The Gerson Lehman Group says Kansas City Southern, a relatively small Class I, “has enjoyed the PE ratio of a high growth company” seemingly because of its merger potential with the major carriers, “but it is hard to guess which one would like to own it. UP and BNSF already operate in its territory and gain little by acquiring the switching duties of serving its customers. Moreover, the Eastern carriers are not a very good match operationally and also have limited traffic to gain compared to a lot of switching expense.
“Thanks to a solid recovery in the chemical sector and some impressive traffic gains in Mexico, KSC is on track to earning close se to its pre-recession numbers by as early as 2011; but the same can be said of the other railroads, which do not have any Mexican lines to bolster their earnings in 2010," said the management research company. "Like the other North American rail carriers, KSC has also improved its operating ratio during the last few years to the point, like them, that it will be able to earn pre-recession level profits with sub pre-recession traffic levels.
“KCS is a north-south railroad in a country where traffic flows are predominantly east-west. While it has a solid base of local customers, its traffic volume is tightly linked to the health of these companies and industries. With the exception of the jointly owned line that depends on Norfolk Southern traffic between Meridian, Miss., and Dallas, Texas, it has very limited prospects for growth in the intermodal sector.
“The highly touted Mexican connection to bring U.S. container traffic in through the West Coast port of Lazaro Cardenas is still a work in progress and KCS is unlikely to match the gains that the Canadian National Railroad has made with U.S. container traffic through the port of Prince Rupert, British Columbia.
“Most railroads are betting on intermodal traffic to carry them into the twenty-first century, and KCS is unfortunately positioned for this traffic.”
Intermodal volume on U.S. freight railroads for the week ended June 19, 2010, reached its highest level since the 45th week of 2008, the Association of American Railroads reported Thursday, up 21.2% over the comparable week in 2009. Intermodal also still trailed the comparable week in 2008, but barely—down just 0.2%.
By contrast, U.S. freight railcar traffic also gained for the week compared with 2009, up 9.2%, but still trailed 2008 levels by 10%. AAR said 15 of the 19 carload commodities groups increased from the comparable week in 2009. They included metallic ores, up 108.9%, metals andmetal products, up 78. %. Only one commodity group, coke, up a slim 0.2%, posted an increase over 2008 levels.
Canadian railroads reported freight carload volume for the week up 22.3%, while intermodal gained 25.9% compared with 2009. Mexico’s two major railroads reported freight carload volume up 15.3% from the year-ago period, while intermodal gained 49.2%.
Combined North American rail volume for the first 24 weeks of 2010 on 13 reporting U.S., Canadian, and Mexican railroads was up 10.3% from the comparable stretch of 2009; intermodal rose 12.5%.
St. Paul, Minn.’s Central Corridor light rail transit project marked a milestone Wednesday as the Metropolitan Council awarded its first heavy construction contract, at $205.1 million, to Chicago-based Walsh Construction.
Walsh Construction will oversee the seven-mile portion of the line within St. Paul, the state capital. Construction is expected to begin in August east of the state Capitol on Robert and 12th streets north of Interstate 94. Utility relocation work, however, is expected to start soon after July 4.
The Central Corridor crosses the Mississippi River into neighboring Minneapolis, and will link with the existing Hiawatha Line light rail service. Bids for the heavy construction work on the line's western three miles will be opened July 27. The Met Council is scheduled to award that contract Aug. 25.
Carnegie Mellon University and Bombardier Corp. are founding partners in a plan to open a $2.2 million research center this fall known as the Pennsylvania Smart Infrastructure Incubator (PSII), to study critical technology areas in a search “more efficient and sustainable civil infrastructure and transit operations.”
The Commonwealth of Pennsylvania is a providing a “significant” economic development grant for the project.
Matthew Sanfilippo, executive director of the PSII, said: “Tomorrow’s infrastructure will blend traditional concrete-and-steel physical infrastructure systems with cyber-infrastructure systems such as computers, networks, and sensors in ways that are just emerging. Pennsylvania has a wealth of companies, universities, and institutions that are inventing many of these emerging technologies that will build or rebuild the world’s infrastructure. We intend to bring these organizations together to leverage and highlight this new resource to help make Pennsylvania a visible leader in these critical emerging technologies."
“Creation of the Bombardier Collaboration Center at Carnegie Mellon will enable joint research in fields such as smart guidance systems, rail control solutions, sensing robotics, and so much more,” said Romuald Ponte, vice president of engineering at Bombardier’s Systems Division and the Centre of Competence. “We will also work with the university to explore creation of a master’s level degree program in transportation systems,” said Ponte, who pointed out that the new collaboration will enable Bombardier's global workforce to feed real-time information to researchers about operating conditions and performance dynamics from various parts of the world.
Thales USA’s transport business has been awarded a contract by MTA New York City Transit (NYCT) to perform signaling upgrades and related refurbishment to the subway system’s No. 7 line, also known as the Flushing Line. The seven-year contract is valued at $343 million.
Thales’s communications-based train control (CBTC) technology will be integrated into the No. 7 line as other upgrades to the line are taking place, including the addition of new rolling stock, which will be placed in service by 2014. The Thales CBTC system will enable automatic operation of trains between stations and will facilitate an improvement in operating flexibility and system safety.
In addition to the core CBTC technology, Thales’ Flushing Line upgrade work will incorporate non-proprietary, free-space, wireless radio communication between the train and wayside equipment.
“Thales is proud to be selected by NYCT for this important program, and we’re fully committed to NYCT’s upgrade objectives for Flushing Line subway service,” said John Brohm, president of Thales USA’s transport business. Allan Cameron, president and CEO of Thales USA, said, “The Flushing Line win is a major milestone in Thales’ plan to be a leader in U.S. urban rail modernization programs.” Similar, open-architecture urban rail signaling systems have been successfully deployed by Thales in Washington, D.C. (Dulles), Las Vegas, Shanghai, and Beijing.The Thales USA transport team will be supported by a sub-contractor team which includes L.K. Comstock, provider of the project’s installation and refurbishment services, and Thales Canada’s rail transport technology development group in Toronto, Ontario.
Canadian Pacific and TSI Terminal Systems Inc. (TSI) announced Wednesday that they have entered into an agreement to speed the flow of containers through the Vancouver, British Columbia, gateway.
“This agreement moves us down the path of a high performance, efficient and reliable supply chain,” said Michael Moore, president and chief executive officer of TSI parent Global Container Terminals. “We will measure performance changes, share best practices, and work cooperatively toward growth for the benefit of our mutual customers.”
TSI handles more than 70% of the containerized cargo that moves through the Vancouver gateway.
TSI and CP will create working groups in operations, technology, and marketing to identify tools and processes for productivityimprovements and predictability of customer demand.
“This agreement will increase the efficiency and reliability of this major supply chain,” said CP President and CEO Fred Green. “Between 2001 and 2008, collaboration between terminal operators and CP has led to a 229% increase in loaded import containers through Canada’s Asia-Pacific Gateway terminals in Vancouver.”
The effort by some shippers to re-regulate freight railroads relies on citing selective rail rates that “don’t tell the entire story,” according to a letter by Association of American Railroads CEO Edward R. Hamberger, which appeared in Wednesday’s Wall Street Journal.
“Average rail rates in 2009 were 55% lower than in 1981. That means the average rail shipper can move twice the freight today for the same price it paid nearly 30 years ago. America’s competitive rail rates also stack up pretty well against the rest of the world,” said Hamberger (pictured at left).
“While rail rates in recent years increased in line with railroad costs and the need to reinvest in the nation’s rail infrastructure, these increases pale in comparison with price increases farmers have seen in other areas, such fertilizer costs, which are up 304%, fuel costs, up 244%, and seed costs, up 154%,” the CEO said.
“Without railroads bringing America’s high-quality, competitively priced grain to the global market, we’ll never achieve the president’s goal of doubling exports on the road to economic recovery,” Hamberger concluded.
Bombardier Inc. is laying off 180 blue-and white-collar workers temporarily at its La Pocatiere, Quebec, railcar plant by the end of the year, attributing the move to a decline in orders from U.S. customers and delays in a contract anticipated to come from Montreal.
The layoffs, which began last month, will total about 40 by the end of July, said Bombardier spokesman Marc-Andre Lefebvre. “These are temporary layoffs of unionized workers, and they will be recalled as soon as orders comein and the workload rebounds,” he said. “They keep their seniority, but if there's no order pickup, it will mean the plant’s payroll will have dropped from about 500 early this year to 240 by year-end.”Lefebvre said the La Pocatiere slowdown won't directly affect Bombardier's St. Bruno, Quebec, operation, producing monorail and light rail equipment, or the company’s Thunder Bay, Ontario, plant, working on orders from Toronto for subway cars and light rail equipment.
Morgan Stanley Research analysts Wednesday issued an upbeat report “adjusting estimates higher” for freight railroad earnings, based on predictions of better-than-expected volume for the second quarter of the year, full-year 2010, and full-year 2011.
“Despite consensus revisions throughout the quarter, we believe rails remain positioned to beat consensus 2Q10 estimates,” Morgan Stanley Research analysts William Greene, John Godyn, and Adam Longson said in a note. Because of that, the trio said, “we are revising estimates across our rail coverage to account for recent traffic trends, management commentary, and updated guidance.”
The note said Class I railroads “are likely to see upside revisions driven by the following trends: (1) Volumes tracking better than expectations, (2) Operating leverage to recovering volumes, and (3) Sustained momentum on core price.”
The analysts said they “continue to favor rails” and, in particular, highlighted CSX, Kansas City Southern, and Union Pacific “as our picks.”
Officials from Dallas Area Rapid Transit Tuesday announced the projected long-term shortfall in sales tax revenue will result in the indefinite delay in the third section of the Orange Line, from Irving to Terminal A at Dallas/Fort Worth International Airport, a second Downtown Dallas alignment (either LRT or streetcar), and the Blue Line extension from Ledbetter Station to the UNT Dallas campus.
The connection to Terminal A had been scheduled for completion in December 2013, the second downtown alignment for 2014, and the UNT Dallas extension for 2018.
DART spokesman Morgan Lyons stressed that more near-term expansion projects are not affected by the decision. These include completion of the Green Line from Pleasant Grove to Carrollton and the new Lake Highlands Station in December; the Blue Line extension from Garland to Rowlett; and the first two sections of the Orange Line from Bachman Station in Northwest Dallas to Irving in 2012.
The proposed 20-year financial plan includes $4.7 billion in capital project funds for the rail expansion and other projects, such as the planned purchase of new buses and other items required to maintain the agency’s state of good repair.
“We are pleased we will be able to maintain almost all of our current expansion. Every transit agency around the country is not so fortunate,” DART President Gary Thomas said. “At the same time, we are very disappointed that it does not appear we willcomplete all of our projects as planned. We will continue working to find ways to advance these projects as best we can based on the current and anticipated economic and financial conditions.”
More than 75% of DART’s income is from the collection of a 1% sales tax in each of the 13 cities served by DART. Anticipated sales tax receipts for fiscal year 2010 are expected to be between $13 million and $15 million below the original estimate of $387.8 million.