The Surface Transportation Board has determined that five of the “Big 7” U.S. Class I railroads achieved revenue adequacy in 2019: BNSF, CSX, Norfolk Southern, Soo Line (the U.S. affiliate of Canadian Pacific) and Union Pacific. STB determined that those Class I’s achieved a rate of return on investment (ROI) equal to or greater than the Board’s calculation of the average cost of capital for the freight rail industry, which for 2019 is 9.34%.
By comparing STB’s cost of capital figure to railroads’ 2019 ROIs—calculated from data reported in the carriers’ Annual Report R-1 Schedule 250 filings—a revenue adequacy figure was determined for each Class I in operation as of Dec. 31, 2019.
The 2019 Class I ROIs (railroads in bold are revenue adequate):
- BNSF: 12.04%
- CSX: 12.84%
- Grand Trunk Corp. (the U.S. affiliate of CN): 7.47%
- Kansas City Southern: 6.20%
- Norfolk Southern: 11.59%
- Soo Line (the U.S. affiliate of Canadian Pacific): 11.34%
- Union Pacific: 15.55%
In contrast, STB found that three Class I’s—CSX, Soo Line and Union Pacific—were revenue adequate for 2018. STB’s 2018 railroad cost of capital was 12.22%. The 2018 Class I ROIs (railroads in bold were revenue adequate):
- BNSF: 11.89%
- CSX: 13.18%
- Grand Trunk Corp. (including U.S. affiliates of CN): 7.69%
- Kansas City Southern: 8.03%
- Norfolk Southern: 11.63%
- Soo Line: 13.49%
- Union Pacific: 15.80%
In other recent developments, STB and the Federal Railroad Administration this summer sent joint, identical letters to the CEOs of the seven North American Class I’s—Carl Ice (BNSF), Keith Creel (Canadian Pacific), JJ Ruest (CN), Jim Foote (CSX), Pat Ottensmeyer (Kansas City Southern), Jim Squires (Norfolk Southern) and Lance Fritz (Union Pacific)—citing service problems and requesting “increased communication and transparency with rail shippers.” Click here for more.