Western Railroad Discussion > Shortline Sustainability

For any given shortline railroad company, how many car loads, be it inbound or outbound, must be met each week or month in order to sustain the shortline RR company? Different car types have different freight rates based on the carried commodity - an average car load charge?

And for any one shipping/receiving shortline customer, how many car loads must be generated (inbound or outbound) before the shortline RR company considers the customer unserviceable?

Is there a national standard of car loads that shortlines look to in order to justify their daily/weekly/monthly service to any one customer?

A rule of thumb in the shortline industry for a shortline to thrive is to have a 100 cars of traffic per mile of track per year. So for a 50 mile shortline, they should be moving 5000 cars per year. Of course there are a lot of shortlines that survive at lower traffic levels, and a lot depends on how much time and money it takes to move a car from interchange to the customer and back. Ideally you only want to move the car a short distance to maximize the profits. The more track you have to maintain to service a customer, the less potential profit there is. Car storage can be integral part of shortlines, and often the short term storage can be key to surviving. Not only can the shortline make daily money on unused sidings and spurs, the can charge to switch the cars in and out. Making a regular business of that can really add to the traffic number. Shortlines will also charge for the "constructive placement" of railcars that cannot fit at a customer facility.
In general shortlines are very welcoming of any potential business so long as it does not cause major disruptions in the operation of the railroad (you'd be surprise at the number of business that assume they can load cars right on the main track next to their facility). The first challenge is finding a spot to load or unload their railcars. Maybe it can be handled on an existing spur. Or they may have to build a spur, but it will be on their dime (shortline might find some track material to use, but don't count on it). The business might be able to obtain a business development grant from a government entity to build a spur, but those always take a couple years to happen. At times you get the unfortunate situation where the shortlines have a 15 mile branchline that is being used for long term car storage. Then some business on the outer end of the branch wants service for 4~5 cars per month. It'll be a major money loser for the shortline unless they can work out a transload on their active track where they operate every day.

Ted Curphey
Ontario, OR

Ted is right on with his information. To add, after working for and starting up short lines for a long time I realized the best position was to work for but not own one. Too many head aches and never enough resources. 

The real "kicker" about most short lines is that they are at the mercy of usually one Class1 which on day one is "excitied" about all the new opportunities they will explore with the new short line but in fact are often just happy to have someone else lease or purchase their broken down piece of railroad. Frequently, a short line will have a new idea/customer to generate new revenue for them only to have the Class 1 carrier refuse to handle it because there wouldn't be enough revenue for them to handle the extra business and it's small potatoes. Also keep in mind that most short lines lose 15-30% of their customers annually due to no fault of their own( customer moves away and goes truck/customer's customer moves away and goes to truck, Class 1 dosen't want new business etc.). 

Short lines can be a satisfying business but rarely a highly, profitable one. Transload operations as Ted menetioned are the real business generator to gain new customers with minimal expense.

Exprail

"exprail" brings up a critical point for all businesses: about 10-15% of your customers go away every year.
You have to hustle new business just to keep up with those losses.
Certainly in the railroad business we have seen old line once steady businesses fade (wood products, logs, coal, fresh produce)
New opportunities in the chemical, frac sand, crude petroleum, ethanol, and recovered business that the Class 1 failed to handle just might fill the gaps.
Decades ago I remember reading an Interstate Commerce Commission guideline that a branch or small railroad might be viable at 35 cars/mile/year, but not a good comparison for today.

Can anyone put the percentage of car load traffic that begins or ends its journey on a short line?  It seems like a tough business to be in where you are dealing with declining revenue as Class 1s have been transitioning for years away from embracing car load transportation.  Some shortlines seems to be one major customer closing away from shutdown.

Todd Clark
Canyon Country, CA
Trainorders.com

Its even harder when the Class 1's go from serving you 5 days a week to once a week if your lucky.  

One of the biggest issue is having a Class ! partner that will work with you.  BNSF is great.

Mike Root
Madras, OR

I remember Ft Worth & Western had just about every passing track full of stored cars when the frac sand business hit big time.  They had to ger rid of stored cars which were furnishing a lot of income.  Now the frac sand business has cooled off a bit.

Short Lines and Regionals represent about one-third of the rail business today.

Dan Sabin

webmaster Wrote:
-------------------------------------------------------
> Can anyone put the percentage of car load traffic
> that begins or ends its journey on a short line? 
> It seems like a tough business to be in where you
> are dealing with declining revenue as Class 1s
> have been transitioning for years away from
> embracing car load transportation.  Some
> shortlines seems to be one major customer closing
> away from shutdown.

About 20% of the total carloads, but their share of the revenue is well under 20%.

Outbound loads, who does the billing (usually the Class 1), what are they giving ypu for a terminal fee (highly negotiated) and
how good a business person is the shortline owner. Do you go to the C of C meetings? Are you friends with the real estate
developers? Just like everything else in life, what you get out is proportional to what you put in.

Out