Rail mergers and pricing

[MP173]

thanks, but time will tell.

I doubt if there are nearly as many out there wanting to discuss pricing vs the current paint schemes of BNSF & UP or the merits of SD40's, but lets see what happens.

ed

[Anonymous]

ED: YOU SURE KNOW HOW TO START A THREAD. this one looks to be interesting. -- PL

[MP173]

I just finished Michael Blaszak's excellent article on mergers in the industry. I consider Trains and obviously the readers to be very fortunate to have both Blaszak and Fred Frailey as regular contributors. Both provide excellent overviews of the industry.

Ok, now that the bouquets have been passed out....

I believe this has been discussed previously, but only in snippets as a part of other subjects. I am curious about railroad pricing and the construction of rates.

My background was LTL trucking. Often we had interline agreements with other carriers in which freight moved on "thru rates". Thus, a shipment could move from nearly any point in the US to any point on a thru rate, which was much lower than "combination of rates" which were point to point rates. The point to point rates would apply to and from the interline (or exchange) location. The point to point rates had built in costs for pickup and delivery.

So, where I am going with this is...are most of the rates in affect today on the rails "thru rates" or "combination rates"?

I have looked at several of the railroad's tariffs, and similar to LTL trucking rates, the short haul freight is the most expensive...since it includes the very costly pickup, delivery, and overhead costs which are spread out over a very short haul.

Today, if most traffic is moving by combination of rates then this traffic is VERY lucrative, as long as the interchange is efficient. My feelings on the economics of this is that tariff rates have to assume a certain level of service, probably one car pickup and one car delivery. I dont see the tariffs have volume discounts to reflect lower cost structures. So, if say...BNSF is interchanging an entire train of 80 loads and 20 empties to NS at Kansas City, and they have local rates to KC and then NS has local rates beyond KC and the freight is interchanged on the fly...that is really good freight.

I have more questions/comments, but will refrain until I see if there is adequate responses to the above.

We have knowledgable sources of info on this forum (Bob Wilcox, Greyhound, and others that have first hand knowledge) that hopefully we can discuss this.

If the mergers do start, then it appears the rates would at least in theory fall for the shippers, based on what I laid out above.

How much traffic today moves on thru rates? and what would a wave of mergers do to rates and costs?

thanks,

Ed