equipment. The average gross revenue for miscellaneous mix shipments, which was mostly containers, was $78.74.
A decline in coal shipments does not necessarily mean the railroads will fall on hard times. If they can replace a portion of the coal tons and the coal revenues with commodities that generate more revenue per ton, i.e. containers, motor vehicles, etc., which is a possibility given the challenges facing truckers, the nation's railroads and investors could come out smelling like a rose.
Short lines are in business, in regions. Short lines are hauling A lot of canola and grain to major Freight lines.
Railroad Demurrage Rules ( and fees, etc $$) are to help schedule better and help small railroads move items in a timely manner.
IF you have your own siding, and your car(s) are not ready , you pay.. and sometimes watch the train roll on by...,,
Recently we used a Tracker for some freight, and we had an extra so I had it sent back with UPS from California, and it was left on.
The Freight and the UPS package ended up on the same UP train! UPS then re Labels it semi locally and sent it to me USPS ( postal service) to my door..... 4 days. Not bad for a 3200 mile trip, and 87% by rail. ......UPS and USPS are heavy Intermodal Users, and as brick and mortar stores carry less items and online shopping increases, I expect the "Mail by rail": services to increase. While REA isnt doing it anymore, the "mail by Rail" business is alive and well...
UPS Flies all express Mail for USPS and USPS delivers all local small packages for UPS, FEDEX gets in on this to a degree too.
Customer manifest on UPS and BNSF will show UPS, USPS and Fedex as heavy Intermodal users
In a previous post to this thread, I showed the impact of coal traffic on CSX's volumes and revenues. Here are the numbers for all of the freight carriers for 2012, as per data from the American Association of Railroads.
Two thoughts: One. Diversification of traffic sources. It is never wise long term to depend so heavily on one or two sources for revenue and profits. Two. It is difficult to measure how much business is turned away by never going after it. Coal and sand and oil and ethanol are the low hanging fruit, but all are energy-related.
C&NW, CA&E, MILW, CGW and IC fan
diningcarWhere do we wish to go with discussions?? Every part of our lives, both personal and business have changed and will again. Buy a 1/2 gallon of ice cream and it is now 1 1/2 quarts; one pound of coffee is now 12 ounces, one gallon of gasoline is now $3-5. Who would prefer to have personal air travel as it was thirty or more years ago. We now pay for things that were once free or realativly cheap. Certainly railroads have priced their service to adjust to the 100's of different factors that did not exist or were only moderately involved 20-30 years ago. We here at this site can wish and plead for what our individual bias's tell us should be the way to do something. But our - skin is not in the game - as the current saying goes.
We're just talking here Diningcar, no need to get upset. Nobody is wishing or pleading here...just discussing. If you don't wish to participate then simply don't. I'm not looking to go anywhere with it, at least not beyond the simple pleasure of discussing things of mutual interest on a chat forum. Is that ok with you? As for having skin in the game, maybe you don't, but I sure as heck do.
This discussion came about as a result of a comparison between today and years gone by... I started out by stating the comparison was one of apples to oranges and everything else kind of went from there... discussions often have a way of changing direction as different participants express their own views... its not a bad thing. Nobody wants to turn the clock back 30 years...
RIDEWITHMEHENRY is the name for our almost monthly day of riding trains and transit in either the NYCity or Philadelphia areas including all commuter lines, Amtrak, subways, light rail and trolleys, bus and ferries when warranted. No fees, just let us know you want to join the ride and pay your fares. Ask to be on our email list or find us on FB as RIDEWITHMEHENRY (all caps) to get descriptions of each outing.
The 80's the decade after Staggers was the decade of aggressive branch line pruning as well as evaluating customers in the view of their profitability for the carrier to continue to service them. Branch lines were either spun off to short line carriers or total abandoned with all possible track materials reclaimed for their scrap values. The industry's view of itself at this point in time was that it was fighting a 'rear guard' action in trying to maintain whatever shareholder value that continued to exist in the companies. Remember, the Rust Belt was overtaking the heavy industry traffic sources. Leadership of that era were the men who had only known heavy regulation in their adult lifetimes, men who had no real understanding of how a railroad could compete in a deregulated transportation environment - they were undertaking the actions they had learned over their careers to be needed for their view of the transportation landscape.
During the 90's newer managers began to assume higher levels of responsibility, managers whose careers did not have the experience of dealing with the heavy regulation of the pre-Staggers era. New ideas began to take hold and be implemented into new services for new market areas.
The 2000's welcomed the ConRail split between CSX & NS and a progressive view of how railroads can thrive in today's economy. The railroads of today have a far different vision of what today's economy is and how their services fit into that economy. Today's economy is totally different than the economy of the 70's & 80's. Work to your strengths, shed your weaknesses; be factual in figuring out your strengths and weakness'.
Never too old to have a happy childhood!
As per page 3 of CSX's 2012 10K, its coal business accounted for 20 per cent of its volumes and 27 per cent of its revenues. The merchandise business accounted for 42 per cent of volume and 57 per cent of revenues. Intermodal racked up 38 per cent of the volume and 14 per cent of revenue, with other revenues of 2 per cent accounting for the difference. The 2013 numbers are similar - I don't have the 2013 10K yet.
Approximately half of the coal volume and presumably half of the coal revenues was for coal destined for overseas users. Thus, it is likely that CSX, as well as NSC, will see a decline in their coal business, but it is likely to happen over a relatively long period of time. Last year, if my memory is correct, coal was used to generate approximately 38 per cent of the nation's electricity. This number is expected to decline over the years, but it is not likely to fall off a cliff.
A key point in this discussion, from my point of view, is the recognition that America's freight railroads are going great guns because they reinvented themselves. Prior to the Staggers Act they were required to provide service to markets that could not or would not pay for them, and they could not reinvent themselves. Staggers gave them the opportunity to stop serving markets that could not be supported and focus instead on markets where the participants would pay for the services.
It's always better to be able to do more, not less. Shippers with rail sidings would enjoy a competitive advantage over those who didn't.
The prevailing wisdom in business of all kinds appears to be to focus narrowly on one aspect of the market and ignore the rest. Today railroads are more efficient, no doubt about it. But they rely on fewer customers and revenue streams, and they are more vulnerable to events in distant lands that produce the dollar store stuff that most of us prefer to buy.
Decades ago profit margins weren't as good, but the railroads' customer base was broader and more diverse, with much less exposure to the vagaries of foreign events and markets. It is always better to have many mid-sized customers than only a few large ones, especially when those large ones are offshore.
CSX and Norfolk Southern are scrambling to find replacement business for their dwindling coal revenues. To their credit they are making good progress, but the underlying problem was that they (and their predecessors) had come to rely too heavily on one revenue stream. The same could happen to all of those containers that come in from Asia. Or oil for that matter.
Bolstering profit margins by cutting back services and axing the physical plant is for the most part short sighted. Modernized branchlines run with eco locomotives and reduced crews could, I believe, have been competitive with trucking. Maybe the pendulum will swing the other way again.
The counter arguement is that with the move away from branch lines and the move towards intermodal has actually expanded the railroad's ability to attract shipments and provide service to smaller companies. If the railroads concentrated on branch line service only those companies immediately adjacent to a rail line would benefit from rail service. With intermodal operations any industry within a hundred or two mile radius of an intermodal ramp can ship by rail.
The company at risk is the one that can't convert to TOFC/COFC.
On the other hand, by converting to the major facilities loading bulk trains, the railroads are able to move more material faster with fewer cars. 30-40 years ago here used to be severe rail car shortages every harvest, the news was full of pictures of piles of grain on the gound because of car shortages. With the large capacity covered hoppers, dedicated shuttle trains, 100+ car trains sizes that is a much, much rarer problem. Instead of a 40 ton car making 1 or maybe 2 trips per month, there are 100 ton cars making 2-4 trips per month.
Dave H. Painted side goes up. My website : wnbranch.com
Was waiting for an item from poster about improved efficiency and allowed more container traffic. Until about 1970 each state regulated trucking especially size. Each state had different loading schedules dimensions lighting; etc.. An example was Illinois that had a height restriction due to the many low clearances of roads under bridges.
Along with that many states required clearance lights on the top of all trucks and trailers. Each state had different standards. when congress finally stepped in size was standardized to a height of 13'6" and 102" wide. Lengths were standardized at 48',& 53'. Total weights of 80,000# and axel loads at 18,000#. These were minimums and some states were allowed higher values. The top clearance lights were no longer required so containers could then be used through out the USA. Do not know about Canada and Mexico.
A number of analysis of fuel efficiency comes up with approximately 450 ton-miles/gallon for a train and 180 ton-miles/gallon for trucks. The 450 number comes from dividing the total ton-miles of railroads in a year (approx 1.7T) by the total fuel consumed (4B gallons). The same analysis is done with trucks but that is problematic because many different sizes and types of trucks move freight and they are regulated in many different ways. With about a 3:1 efficiency advantage, the railroads can afford maintain their physical plant where trucks are heavily subsidized by the auto and general tax funds. The subsidy sort of balances out the rail's advantage so it doesn't pay for them to operate branch lines.
As for passenger service, Amtrak moves folks at about 70 Pass-Miles/gallon and buses at 40 Pass-Miles/gallon. Again Amtrak is 1/3 subsidy and buses at least 60% subsidy so cost analysis is tough to do .
Comparing Europe's freight system to the U.S. is really tough. BNSF moves 300B Ton-miles in 6 months and all of Europe moves 250B Ton-miles in a year. (http://www.trforum.org/journal/downloads/2013v52n2_04_FreightRailways.pdf). There is no comparison. U.S. costs/ton-mile are 1/4 of the European costs.
To add my own opinion, the reason the American rail network appear so much more efficient, at least by statistical measure, is that we are comparing apples and oranges. Much of the traffic here is very long haul, often in unit trains. Few rail networks elsewhere in the world are fortunate enough to have the luxury of 1,000 mile line hauls. Furthermore, the short haul loose car traffic has, to a considerable extent, been the victim of continuous demarketing for something like 50 or 60 years.
But I do not blame railroad management for the demarketing, since it was, and still is, the correct commercial answer to government interference in the marketplace. At first it was regulation of rates that prevented the railroads from recovering the true costs of local switching and branch line service. In reaction railroads used aggressive cost-cutting measures that impaired the service, and of course the affected industries out of necessity spent money and switched to other transportation options.
But note that I said "at first". Government interference in the market place is still with us today, just in a more subtle form. That local service provided by trucks uses a vast network of roads provided to them essentially cost-free. That is a subsidy by the back door. While specific highways, especially the Interstates, are perhaps recovering full costs from fuel taxes they are the exception. I question whether that 200 mile haul by truck to the nearest intermodal terminal would have still made economic sense if fully allocated costs were added. And those fully allocated costs would include a fee paid to the various local jurisdictions by commercial operators in lieu of property taxes on the roadway.
Unfortunately the branch line network has long fallen below critical mass, and neither the remaining business nor the surviving infrastructure is enough to allow recovery except in a few exceptional cases. The damage has been done and we have to live with the consequences.
In contrast, Europe sees economic advantages to getting their relatively short haul freight off the public highways. That is a fairly recent development, as the politicians started to identify the actual cost of highway transport on other budgets.
John
I often hear that trucking is best for shorthauls and the pickup and delivery while rail is best for the longhaul. Yet, for the most part we in trucking don't like the short-haul stuff either. Shorthauls involve bumping docks and dispatching on a daily basis, and disproportionately more time lost due to waiting around to get on and off load. We too prefer the juicy long hauls that are easier to manage and are also a bit easier on the drivers.
Trains Classics recently had a very nice article about CN branchline railroading in Palmerston, ON in the 1950s. This article was all the more interesting to me because I have customers up there who ship locally within Ontario. I know for sure that they'd ship rail if they had the option. My (and my competitors') rates are high because none of us want to fool with 50 mile dispatches... so I wonder, from a shipper's perspective, how much cheaper/more efficient trucking really is in their market.
I think greyhounds has a very good enalysis, and I would expect Sam1 to agree.
I would wish for Class I's to figure out a way of handling loosse car railroading more efficiently, learniing techniques from the short lines, but I am not expecting this to happen. Even management time and effort and intelligence are commodoities and must be spent where the profit is greatest.
One reason loose car railroading is less efficient is the amount of tiime these cars spend in yards. A second is the need for far more switching than either intermodal or unit trains. And a third is the proportion of management time per shipment value.
tree68 There is still a need for "onesy-twosy" car movements. I would opine, though, that much of that portion of the business is now being covered by shortlines. A shortline based in Utica, NY, uses trackage rights over CSX to move comparatively small numbers of cars between Utica and Rome, NY, at the former air base. While the number of cars is relatively small, it's enough to keep this line in business. If left to CSX I'm sure that rail service there would have died off years ago. CSX makes their drops and pickups in Utica, where there are plenty of facilities to handle same.
There is still a need for "onesy-twosy" car movements. I would opine, though, that much of that portion of the business is now being covered by shortlines.
A shortline based in Utica, NY, uses trackage rights over CSX to move comparatively small numbers of cars between Utica and Rome, NY, at the former air base. While the number of cars is relatively small, it's enough to keep this line in business. If left to CSX I'm sure that rail service there would have died off years ago.
CSX makes their drops and pickups in Utica, where there are plenty of facilities to handle same.
Oh, for sure!
Sometimes shortline service hits the spot. I didn't say there was NO rail pick up and delivery. I said the volume had decreased.
But, in general, railroads work best for line haul and trucks work best for pick up and delivery. (Bulk commodity unit trains excepted!)
The US logistics system has somewhat configured itself into that most efficient configuration after the stupid government quit blocking the way. There is still some work to be done.
Right now, 46% of rail loads are intermodal. I do not know how many are in unit trains, but intermodal/unit trains are obviously the overwhelming amount of rail business. That's why US railroads are so efficient. And the stupid US government fought that every step of the way. Until some rare wise men/women in the government prevailed.
Larry Resident Microferroequinologist (at least at my house) Everyone goes home; Safety begins with you My Opinion. Standard Disclaimers Apply. No Expiration Date Come ride the rails with me! There's one thing about humility - the moment you think you've got it, you've lost it...
Ulrich Railroads today are basically trunk lines that ship large volumes between major centres. 30 years ago they were more heavily involved in the pick-up and distribution of freight from customers who were often located on branch lines. Most of those branch lines are gone now, and the smaller shippers don't matter that much anymore, hence the proliferation of trucking and third party logistics companies over the last several decades. The comparison isn't really a fair one as the service offerings today are more focussed on fewer key markets and not on the general freight market any longer. An efficient railroad is of no use to a shipper when that railroad doesn't service his business or community and he has to truck his freight.
Railroads today are basically trunk lines that ship large volumes between major centres. 30 years ago they were more heavily involved in the pick-up and distribution of freight from customers who were often located on branch lines. Most of those branch lines are gone now, and the smaller shippers don't matter that much anymore, hence the proliferation of trucking and third party logistics companies over the last several decades.
The comparison isn't really a fair one as the service offerings today are more focussed on fewer key markets and not on the general freight market any longer. An efficient railroad is of no use to a shipper when that railroad doesn't service his business or community and he has to truck his freight.
I think you're missing the point.
The railroad industry has changed dramatically and no longer does the volume of "Retail" deliveries that it once did. But that's to the good. Trains make lousy pick up and delivery vehicles for individual shipments. They're very inefficient used in that manner.
On the other hand, they're great for moving significant volumes between hubs. So what you do is use the train for a line haul vehicle and a truck for the "Onesee/Twosee" deliveries. Use each vehicle to its best advantage and you get greater efficiency. After all, a train and a truck are just two different tools for doing the same job. Use each tool to its best advantage. (This, naturally, changes with unit trains of oil, coal, grain, etc.)
Regulation blocked needed changes, such as described, in the transportation/logistics structure of the US for at least five decades. My open challenge to anyone is to cite two beneficial outcomes from economic regulation of transportation in the US
CSSHEGEWISCH Libertarianism and Marxism both look really good on paper but neither works too well in the real world.
Libertarianism and Marxism both look really good on paper but neither works too well in the real world.
The problem is there are too many real people!
-Don (Random stuff, mostly about trains - what else? http://blerfblog.blogspot.com/)
Quite often change is driven by short term considerations and profit motive. It's a rare business and industry that will forgo short term profits for long term gains that extend beyond ten years. Moreover, capitalism doesn't discern between good and bad in realms that go beyond economic activities.. i.e its good business to exploit cheap labour overseas.. but is it right?
In my view trimming the rail network of its many branches will prove to be a bad decision. Trucking looked much better 30 years ago than it does today. There was no driver shortage, fuel was dirt cheap, and there were no environmental regulations to speak of. In today's environment the railroads are much better placed to compete on these short-hauls, if only the tracks were still in place.
Sam1Now, if we would just allow passenger rail to do the same thing.
Sam1,
I'm curious, if you had the proverbial magic wand that you could wave to make this happen, what would you do?What would the passenger rail world look like?
As a rail shareholder for several decades, I would be the last to complain.
Notwithstanding profits however, railroads today are less relevant and less in the public eye than they were 30 years ago. The average shipper nolonger uses rail...only the big ones do. The average person can nolonger name the railroads that run through town like every five year old kid could 30 years ago. Railroads nolonger employ the numbers they did years ago when everyone seemed to have a relative on the railroad. That's not good or bad, it simply shows that a comparison between today and years gone by is an apples/oranges comparison. To simply state that railroads are so much more efficient today doesn't tell the whole story nor does it do justice to the railroads and railroaders of decades gone by.
Today's railroads are not the arterial network of branches and mainlines that served thousands of domestic shippers directly years ago; they are trunk lines that move volumes of bulk material for a few really big customers and vast quantities of low priced dollar freight brought to our ports from low wage countries (and mostly for a few really big retailers). They may be profitable now, but that profitability will evaporate if one or both of those revenue streams goes away.
Properly regulated markets just work better than state directed solutions. Proper regulation means sensible regulation, which is sometime difficult to define, but at the end of the day, when in doubt, less is better than too much. The one area where compromise should not be permitted is health and safety.
Over the past year the stocks of the U.S. and Canadian railroads have outperformed the S&P 500 by an average of six percentage points. Take out the Kansas City Southern stock, which has under performed the S&P 500 significantly, and the outperformed number jumps to 12.2 per cent. While the performance of market shares is not correlated 100 per cent with the underlying financials, the correlation is relatively tight, and the price of the market shares reflects the health of the company and the industry.
America's freight railroad are doing well because the government got off their backs, and they were allowed to reinvent themselves. This is just one example of how a market oriented business, if allowed to do so, can reinvent itself. Now, if we would just allow passenger rail to do the same thing.
Russell
Our community is FREE to join. To participate you must either login or register for an account.