Thursday, November 07, 2013

"We are one industry"

Written by  William C. Vantuono, Editor-in-Chief
"We are one industry" William C. Vantuono

Railway Age’s 20th annual conference on shared-use addressed the capacity needs of a growing industry.

The 20th edition of Railway Age's annual Passenger Trains on Freight Railroads Conference last month in Washington, D.C. tackled the issues that passenger and freight rail operators have been dealing with for at least a generation: Capacity. Safety. Liability. Compensation. Competition. Access. Underscoring all of these is growth, which in recent years has been both a blessing and a challenge, for both sides.

Yet, should shared-use really be an issue of "sides," freight vs. passenger? Amtrak President and CEO Joe Boardman (photo, above left), in his keynote address, had this to say:

"There is a misperception that there are two kinds of railroad: a private one that hauls freight, and a public one that carries people. The reality is that our industry is a mixed collection of carriers, freight and passenger railroads, bound by agreements, arrangements, rules, and procedures, and by culture—largely internal, but also by the constantly changing business and political culture in which we operate."

"Amtrak just broke its annual ridership record again, 31.6 million riders and $2.1 billion in ticket sales, our 10th annual record in 11 years, but it has really only been about five or six years that we began to have the ability to price-manage our Northeast Corridor business," Boardman said. "The freight railroads have found the same ability, nearly doubling their operating revenue over the past decade. It is a remarkable change to be thinking and talking about capacity growth for both passenger and freight. This is important to us as an industry because Amtrak is a major beneficiary of the strong financial health of our host railroads, and those who depend upon NEC access. Freight and commuter railroads both depend on Amtrak's financial health. Over the long term we will continue to be interdependent, and carriers like Amtrak have a vital interest in a healthy and thriving freight industry."

The creation of Amtrak in 1971 "was a major step toward the restoration of a healthy freight sector," Boardman said. "The health of that passenger sector depends on the continued health of the freight carriers and the willingness of Congress to contract with Amtrak to pay the cost of long-distance trains. That is an open question for the next Amtrak bill, I believe. Amtrak relieved the freight carriers of a portion of their common-carrier obligation, but we are also the most publicly visible component of their obligation to serve the public. That too is an open question for the industry. Will there be any future obligation on the freight railroads to renew passenger service if Congress decided to end its national contract with Amtrak?"

Noting that, in some corners of Congress, there have been attempts to privatize Amtrak's long-distance services and open those routes to competition, Boardman said that the agreement between Amtrak and its host freight railroads "has held us together for more than four decades, and it's a good one. Few nations are as well-served by its rail systems as America. Our service is founded on our partnership because in the final estimate, we are one industry. I believe we will rise or fall as an industry. Our problems and challenges aren't narrowly confined to one carrier or one type of carrier. They are industry challenges."

One of those challenges is operating discipline. In a luncheon address, Steve Ditmeyer, who currently is devoting much of his time to education as an Adjunct Professor of Railway Management at Michigan State University's Eli Broad College of Business, recalled a late-1970s meeting with Missouri Pacific President Downing Jenks:

"After returning to the FRA as head of the policy office, I had occasion to meet with Jenks. He explained to me that, even though the creation of Amtrak had reduced the financial burden of passenger service on the MoPac, there were some unforeseen consequences. It seems that the drastic reduction in the number of passenger trains brought with it a loss of operating discipline. Yardmasters, trainmasters, and superintendents, who had all known that passenger trains had priority, decided that, once the passenger trains had largely disappeared, they could run the freight trains whenever they felt like running them. Jenks found that reintroducing discipline into the MoPac's freight operations was a major management challenge."

Boardman's and Ditmeyer's remarks are only a fraction of what was presented in Washington. For those who did not attend the conference and would like to access the available presentations, they can be purchased through the Simmons-Boardman Conference Division. Contact Michelle Zolkos, mzolkos@sbpub.com.