Norfolk Southern CEO Wick Moorman tolda House subcommittee Thursday that tax incentives to expand freight rail capacity would generate $1 billion in economic benefits and 20,000 green jobs.
“America needs more transportation capacity and needs it now,” Moorman said in testimony presented on behalf of the Association of American Railroads.
Asserting that today’s transportation network is not designed to handle the doubled freight demand projected by 2035, Moorman (pictured at left) said railroads are "the most affordable and environmentally responsible way to meet this demand."
He noted that railroads spent arecord $10.2 billion in capital improvements last year alone, adding: “Since 1980, railroads have spent more than 40% of their revenues–some$440 billion–to maintain, improve, and expand their networks. “Yet as much as railroads are investing, it isn’t enough to meet projected demand," Moorman said.
Moorman said recent study found a $52 billion gap between the $148 billion needed for expanding freight railcapacity and the $96 billion railroads can expect to generate. Tax incentives “provide a sensible way to help bridge this gap,” he said.
“Numerous states are partnering with us,” Moorman said. “Thanks to the leadership of Pennsylvania Gov. Ed Rendell, Virginia Gov. Tim Kaine, and others, we are already investing to expand our system to meet the looming demands of moving our nation’s commerce. Congress should bolster these efforts by enacting tax credit legislation to encourage additional freight rail investment,” he said.
With customers cutting their fleets and pressing for price breaks, GATX Leasing Corp. on Thursday reported a 68% drop in second quarter earnings and revised its forecast for 2009 earnings from $2.50 to $2.00 per share.
Second-quarter income was $12.7 million, or 27 cents per share, vs. analyst expectations of 40 cents for the rail and marine equipment lessor.
"In Rail, customers continue to trim their rail fleets and seek the most competitive rates when renewing leases,” said GATX President and CEO Brian A Kenney. “GATX is competing aggressively to maintain fleet utilization while selectively shortening the term of renewals to position the fleet to benefit from a stronger market in the future."
On June 3, GATX had approximately111,000 cars in its North American fleet. Utilization was 96.0% compared to 96.5% to the end of the first quarter and 97.9% at the beginning of the year.
Debunking the oft-made claim that light rail transit systems “steal” riders from existing bus operations, and therefore offers little public benefit, North Carolina's Charlotte Area Transit System (CATS) Thursday disclosed survey results finding that 72% of Lynx LRT riders are new to public transportation and hadn't used buses before.
Among those riders surveyed who previously had traveled by means other than a single-occupant vehicle, 21% of Lynx passengers previously rode a bus, while another 6% either used a CATS vanpool or another form of carpooling.
CATS hired an outside marketing firm to survey nearly 1,000 rail riders in December and January, in an effort to determine the system’s customer market and the reasons people chose to ride LRT.
The survey found that the average Lynx rider's householdincome is $65,000, compared with $55,200 for an express bus rider and $31,800 for a regular bus rider. The median county household income is $62,241, according to CATS.
Union Pacific Corp. Thursday said its second-quarter profit was better than expected despite lower freight volumes and revenue, and said the economy appears to have stabilized.
UP net income of $468 million, or 92 cents per share, was down 12% from the second quarter of 2008, when it notched $531 million, or $1.02 per share. Excluding a one-time benefit from a $72 million land sale, UP reported earnings per share of 78 cents, better than the consensus estimate of 74 cents anticipated by Wall Street.
Quarterly revenue fell to $3.30 billion from $4.57 billion in the comparable 2008 period; analysts had expected $3.38 billion. Freight volume fell 22% during the quarter, UP said.
“Although we expect it will be some time before the economy recovers," Chief Executive Jim Young (pictured at right) said, "it appears that volume levels may have hit the bottom as the economy seems to have stabilized.”
New York-based investment bank Dahlman Rose & Co.concurs. In a note July 24, the company said, “Although the economy will likelyprovide near-term challenges for Union Pacific, the railroad has clearly showedus its ability to truly weather the storm. Indeed, once freight levelseventually return, UNP has ample capacity to take them on without spendingsignificant excess capital. We continue to believe that the company’s trueoperating ratio lies somewhere south of 70% in a more normalized economicenvironment. Accordingly, we reiterate our Buy rating on the company’s shares.”
Said Morgan Stanley & Co. analysts William Greene and Adam Longson: “Consistentwith our forecast for an auto-led volume rebound in 2H09, UP management firmlyreiterated recent comments from other rails that volumes have likelybottomed. Having some of the easiest volume comparisons among the railsin 3Q and a large auto franchise, we believe that UP could post one ofthe better volume recoveries later this year as auto productionrebounds.
"Furthermore, new intermodal volumes from Hub Group shouldramp through 2H09 and further boost volumes. As these volume trends play out, we expect earnings revisions to improve across the rails, but at UP in particular. We expect much of UP's recentproductivity gains achieved in the downturn to be sustained as volumesrebound, driving substantial operating leverage. Management has notedthe company could easily add 10% more volume without adding anothertrain start.
"We expect UP to outperform," Morgan Stanley said. "We aresignificantly above consensus on 2010 EPS ($4.65 vs. $4.30) even thoughwe assume a tepid rebound and pricing slows materially. UP is particularly leveraged to an auto-led rebound and has easy 2H09 and 1H10 comps. In our view, UNP has the potential for large productivity gains and recent results confirm management is executing."
Citing its growing role in "green business" opportunities, Canadian National notes it is playing a key role in the transportation of huge windturbine components to northeastern British Columbia. CN Specialized Services (CNSS) says it recently completed the first-ever rail move of twin-pack wind turbine blades from German manufacturer Enercon GmbH and Salco Energy Services Inc. of Calgary. Enercon is a global manufacturer of wind turbine systems; Salco Energy offers wind turbine transport and wind park logistics management.
CN says 51 sets of twin-pack blades are being installed in the 102 MW Bear Mountain Wind Park in Dawson Creek, British Columbia. When completed, the Bear Mountain installation will have 34 Enercon E-82 3.0 MW wind turbines that will generate enough clean, renewable electricity to power most of the province's South Peace Region. The project is on schedule to become British Columbia's first fully operational wind park by the end of the year.
CNSS received the wind turbine blades, measuring 135 feet in length, at the Port of Thunder Bay, Ont., in early May, and arranged for rail car modifications forthe move. Six trains were required to transport the equipment from Thunder Bay to Dawson Creek over CN's network. At the receiving end, CNSS provided services for unloading the equipment for transportation to the wind farm. Dan Bingeman, CN assistant vice-president, said: "The logistics of moving the turbine components were a challenge, but that is what CN and CNSS do best. And we are well positioned to support this important emerging market on accountof our extensive network reach, port connections on three coasts, expertise, and complete transportation solutions." CN says it serves the main wind farm regions of Canada, from Nova Scotia toBritish Columbia, and also the U.S. Midwest. CN says wind turbine componentsare one of its growing sustainable energy business segments, which include environmentallyfriendly wood pellets for energy generation, biodiesel and ethanol. "CN, as a railway, can help address the challenge of climate change,"said Bruno Demers, director of marketing for CN. "Rail emits six timesless greenhouse gases (GHG) than heavy trucks. Plus, rail consumes a fractionof the fuel to transport one [metric] ton of freight one kilometer.”
Downers Grove, Ill.-based Hub Group Inc. Wednesday reported its second-quarter profit fell 45% due to weakness in all of its transport sectors.
Revenue from truck brokerage and intermodal segments—both involving freight rail—each fell 28%; Hub Group’s logistics sales revenue declined 9%. Total revenue fell 26% to $363 million, compared with $491 million in the second quarter of 2008; analysts had anticipated revenue of $387.5 million.
But earnings beat analyst consensus expectations of 21 cents per share. The company said it earned $8.3 million, or 22 cents per share, in the second quarter, compared with $15 million, or 40 cents per share, in the comparable quarter a year ago.
London-based DeltaRail Group Ltd. has been awarded a contract by MTA Metro-North Railroad to supply the regional rail carrier with the WheelChex® wheel impact load measuring system, to be installed this summer through the four-track Park Avenue Tunnel leading to and from Grand Central Terminal in New York.
WheelChex will be linked to Metro-North's maintenance systems so that the company can benefit from regular and consistent information on wheel condition. The tunnel handles the vast majority of Metro-North trains.
The Association of American Railroads Wednesday released its June 2009 Rail Time Indicators economic report, and also launched a new online video summary of the June report. AAR notes the report combines rail traffic data with more than 15 key U.S. economic indicators, including consumer confidence, housing starts, and industrial production, in a non-technical snapshot of how rail traffic data reflects the broader U.S. economy.
"We wanted to pull together the best information from not only the freight rail industry, but also other key economic indicators," said AAR Senior Vice President of Policy and Economics John Gray. "We think the report offers a convenient, clear look at trends that may reveal where the overall economy and freight rail traffic are going."
AAR also launched a monthly video summary of the report, presented by a member of the association's policy and economics team.
AAR’s video highlights trends from the data on the 19 major commodities that AAR tracks in the Rail Time Indicators report. For example, this month, the video examines the impact the U.S. domestic economy is having on the freight rail movement of motor vehicles and equipment, metallic ores, and metals.
"At the end of the day, if people aren't building or buying things, freight rail traffic feels the effects," Gray added. "We thought that a video summary would be a more accessible way to introduce the data to a broader audience."
Both the written report and its video component summary are available for viewing at www.aar.org.