Of course KCS had an incentive to favor CP before the purchase by CP as it gave them a much longer haul rather than turning most of the traffic over to CN at Jackson, MS. East St. Louis no longer offers CN direct access to Chicago, as they sold or abandoned the direct routes to the north. KCS interchanges only with IMRR at Springfield, IL and only once per week.
KCS added by lease, 80 used former BNSF Dash-9 locomotives during the period between the purchase by CP and the merger. This is due to a large uptick in traffic coming out of Mexico.
As to whether or not the same efficiencies could be obtained without the merger, the two companies tried that for three years and found that one railroad or the other had to make sacrifices of their revenue to make deals work, only in a few cases like the Oil Train moves from Canada to Port Arthur, TX make sense.
It should be noted that KCS passes through Houston, TX but does not serve the city except vi
Prior to April 14 we had seven class 1 railroads that could interchange freely with one another. After April 14 we have only six class 1s that can interchange freely with one another. End result is fewer options for shippers… i.e. less competition. If end to end mergers unlock so much potential without inhibiting competition, then why not have UP and CSX/ NS and BNSF merge?
One point to consider is that the CP/KCS merger, aside from being end-to-end, is also primarily a north-south route on a continent where most traffic is east-west.
To remain competitive you must remain efficient. Railroad companies that must maintain their own infrastructure need to combine in ways that make the best use of those assets. Remember most other modes use public infrastructure. Sentimentality is not necessarily a good economic strategy.
No sentimentality…and other modes… notably trucking…pay for its infrastructure through a variety of taxes…fuel taxes (municipal, state, federal) ton mile tax…and of course road/bridge/tunnel tolls. If all collected road and fuel taxes were directed back to road infrastructure we could rebuild the interstate highway system (or at least repave it) every couple of years…
Of course railroads need to be efficient…we all do…but removing the impetus to innovate and compete doesn’t work in that direction. We all work best when the wolf is at the door…human nature…
My understanding is that despite the various taxes other transportation modes pay for the taxpayer provided facilities they use, those tax payments are far from covering the benefits they receive
If trucks fully paid for the road use, the highway trust fund wouldn’t be about $40 billion short. Nevertheless, the main point I was trying to make is that the rail infrastructure is sunk costs, whereas trucks can rearrange their service area at will.
The wolf was at the door, which is why all the railroad mergers. As long as there are still two railroads, they will have to innovate/compete between themselves and also trucking, and pipelines, and barges (and hyperloops?)
1-CN has access to Mexico. It’s called the CG Railway and it has 2 railcar ferries that provide service between Mobile, AL and Coatzacoalcos, MX. The ferry offers 2 day transit time which is currently on average faster than going via Laredo, TX which can can delay interchange up to 120H…
2-Most Missouri grain goes via the Mississippi. Any grain by rail on CPKC will not go east to Canada. It will go to the Gulf for export.
CPKC was a defensive merger as CP ran out of options for growth…Nor could they allow KCS to end up with BNSF, CN, UP, or NS? CN will still command a much better network.
CPKC’s intermodal franchise will be fairly weak domestically and certainly can’t hold a candle to vastly better route options that CN, BNSF, and UP hold between the Gulf and Midwest. CPKC believes Lazaro Cardenas-Chicago is going to jump off at the expense of the less expensive ports of POLA/POLB? No chance… LC is more expensive to Chicago, 7 day longer sailing time and lacks transload capability… While adding customs delays. Versus landing boxes stateside for domestic receivers…
Another stickler… CPKC only has exclusive operating concessions for the Mexican portion until 2037… Anyone’s open to bid for open access once it expires. Then 10 years later the concession will be open to bid for a new operator… Also Mexico industrial policy is pretty dicey and can change on a whim…
CPKC has alot of challenges ahead and its route structure will certainly give it a run for its own money…
On webcams I’ve been seeing blocks of doublestack intermodal containers start to show up on the CPKC manifest trains running between Nahant, IA and Kansas City. They seem to be on already-existing trains so far. I also saw an autorack train, which I don’t recall seeing before. All this since the merger date this week. The containers haven’t appeared in Dubuque, so must be headed toward Chicago.
If trucks fully paid for the road damage they cause, the trucking industry would likely be trillions short. As we transition away from the ‘good roads’ movement making road and highway maintenance the same sort of ‘free right’ as public education, we may expect to see measures to make trucks pay their ‘fair share’ of this – and with the government’s proven authority to be paid revenue “owed” them (or face expedient prosecution, imposition of strict scrutiny, etc.)
That “fair share” would simply be passed on to the consumer…Ultimately any subsidies are subsidies to you and me and every other consumer who buys stuff from stores that aren’t located on a rail line.
And let’s not forget that all transportation modes benefit from taxpayer subsidies…Amtrak, VIA, and all commuter rail operations, for example are largely paid for by the taxpayer while their host railroads enjoy sub 60% operating ratios. Similarly, cheap airfares are only possible because we have subsidized airports, and security…thanks again to taxpayers.
Of course it would, and most probably with the same ‘markup’ we saw with ‘emergency’ fuel surcharges at times over the years. The point is that the price of service would reflect the actual costs of damage done to public infrastructure, and allocate them fairly rather than expect government or some other vague welfare-economic source to subsidize (or ignore) them.
Schnieder states they do not care about the multi-railroad offering even if it has marginally better times because they only want a single vendor to deal with the service vs. multiple railroads. Seems to me that is a fairly big clue dropped by a major client that UP & CN both need to setup a single touch point for their intermodal clients on cross border and cross country traffic.
Question is, will they do that?
I think American railroads approach to traffic offline is rather 1970’s era and needs to be updated. I could not imagine telling a client if I had a joint rate with someone that they need to call the other person to find out about their shipment or to complain. Just seems like fairly bad customer service.
Actually, Schneider doesn’t say that in the article. From the article: “Schneider’s growing customer base will be able to leverage CPKC’s broad network of rail lines and terminals, according to the Class I railroad. “These services, supported by Schneider’s drayage capabilities and expertise in the U.S. and Mexico, will create service reliability in lanes that until now lacked single-line, truck-competitive intermodal options,” the railroad reported.” This quote is from the railroad; the quote from Schneider in the article doesn’t mention the “single-line” route. (If there are other articles that do include such quotes from Schneider officials, please provide the link.)
It sure is an amazing coincidence that this new business was announced right after the CPKC merger was consummated. Could it be that CPKC is offering a rate lower than the competition? Maybe even too low just to attract customers to prove their merger a “success?”
Nine doublestack well cars with 11 containers on the end of tonight’s 261 everything-train passing through Washington, Iowa. 3x1x0 power setup on a typical long slow one.