How are shortlines and regionals able to run some lines profitably when their class 1 predecessors couldn’t? The Class 1 roads have the advantages of ecomomies of scale, they are able to keep their locomotive fleets up to date with the latest technology etc. So how is it that a shortline/regional can thrive with old locomotives, lower volumes, and no economies of scale?
Looking at my own industry (non-RR) the BIG Companies I have worked for expected large margins and volumes or it was not worth doing. The smaller companies picked up those areas since their margins did not need to be a big to operate. Also, not everything needs the Best of the Best so the hand-me-down stuff can work just fine in smaller operations. I would assume the same holds true for nearly all industries.
[C):-)]
Because they go after business the Class 1s (at least some of them) turn their nose up at.
A couple months ago I was at a RITS regional meet where Dan Sabin of the IANR was the featured presentation. He talked about the Manly Railroad musuem he’s sponsering, but also about the IANR.
Another thread mentions the new IANR expansion on a former UP branchline. He talked about that and said he thought the acquisition would take a couple of years to pay for itself, but it only took a few months. They (IANR) did more business on the line in the first few months than the UP did in the last few years. (He gave specific numbers, but I don’t remember them.) My wife whispered to me that she didn’t believe that, but I whispered back that I did, knowing how the UP looks at short haul/smaller volume traffic.
It used to be said of the railroad, “If it doesn’t fit in a box car, we don’t care about it.” Now it’s more of, “If it isn’t a unit train sized move, we don’t care about it.” It’s like they (class 1s) want the cream off the top, but don’t want to milk the cow.
And it’s not about being able to make money from a one car per week customer at the end of a 20 mile branch line. Unless more business can be found, that line will be abandoned by either a short line or class 1. The difference is the short line is more likely to try to find business that will keep the line active, the class 1 probably would not.
Jeff
See generally Roy Blanchard’s website and references, publications, etc. at:
How long will the Class Is keep accepting single carload traffic from shortlines. Certainly the customer will be better off if the final delivery is by another shortline. The big problem with the Class Is is operational discipline. If you want to see true precision railroading look at the Swiss Federal Railways domestic carload network, next day delivery of your load from anywhere in Switzerland to anywhere else in Switzerland overnight. And if you are along one of the mainlines it will be by noon the following day. So say you are the Brewery at Rheinfelden, east of Basel, and you need a carload of Beer shipped to Geneva. Your carload will be picked up by 5 pm, humped at Basel, put on a mainline train to Lausanne, humped again, and delivered to your warehouse near Geneva by noon the next day. On a US railroad you might be lucky if they completed the hump switching at Basel by noon the next day. A big part of the problem is the very big size of carload trains in the US. It cuts down on the linehaul cost of carload movement, but tends to create real problems in execution of switching. BTW SBB delivers 98% of the carload traffic on time which is defined as within 30 minutes of schedule. US railroads can’t achieve that percentage within 24 hours of schedule.
Of course the corollary for the Swiss is that your carload better be ready on time, or it won’t move at all.
We should mention the significant operating cost savings resulting from owners and managers doing multiple tasks. When you have an ownwership equity you do whatever is necessary; and when you hire people you look for that same commitment. There was a Trains story recently about how a very successful short line RR worked which gave details of the commitment all who worked there had.
The flip side to the economies of scale are the diseconomies of scale. You can google the phrase, but it essentially refers to the increasing difficulty of managing an increasing number of people. The large RRs seem to feel it’s better to spin off marginal lines (and their personnel, costs, liabilities, etc.) and replace all that with an employee to coordinate all the traffic that hopefully the shortline will supply to the big road. And if the spin-off fails, the original RR often has the option to re-acquire, or let it expire.
Big business railroads want to handle long haul traffic with as little handling (terminal, switching) as possible. Thus a branch line or segments of lines are good candidates for spinning off to short line operators. Short line guys are often local people…at least at start up…and will seek new business, make deals, have smaller crews at lower wages, every employee multitasks, only one but no more than say 5 locomotives are needed, don’t have to own equipment or can have and lease out, often track becomes owned by shipper’s cooperative or government agency which will farm out the operation, There are so many ways it is cheaper for smaller owners, as many different ways as there are shortlines I suppose.
“Bob Bryant’s Big Little Railroad”
By Fred Frailey
Buckingham Branch, once a mom-and-pop short line, spreads its wings and flies
January 2012 Trains
Undoubtedly one of the factors that help the Swiss Federal Railways (SBB) achieve the laudatory results that you reference is the fact that approximately 29 per cent of its revenues comes from the public sector. Read taxpayer subsidies! And a total of 21 per cent of these revenues are plowed into infrastructure that is used by passenger and freight trains.
This is a fact and not a political statement. I am a strong supported of free markets with minimum regulation. Having said that, I believe a case could be made to have a public sector corporation take ov
The concept of open access has been sliced and diced in these forums in the past. Your proposal suggests that the railroad system be nationalized and separated into a publicly owned infrastructure company with various operating companies still in private hands.
Shortlines move the carloads the class 1’s dont want, like single carload customers. The big guys want unit trains. Class 1 money is way more than what most shortlines pay, have not heard of a shortline yet that pays six figures. Lots of shorlines pay salary with no OT. Many shortline managers are also engineers, conductors, track formen, ect. Shortline employees can wear many hats, which in turn saves money.
Track. Yea there are several smaller roads that will get by with the minimum. It often takes an FRA track man to come inspect the line and write up defects before the company will make repairs. Track work costs lots of money which is why you see such slow speeds on the small roads. Most have class 1, and excepted track.
Nationalization is not the correct term. I would keep the infrastructure in private hands, as per below.
It could be set up similar to the electric utilities in Texas and parts of Australia. Here and there the poles and wires (similar to railroad rights-of-way) are owned by investor owned, independent operators, but their rates and rules governing their use are set by a utility commission. In Texas it is the Public Utility Commission.
Private generators and retailers buy access to the poles and wires to transmit and distribute electric energy. They pay a fee to use the system. Well, actually, their customers pay the fee. The energy is produced by a variety of generators, and it is sold through a greater number of retailers. The generators and retailers have to meet the system operator’s standar
Domestic carload freight is not Open Access in Switzerland. It is SBB Cargo or nothing. The difference is in the attitude of the management and employees. Unless the locomotive is one of the old Ae6/6 locomotives the Driver (they have no Conductor’s on through freights) will dock his company issued laptop is a special bay alongside which is a clock. Next he will bring up his train’s schedule on the laptop which will be listed at every timing point from start to final destination. On freights the timings are to exact minute, on passenger trains to the exact second. Next he will make sure that his watch, the computer’s clock, and the locomotive’s clock are all synchronized. At the scheduled departure time he will begin to roll, there is no calling to see if the dispatchers are ready for him, both he and they are expected to be ready, there is no pencil-whipping. If he is late passing one of his timing points by one minute the color of his train symbol changes to a warning color on the Dispatcher’s Display, at three minutes late the color gets more ominous and the Dispatcher will get an audible warning and the Driver will be contacted via radio. On trackage equipped with newer signalling systems the Driver gets the same warnings as the Dispatcher. SBB has no trouble attracting top notch college graduates for management positions, and a very through apprenticeship program for the skill positions. Training for a Engineer is typically a six semester program with serious hands-on training on everything he might possibly need to know. The pride in their professionalism shows.
Now contrast that with the US, the reason that US railroads are de-emphasizing carload traffic is because they cannot provide service in a timely manner. They feel that every time a freight has to be switched it is an opportunity for service to fail, and with carload traffic and many OD pairs resulting in a complex network, carloads will have to be switched at least twice and many will need more resulting in many chances of service failur
Completely agree. Roy is the man on this…
I suspect that many shortlines can make a profit because a significant portion of the roadway cost are reduced through grants, loans, or ownership by government authorities.
I also suspect that a lot of the same short lines and governmental authorities are about to get a rude awakening about the capital investment needed to keep a railroad in working condition - a lot of them have been coasting for many years on the condition of the lines inherited from the Class Ones.
it seems like a lot of shortlines and regionals are mainly one commodity lines. In our part of the world, it’s either grain or pink rocks. It seems pretty common, that the folks selling those commodities tend invest in a financial stake in the forming of new roads.
The other oddity, to me at least, is that a class 1 would never operate a line hauling frain cars at 10 m.p.h., but a shortline would, if it made economic sense to them.
Not really,
Most short lines are very conscience of track maintenance, but they do re-use and re-lay a lot of second hand rail
http://www.aslrra.org/our_members/railroad_members/index.cfm
Check out your state and see how many short lines are out there, and while quite a few serve only a handful of companies, most serve a lot more than you think.
My own railroad only has 52 miles of “main line” but over 450 miles of secondary track, yard track and industrial track, we serve almost 400 customers.
We operate under RTC, in dark territory, with the GCOR and rule 6.28, max speed 20 mph, 10 mph yard speed.
We move over 500,000. cars a year, have 3 major yards, 3 small marshaling yards, own 25 locomotives, employee 324 T&E employees and god knows how many clerks, MOW and such.
Besides the “loose car” railroading, we handle three to four inbound 120 car plus grain trains daily, and at least that many coke and coal trains of the same size.
We can turn and burn an pair of inbound and empty unit trains out of Cargil elevator in 4 to 5 hours and have the empty ready to hand off to the Class 1 who brought it to us.
Odds are, if you have a windmill farm near you, we hauled the part for it out of the Houston public docks, built the train and handed it off to our class 1 partners.
Our rip tracks alone bills over one million dollars a quarter, so…
One of the major reasons short line exist isn’t because they are not profitable, low maintenance on the fly cheap operations, held together with baling wire and bubble gum , but because a class 1 would have to build, maintain, staff a terminal close to or in place of the short line, and a lot of short lines and regional roads don’t generate the profit a class 1 would have to have to do that…short lines and regionals, switching and terminal roads(class 2 and class 3) don’t have quite
The regionals seem to be succeeding in areas where the class 1s couldn’t…the G&W Atlantic & St Lawrence line and the MMA line through Quebec are two good examples. I knew both lines when they belonged to CN and CP respectively, and back in the late 70s and early 80s trains were mostly one locomotive and three to ten cars. Nowadays, under regional management trains are much longer…even my mother complains that they take forever to clear a crossing because trains are so long. Good for them and the communities they serve. From all appearances they’ve done a great job in bringing life back to those lines.
http://www.ptra.com/index.php/customers/tariff.html
If you were wondering what a Class 3 can charge for service, look at our 2011 tariffs…by the way, the web site is still under construction, and like most construction projects on a railroad, may take a while…[;)]