I’m not a railroad employee, former or otherwise. I do however, like to follow the future of the industry. There are several expansion projects going on, there are proposed projects as well. However, when do you know that “it’s time.” You know what I mean? The multi-tracking of a railroad is based on many factors, I am aware of that. I look at the ebbs and flows of the economy, imports, exports, fossil fuels, etc. and I have sense enough to know that you don’t just double track a railroad simply because you are “currently” running more trains. What influences a company to finally make that decision? P.S…while I’m here, CSX’s proposed “Pennsy” style multi-tracking for it’s former RF&P/ACL main from D.C. to Miami?..Are they trying to expand this line into an extended NE-SE corridor or are they only trying to ease conjestion for commuter traffic from D.C. south into VA?
The answer you already know, of course, is when traffic volumes projected well into the future exceed the capacity of single-track, and the profit from that traffic is sufficient to pay for the net present value of the construction.
It’s really a very tall threshold. In rough terms, if traffic projected 20-30 years into the future is expected to exceed 35-50 trains per day and the new traffic will consistently pay a freight rate of maybe 4 cents a ton-mile or more, then there might be a case for the railroad spending its investors’ money on a second main track. If it’s less than that, then there might still be a case for some judicious expenditures on new sidings and siding extensions. Alternatively, the railroad might talk to the state and point out that a public-private partnership under which the state helps fund the new track provides greater public benefits in terms of reduced costs of emissions, transportation, construction, and maintenance, compared to the equivalent capacity on the highway system.
One would think that with all the whining you hear from the RRs about cutting crew costs, they’d see how much they are pouring down the drain paying crews to wait for hours on end for meets, in single track land
The analysis which RR’s apply to all facets of their operations, expenses, revenues and projected revenues is so much more sophisticated today than it was even ten years ago. They are more ‘on top’ of their business than most posters here realize.
Since I am 17 years retired I do not know how crews are compensated; perhaps Dweezil or someone else can tell me if crew costs are extra for waiting on meets if they do not exceed the 12 hour law.
I was at a gathering where one of the senior planning officers from CSX presented there outlook for future tonnage along their main corridors. The forecast was broken down by type of service-loose car, bulk unit trains and intermodal. No doubt the forecast is the starting point for deciding where future expansion will take place.
I suspect that current expansion decisions are based more on what do we need yesterday. It seems to me that choke points and lines with tonnage over the capacity would be well known by the Class 1’s top managers. At that point, it’s just deciding the scope of the project, the cost for the project, the projected return and prioritizing the projects to get the best bang for the available buck.
If there is an industry welded to its conventional wisdoms, it is undoubtedly the rail industry, and it is no different when it comes to “capacity”. Most manufacturing industries know at exactly what level of operation best maximizes the economic efficiency of their machines. And, it’s usually not “wide open.” In the industry I am currently familiar with, the mills run their best at between 86% and 92% of “capacity”. Above or below that and the economic efficiency – profitability – of the production falls off for a variety of reasons. The rail industry, based on no actual studies that I am aware of, continues to believe that operating at capacity is economically efficient.
In 1961, Kent Healy produced his interesting study The Effects of Scale in the Railroad Industry (Cambridge: Yale University Press, 1961). During his study, he found the puzzling result that smaller railroads were generally more profitable than larger railroads, and through his analysis – he was a Transportation Economics professor at Yale – discovered that in the rail industry there were economies of scale but that, at a certain point, railroads suffered diseconomies of scale. The problem with railroads was that they were generally staffed by people who had 19th Century views of problems: and bigger was always better to those gentlemen, including the notion that consolidation of lines to increase capacity utilization generated more profit.
It didn’t.
However, Healy’s landmark study never took hold in the rail industry, notwithstanding the statistical evidence that his conclusions were absolutely true, because the conventional wisdom was simply stronger than the actual evidence. It was neither the first, nor the last time that conclusive proof of something would be dismissed by rooms full of cigar-smoking “insiders” proclaiming “that’s BS. Everyone knows that such and such is what we need to …”
I agree Mr. Sol on the efficiency ratio. Because of the nature of railroading and it’s difficult infrastructure, rail companies must project well into the future projected traffic patterns as well as dependable revenue. You can’t just pop in a new mainline overnight like a freeway expansion (It’s a “tad bit” more difficult.) Also you have the guaranteed traffic issue to deal with. How many rail lines became rails-to-trails because of drying traffic sources due to domestic industry shutting down or slowing down in that region? How many second mains were ripped up and became CTC single track? On the other hand, keeping WT, Mr. Dweezil posted an excellent point about crews timing out in some siding someplace waiting for a meet. Trains Mag’s recent cover story about the new Sunset Route shows a line that imo did it right. Their expansion was desperately needed. It spoke of trains waiting in about every siding on a typical day. Several years ago, my wife and I were driving on I-10 between Phoenix and Tucson and we (I…heh,heh) witnessed that…headlights for miles from waiting trains. Traffic is still at near capacity level on many of our mainlines…And even though our economy is slowing for now, I don’t believe traffic will wane much. The several billion dollar boost of investment into our economy from oversea interest lets me know that.
A very high risk is the difficulty in making a revenue forecast more than five years into the future. So many varibles start entering the picture the chance of being wrong goes way up. Operations and financial models have vastly improved with the ability to gather and sort data. However, setting down with the DRI numbers for future units out into the future and estimating how will I do better or worse than history would indicate is still a real crap shoot. A good revenue forecast is based on taking the econmetric data from someone like DRI and talking to your customers about variances from the trend. Past five years your customer does not have a clue. As soon as you move away from what your customers think they need you are going into very deep water.
The formula doesn’t care how you do it – on a given section of track, the variables are filled in from real time, real world measurements, taken with a stopwatch and a specific track profile. It doesn’t matter what you did in 1961 and what you do now: it shows up on the stopwatch. The formula isn’t based on a particular set of “practices”, it is based on operating results. They are what they are and the rest is physics.
In the absence of specific line parameters, the formula reflects comparisons between system congestion levels that assumes that train movements are “equal”, that is, that the trains are not operating under different systems from different eras. Fair enough?
If you were familiar with the formula, you would know that it contains an average speed between sidings. The “average” speed between sidings is a variable. It is not prejudiced to 1961, 2001, or 2020. If trains are slowing for the tissue paper, that’s reflected in that average speed. If they are not slowing, that’s also reflected in that speed. The formula doesn’t care what you might be doing in terms of practices, it only cares about how those practices affect average train speed. You would know, from the formula, how a practice that changes average speed affects line capacity. Which is probably something you would want to know.
But that has nothing whatsoever to do with the validity of the formula as you suspect – rather, it simply confirms it.</
And this is the conundrum…I question capacity limitations that everybody complains about (except engineers) because if I recall, the average capitalist mentality would say “keep pushing the envelope until it starts costing money.” The Transcon for example…this line segment through Kansas had a lot of single track. Then some BNSF exec woke up and realized “hey, we’re almost at 100 trains a day, lets propose to double track this line all the way to chicago.” Did the decision occur because of congestion and crew time-outs or because well paying over-seas customers didn’t appreciate their containers taking 2 and 1/2 days to make the run into the Port of Los Angeles? I know, I know…they both cost money but I would guess the decision ultimately is decided by interference with revenue as oppossed to congestive running conditions.
DRI was orginally Data Resources Institue. They sell econmetric data to private firms, the Federal Reserve, the Executive Branch, Congressional Committies, etc. As an example I would use their orgininated carload forecast for chemical traffic for the next five years broken down origin territory and by quarter as a place to start making my annual carload forecast.
The decision was made so the railroad could add more trains and increase revenue.
Congestion doesn’t just happen without a concious decision to create it – someone makes the decision to add trains to the point that the capacity is saturated. There’s an immense experience base to railway operations, and if someone asks if there’s spare capacity for new train XYZ with such-and-such horsepower/ton, such-and-such schedule, etc., and wants to hear an honest answer, he’ll get one. The railway may accept temporary congestion for various reasons, and most congestion is temporary. The single-track lines I used to be responsible for could some days be a jackpot and two days later would be dead. Traffic fluctuated violently from one day to the next depending upon what our connections did or didn’t do, the weather, grade-crossing accidents, mine problems, power-plant problems, the opening day of elk hunting season, power shortages we sometimes created ourselves and sometimes another railroad created for us, etc. You could a
Even just intuitively, I will accept the idea that as traffic grows over a given segment, the average time for trains to cross the segment will increase. The formula cited was appearantly developed from actual observations of train movements circa 1960 or so. Given that, it is reasonable to assume that for any given set of parameters, the formula would have been reasonably accurate in predicting average transit times for railroad operations of that same period.
My position is that improved communications allowed a certain increase in the efficiency in the dispatching function to the point that the observed percentage ratio of siding to running time could be lower than the formula calculation.
Seems to me that there is another point worthy of consideration. Assuming a direct correlation between total transit time and operating cost, and further assuming that operating cost is on the order of 50% of revenue for the 5 train volume, total profit for the 25 train volume would be on the order of three times that of the 5 train volumn.
Personally, I’ll sacrifice the per train margin for the total profit gain.
The formula is based on the measured running time, whatever it happens to be. And that is a key: if a given practice is better than a previous one, the formula automatically recognizes that since the data input reflects the improvement – it has to. But the formula also looks at the underlying mathematics: for a given number of trains, there is a corresponding number of meets which is mathematically related; it can’t get “lower”. You can speed up various aspects of efficiency, but then that applies across the board and doesn’t change the relative comparisons of the configurations. Poole in fact included in his formula a differential between train orders, ABS, and CTC – giving CTC a 20% advantage over the train order system.
Wow! This is facinating stuff, Michael. These numbers are way below what I would have thought would be a point of diminishing (let alone negative) return. Thanks for another gold mine, here.