Well, they have to bill somebody to make up the difference, I'm not sure that a 300% or 400% rate R/VC imposed on captive shippers is an accident.
However, the thread raises an interesting issue, and may be one reason John Snow is on his way out.
The primary "race to the bottom" insofar as rates were concerned was with intermodal. Kind of the "revenge of LCL" in some ways. Has been and probably always will be little profitability.
Yet, enormous capital resources have been devoted to meeting the capacity requriements of a low-profitability traffic, while ignoring the capacity needs of the captive shippers because, well, they're captive. This is notwithstanding that capacity improvements for high margin traffic would yield improved equipment cycle times most likely permitting reduced rates and still maintaining the profit margin, just because of efficiency improvements.
Now, despite allegations that it's all Wal-Mart's fault, the primary reasons that Chinese (not Asian) imports have flooded American railroads is 1) an extremely undervalued Yuan, and 2) preferential transportation rates compared to captive American manufacturers.
Western railroads have been pouring tons of capital into carrying this low-profit traffic. It raises the question, when the U.S. is attempting to put pressure on China to revalue the Yuan, what is the position of the U.S. Rail industry?
Senators Schumer and Graham recently proposed legislation to impose a 27% tariff on all Chinese imports. This is based on studies which show that the Yuan is undervalued anywhere between 15% and 45%.
The 27% tariff is designed to restore a level playing field to American manufacturers in terms of fairly valued currencies.
If that were to happen, what do you suppose would happen to these enormous capital investments of the past five years if import traffic drops 30 or 40%. Wow, all of a sudden, those corridors have plenty -- plenty -- of capacity. And plenty of fixed costs to cover.
UP and BNSF then have a real incentive to try and get the traffic back --- from the other guy. What do you suppose will happen to intermodal rates? Up, or down? Who do you supppose will be paying even higher rates to make up the losses?
And suppose, just suppose, the AAR has to take a position on legislation that would restore currency competitiveness to American manufacturers? At the sacrifice of billions of dollars of investment in corridor capacity to carry imports?
Do you suppose that American railroads will support legislation to restore fairness to American manufacturers, or do you suppose American railroads have committed their financial futures to a politically manipulated Chinese Yuan which is
designed to unfairly destroy American manufacturing capacity?
Who will they support? Who are they supporting? American manufacturers or Chinese manufacturers?
John Snow's role so far? That's a question that has been fairly raised.
Intermodal is proving to be the Tar Pit of modern railroading: politically as well as economically. The railroads can't get out.