why does bnsf think that it is cost effictive to sell parts of there railroad making small shortline railroads? i just dont see what the advantage is.
ICG was probably one of the first major practitioners of large selloffs, although selling off a branch as a shortline has been around for a long time. All of the major US carriers have done it to some extent, and CN and CP are also starting to do so. As I see it, it allows the Class I to sell off a line that may barely be paying its way to a local management that may have more incentive to make the line pay its way. The Class I can get rid of the expense of maintaining the line but still gets a share of the interline revenue.
As mergers have consolidated Class 1 carriers into a group of 7, these carries have become wholesalers of rail transportation, concentrating on high speed unit trains and intermodel trains all running longer distances. Part of this strategy is to shed slow speed branch lines with high labor costs to short line railroad companies. Also, the marketing expenses for branch line by Class 1s is costly and since the Class 1s will get this business anyway via a short line, they think its most cost effective to let the short line market the service as a retailer. Also, in most cases, its faster and easier to sell/lease a branch line than it is to abandon a line.
There is a very good 37 page article written by W. Bruce Allen, Michael Sussman, and Drew Miller titled “Regional and Short Line Railroads in the United States” which appeared in Transportation Quarterly, Vol 56, No 4 that outlines answers to your question. If you want the long answer, I’d go to your public library and get a copy of that article.
Jim - Lawton, NV