Norfolk Southern is taking steps to ensure that its stored locomotives are ready to roll when needed.
"At the end of June, we had just over 600 locomotives stored, about 16% of our fleet," EVP and Chief Operating Officer Mark D. Manion said in a second-quarter earnings presentation Tuesday. "In June we started to reduce the number of locomotives stored from a high of 700 at the end of May. This reduction represents, in part, a need for more locomotives to handle an increase in coal trains from May to June, but more important, to support a new effort to cycle our stored locomotives."
"In the past when storing locomotives it has been for periods of time less than a year," Manion noted. "With the uncertainty of the economy, we are taking additional preventative maintenance action to ensure that all of our stored power remains in good working order. So, when demand justifies their return to service, we can do so smoothly and with minimal delay."
Manion also said that at the end of June NS had 35,000 freight cars stored. "This includes about 28,000 cars owned or leased by Norfolk Southern as well as cars from Norfolk Southern's allocation of stored national pools managed by TTX for automotive and intermodal, as well as TTX flats and some boxcar equipment. It also includes about 900 cars stored under car-hire arrangements with various short lines."
When full demand for this equipment will materializes is still uncertain. But in another presentation, Norfolk Southern EVP and Chief Marketing Officer Donald W. Seale said that that while "the duration of the recession and the shape of the recovery are still question marks ... we are encouraged that the erosion of our traffic volumes that we have seen in the past eight or nine months seems to have stabilized. It does feel like we've reached a bottom."
Association of American Railroads President and CEO Edward R. Hamberger told the the Midwest High-Speed Rail Summit in Chicago Tuesday that "striking the right balance between passenger and freight rail expansion is key to the success of high speed rail in America."
“America’s freight railroads support the goal of increased passenger rail investment,” Hamberger (pictured at left) said. “It’s good for our economy and the environment when more people and goods move faster by rail.”
He pointed out the privately owned freight rail network is "the literal foundation for high speed rail in America."
“We are critical stakeholders that need to be engaged from the very beginning of project planning and development. Passenger and freight efforts to grow and expand must complement, not compromise one another,” Hamberger said.
Attending the the summit were Illinois Gov. Patrick Quinn, Iowa Gov. Chester Culver, Michigan Gov. Jennifer Granholm, Missouri Gov. Jeremiah Nixon, Ohio Gov. Ted Strickland, Minnesota Gov. Tim Pawlenty, Indiana Gov. Mitch Daniels, and Wisconsin Gov. Jim Doyle.
Hamberger said each high speed rail project needs to stake into consideration "volume of freight traffic, terrain, number of grade crossings, and track configuration. These issues will help determine the feasibility of operating high speed passenger trains on the freight rail network."
Hamberger stressed that agreements addressing liability,compensation, and increased maintenance need to be approved prior to project planning and development.
Add Norfolk Southern to those Class I railroads exceeding Wall Street expectations in the second quarter. NS late Tuesday reported second-quarter net income of $247 million, or 66 cents per diluted share, compared with $453 million, or $1.18 per diluted share, for the second quarter of 2008. That exceeded by two cents per share Wall Street analyst EPS estimates of 64 cents.
NS said second-quarter operating revenue was $1.9 billion, down 33% from the comparable 2008 period, mostly due to a 26% reduction in traffic volume and also lower fuel-related revenue.
“Second-quarter results obviously reflect the impact of the recession," said Norfolk Southern CEO Wick Moorman. "However, the measures we are taking to control expenses while maintaining our industry-leading service levels have enabled us to post solid second-quarter results, while at the same time we continue to invest in projects that position us for the eventual economic recovery."
Railway operating expenses for the quarter were $1.4 billion, down 29% from the same period a year ago. Norfolk Southern’s operating ratio was 74.8%, up from 71.1% during the second-quarter of 2008.
After NS released its figures, New York investment bank Dahlman Rose & Co., in a statement, noted that “when removing a $21 million favorable adjustment to Materials and Other operating expenses related to settlement of a multi-year state tax dispute, EPS from continuing operations came in at $0.63, in line with consensus” and not exceeding it. Dahlman Rose also said NS “continues to implement cost control measures as evident in the sharp declines in operating expenses and the reduction of employee count.”
Morgan Stanley analysts commented that Norfok Southern’s “core operations fell short of consensus estimates,” but added, “That said, cost control was strong and NS performed remarkably well in the face of unprecedented weakness in some of its highest margin segments.”
In a closely watched captive-shipper rate case, the Surface Transportation Board has granted an estimated $100 million in reparations and rate reductions over the next 10 years from the Union Pacific to Oklahoma Gas & Electric Co. (OG&E).
"UP has hauled roughly six million tons of coal per year from Wyoming's southern Powder River Basin to OG&E's Muskogee Station power plant in Fort Gibson, Okla. under contracts between the parties," said the STB in announcing its decision. "But after the latest contract expired on Dec. 31, 2008, UP and OG&E could not agree on a new contractual rate. So OG&E asked UP for common carrier rates, which the utility began paying in January 2009. OG&E then challenged the new rates in a complaint to the STB.
"Both OG&E and UP agreed that the Muskogee Station is captive to UP, meaning that there is no effective transportation alternative available to OG&E other than using UP. And both parties agreed that the January 2009 common carrier rates should not exceed 180% of the variable costs of providing that transportation. The central question put to the STB in this case centered on how to calculate the 185% revenue-to-variable cost ratio.
"The STB found that the amount of relief owed to OG&E for the first two quarters of 2009 ranged from $1.66 to $1.91 per ton in shipper-supplied rail cars, depending on the particular mine origin. The decision also ordered UP to set common carrier rates for the next 10 years at the 180% of variable-costs levels. Assuming historical volumes of 6 million tons a year, the relief to OG&E will likely exceed $10 million a year for the next 10 years."
The decision is available for viewing and downloading, via the Board's website at www.stb.gov, under"E-LIBRARY," then under "Decisions & Notices," beneath the date "7/24/09."
Amtrak’s request for proposals to supply both electric locomotives and new Viewliner 2 single-level passenger rolling stock has generated widespread interest among equipment suppliers, according to Amtrak’s William F. Durham, program director for capital acquisition.
“We’re happy with the response,” Durham said Tuesday. “All the major players showed up, and considering the other large contracts out there--WMATA, Miami, the PATCO overhaul--we were pleased to see the great attendance at the meetings.”
At the pre-proposal meeting July 20 in Philadelphia, representatives from Alstom, Bombardier Transportation, MotivePower Inc. (Wabtec), Siemens Transportation, GE, EMD, and Patentes Talgo SA were on hand, Durham said. Amtrak plans to order 20 AC propulsion engines capable of 125 mph speeds for use on the Northeast Corridor, with an option for 40 additional units, and expects to award a contract late next March.
At a similar meeting for a Viewliner 2 order of 130 cars, held in Hialeah, Fla., July 23-24, attendees included representatives from Alstom, Kawasaki, Nippon Sharyo, Sumitomo, CAF, and Bombardier, Durham said.
Amtrak’s current breakdown for its 130-car Viewliner 2 order includes 25 sleeping cars, 25 baggage-dorm cars, 25 diners,and 55 baggage cars. An option for 70 cars, if exercised, would add 10 sleepers, 15 baggage-dorm cars, 15 diners, and 30 baggage cars, Durham said. A Viewliner contract is scheduled to be awarded next May.
Eight governors from Midwest states announced a pact Monday to seek federal stimulus funds to establish a high speed rail network with Chicago as the hub. The Obama Administration in April identified such a network as one of 10 candidates eligible for a portion of $8 billion provided for high speed rail by the American Recovery and Reinvestment Act (ARRA).
In forming the pact, the governors, by accident or design, are mimicking ongoing efforts by the not-for-profit Midwest High Speed Rail Association, which since 1993 has advocated a Chicago-based high speed rail network with top speeds of 220 mph.
Governors from Illinois, Iowa, Wisconsin, Michigan, and Ohio gathered in Chicago Monday at the Midwest High Speed Rail Summit, signing a Memorandum of Understanding to jointly seek federal funds for HSR. Chicago Mayor Richard Daley, also present, signed the MOU on behalf of his city. Other states in the group include Minnesota, Indiana, and Missouri; the governors from these three states signed the MOU prior to the meeting.
Said Illinois Gov. Pat Quinn, “We are determined to take full advantage of federal recovery funds and bring high speed rail to Illinois and the Midwest.” He added, "Today's agreement will help make our vision a reality."
The participants will establish a multistate steering group to coordinate the region's work associated with all ARRA applications. Such coordination could turn a potential liability—numerous state players—into a political asset if the group maintains its cohesion.
The governors and their allies envision an initial push to upgrade three routes to operate at top speeds of 110 mph: Chicago-St. Louis; Chicago-Madison, Wis., via Milwaukee; and Chicago-Pontiac, Mich., through Detroit. Amtrak currently covers those routes, save the link between Milwaukee and Madison, and between Detroit and Pontiac, with conventional short-distance services. Other routes, such as St. Louis-to-Kansas City, Mo., and Ohio’s “3C Corridor” linking Cleveland, Columbus, and Cincinnati, would be added to the high speed rail network in future years.
Public comment solicitation ended Monday for St. Paul, Minn.’s Central Corridor light rail project, with local citizens and the University of Minnesota weighing in over various concerns.
Project Manager Mark Fuhrmann anticipated St. Paul community groups to lobby for three more light rail stations along a stretch of University Avenue in St. Paul.
The university continues to voice concerns over supposed noise and vibration threats and electromagnetic interference affecting sensitive scientific equipment on campus. A faculty committee appointed by university President Robert Bruininks last January released a study last week noting the problems could be addressed but could prove costly.
Preliminary engineering for the Central Corridor has begun, with construction slated to begin next summer, and service scheduled to commence in 2014.
Veolia Transportation said Monday it has been awarded an operations and maintenance contract by the Metropolitan Transit Authority of Harris County (METRO) for Houston’s light rail transit expansion project. The work will take place through a joint venture company, Houston Operation and Maintenance, LLC (HOM), an entity owned by Veolia Transportation and Parsons.
HOM will initially be responsible for planning and development services and advising in the planning, design, and integration of the rail lines, systems, and maintenance facilities and the light rail vehicles for the project.
Once revenue service begins, Veolia Transportation will be responsible for all aspects of the LRT network for an initial period of five years, which can be extended up to 35 years. Responsibilities include maintaining four new routes totaling approximately 20 miles of light rail, 32 stations, storage and inspection facilities, right-of-way and systems maintenance, dispatching, and operation and maintenance of 103 LRT vehicles.
“We applaud Houston METRO on its visionary approach to this project which provides for the operator to be involved from the inception of planning,” said Mark L. Joseph, CEO of Veolia Transportation’s North American entity. “This is a signature project for the United States which we expect to be a model for other cities and we are thrilled to be playing a central role. Projects like this offer major benefits to cities in the enhancement of the urban environment, mobility, and quality of life.” Houston Rapid Transit, a Parsons joint venture including Granite Construction Co., Kiewit Texas Construction LP, and Stacy and Witbeck Inc. will oversee the design-build portion of the project.
VIA Rail Canada and the Teamsters Canada Rail Conference late Saturday agreed to binding arbitration to settle their contract dispute, one day after the latter went on strike at noon, July 24, effectively shutting down most of Canada’s intercity rail passenger service. VIA services slowly resumed operation on Sunday.
“The process proposed by the mediator will allow the parties to resolve outstanding issues and, most importantly, will get Canada’s passenger rail service up and running again for our customers,” said VIA President and Chief Executive Officer Paul Côté.
“The negotiations have been challenging and we appreciate the support shown by our members during this process. We look forward to having our members back on the trains,” said Dan Shewchuk, president of the TCRC.
TCRC says its members have been without a contract since Dec. 31, 2006. At issue are improved wages and benefits, scheduling that allows members two consecutive days off, and increased training schedules for engineers.
Wilmerdering, Pa.-based Wabtec Corp. said Friday itssecond-quarter profit slipped 9% due to the continuing falloff in freight rail traffic;earnings of $30.8 million, or 64 cents per share, were down from $33.8 million,or 69 cents per share, in the comparable 2008 quarter. That was lower than WallStreet analyst expectations of 62 cents per share.
Revenue also declined by 14% to $334 million. Wabtec cut itsfull-year earnings guidance, citing the weak freight rail market. Companyshares lost 5% of their value at midday Friday.
"Going forward this year, we expect stability in ourtransit operations, while the freight businesses will continue to be affectednegatively by the global recession," Wabtec CEO Albert J. Neupaver said ina statement.