Productivity, Pricing, and Profitability in the U.S. Rail Freight Industry, 1995-2004

Rail industry productivity grew by 7% per year from 1984 to 1995, but most of the benefits to the industry were offset by reductions in rail rates and the increasing need for capital expenditures. Rail rates declined by more than one-third during that period, while financial measures, such as return on shareholders equity and net railway operating income, showed only a modest improvement. From 1995 to 2004, productivity improved 5% per year, prices continued to fall, and financial performance was flat or declining. There is no doubt that productivity improvements helped railroads make very significant reductions in their costs during this 20-year period. However, by 2004, the long-term trends were coming to an end. The rate of productivity improvement was declining, rates were starting to rise, and capacity and service problems were becoming more serious. With higher rates, many of the Class I railroads were coming close to earning their cost of capital. The combination of increasing profitability, declining service, and inadequate capacity is unlikely to be sustainable. The lack of capacity and deteriorating service quality are seen as serious problems not only for rail customers, but for public agencies at the local, state, and federal levels. Railroads will need financial and planning assistance from these agencies as they seek to provide sufficient capacity to handle the potential growth in traffic that is expected over the next 20 years

The Journey to Work: 25 Years on the Jamaicaway

More than 600 observations were recorded for the author's home-to-work trip for the same route from Boston to Cambridge, Mass., over the period 1980 to 2004. With this data, it is possible to graph the pattern of travel times and travel time reliability as a function of departure times during the morning rush hour. The image of rush hour performance that emerges from this study is more complex than what is often used in network models or abstract economic analysis. For example, as rush hour progresses, variability increases even though expected travel times start to decline. There may also be lulls in rush hour, i.e. intervals of 10-15 minutes when expected trip times and reliability temporarily improve. This type of performance cannot realistically be modeled as a linear function of traffic volume, nor can it be approximated using a steady state queuing analysis. It will be far better to view rush hour performance as a steady state cyclical queuing phenomenon: every day may start afresh, but expected conditions on next Tuesday at 8:30 am are likely to be similar to conditions last Tuesday at that time.Over the 25-year period, there was surprisingly little change in rush hour performance on this congested urban route. Average travel times were mostly in the range of 25-27 minutes with a standard deviation of three to four minutes. There was some spreading of the peak, especially during periods involving major construction, but performance in the most recent period was actually equivalent to performance in the 1980s despite an increase of about 10% in traffic volume. Variability in trip times is mostly related to variability in the delays associated with the most congeste

Introduction of Heavy Axle Loads

The Association of American Railroads (AAR) initiated the Heavy Axle Load (HAL) Research Program in 1988 in order to “provide guidance to the North American railroad industry about whether to increase axle loads and to determine the most economic payload consistent with safety” (Kalay and Martland 2001). The research demonstrated the technical feasibility and economic desirability of increasing axle loads and the ability of technology to mitigate the adverse effects of heavier loads. In 1991, the industry decided to accept cars with 286,000 lb. gross vehicle weight (286k GVW) in interchange service. Since then, more than 90% of all bulk equipment acquired has been rated for 286k GVW. By 2010, nearly 100% of coal traffic and 30% of general freight moved in 286k loads. Technological improvements resulting from the HAL research program have been critical in enabling the industry to reduce costs of 286k operations. Stronger materials, better designs, and improved maintenance techniques reduced life cycle costs for rail and other track components. Bridge costs did not increase as much as expected, because of technological developments and better understanding of their ability to withstand HAL loads. Net benefits of HAL operations to railroads, suppliers, and their customers were approximately $6 billion between 1994 and 2010. Annual net benefits exceeded$600 million in 2010. Benefits included reductions in equipment expense, more efficient operations, and increases in line capacity. Given the technological advances in railroad engineering over the past 20 years, further increases in GVW or loading density should now be considered. OVERVIEW OF THE HAL RESEARCH PROGRAMThis paper has two major objectives. First, it estimates the net benefits achieved by increasing the maximum GVW to 286k, taking into account impacts on operations and infrastructure. Second

Origin-to-Destination Performance for General Merchandise Traffic Moving to or from Short Line Railroads

Since nearly 40% of rail freight traffic, other than coal or intermodal, originates or terminates on short lines, the service provided to short line customers is indicative of the service provided to rail customers in general. For a representative set of moves to or from short lines, the average trip time was 7.3 days with a standard deviation of about two days, which is similar to service levels documented in prior studies. A research program involving Class I railroads, short lines, customers, and public agencies would help develop effective strategies for improving service and equipment utilization for general merchandise freight

Introduction of Heavy Axle Loads by the North American Rail Industry

The Association of American Railroads (AAR) initiated the Heavy Axle Load (HAL) Research Program in 1988 in order to “provide guidance to the North American railroad industry about whether to increase axle loads and to determine the most economic payload consistent with safety” (Kalay and Martland 2001). The research demonstrated the technical feasibility and economic desirability of increasing axle loads and the ability of technology to mitigate the adverse effects of heavier loads. In 1991, the industry decided to accept cars with 286,000 lb. gross vehicle weight (286k GVW) in interchange service. Since then, more than 90% of all bulk equipment acquired has been rated for 286k GVW. By 2010, nearly 100% of coal traffic and 30% of general freight moved in 286k loads. Technological improvements resulting from the HAL research program have been critical in enabling the industry to reduce costs of 286k operations. Stronger materials, better designs, and improved maintenance techniques reduced life cycle costs for rail and other track components. Bridge costs did not increase as much as expected, because of technological developments and better understanding of their ability to withstand HAL loads. Net benefits of HAL operations to railroads, suppliers, and their customers were approximately $6 billion between 1994 and 2010. Annual net benefits exceeded$600 million in 2010. Benefits included reductions in equipment expense, more efficient operations, and increases in line capacity. Given the technological advances in railroad engineering over the past 20 years, further increases in GVW or loading density should now be considered

Productivity, Pricing and Profitability in the U.S. Rail Freight Industry, 1995-2004

Rail industry productivity grew by 7% per year from 1984 to 1995, but most of the benefi ts to the industry were offset by reductions in rail rates and the increasing need for capital expenditures. Rail rates declined by more than one-third during that period, while fi nancial measures, such as return on shareholders equity and net railway operating income, showed only a modest improvement. From 1995 to 2004, productivity improved 5% per year, prices continued to fall, and fi nancial performance was fl at or declining. There is no doubt that productivity improvements helped railroads make very signifi cant reductions in their costs during this 20-year period. However, by 2004, the long-term trends were coming to an end. The rate of productivity improvement was declining, rates were starting to rise, and capacity and service problems were becoming more serious. With higher rates, many of the Class I railroads were coming close to earning their cost of capital. The combination of increasing profi tability, declining service, and inadequate capacity is unlikely to be sustainable. The lack of capacity and deteriorating service quality are seen as serious problems not only for rail customers, but for public agencies at the local, state, and federal levels. Railroads will need fi nancial and planning assistance from these agencies as they seek to provide suffi cient capacity to handle the potential growth in traffi c that is expected over the next 20 years