The Next New Thing?

Posted by Fred Frailey
on Thursday, November 17, 2016

Edited 9: 15 a.m. November 18

In the late 1990s, Rob Krebs of Burlington Northern Santa Fe proposed to his former colleague Mike Haverty of Kansas City Southern that the two railroads publish a joint rate for traffic to and from Mexico via the Laredo gateway that would blunt the competitive advantages of BNSF rival Union Pacific. The proposal didn't fly because its terms didn't pass the smell test.

This week, the wheel completed its full circle. The two railroads announced a joint intermodal service that will gather containers on BNSF Railway from Chicago to Seattle and all points in-between and funnel them to KCS in Robstown, Tex., for distribution to the doorstep of Mexico City. (By the way, this service connects directly with a new BNSF intermodal train between Seattle and Texas by way of the Powder River Basin and Denver.)

The effect will be to vastly expand Kansas City Southern’s reach into U.S. markets, and open to BNSF an intermodal opportunity previously unavailable to it. In other words, this looks like a win-win deal. The only loser is perhaps Union Pacific, but weep not for it, my friends, because according to the Journal of Commerce UP is gobbling up more and more of the traffic these days.

BNSF says the train will originate in Chicago's Corwith intermodal yard and gather additional traffic from the west and northwest at Alliance, just north of Fort Worth. The map depicted above makes it appear that the train will operate over the former Burlington-Rock Island tracks via Dallas, and then on trackage rights over UP from Houston to a connection with KCS in Robstown. I wonder why BNSF would not just deliver the train to KCS at Rosenberg in suburban Houston. In any event, BNSF's own trackage rights over UP are more direct than the path taken by KCS trains.

The potential of this alliance is limited only by the degree of commitment to it by the two railroads. BNSF’s reach across the western United States is every bit as great as that of Union Pacific. Kansas City Southern almost exclusively reaches the biggest cities of Mexico via KCS de Mexico. Now add to that the potential that BNSF partner J.B. Hunt Transport Services, the giant of U.S. trucking, might be attracted to join this partnership. All you have to do is spend a day along the core BNSF route, Chicago to Los Angeles, to appreciate what J.B. Hunt can add to a railroad’s book of business.

In other words, this has the possibility of being a really big deal, the Next New Thing. For that to actually happen will require both railroads not just to sell the service, but to deliver it with utter dependability, which is what shippers and intermodal third parties demand.—Fred W. Frailey

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