Eastern Railroad Discussion > Who got the better deal, CSX or NS?

A comment down several threads by halfmoonharold spurred this question, which has crossed my mind on occasion the last 3 years. Halfmoon stated
(paraphrasing)that NS got the better deal via the Conrail split.
Realizing this question may not be painted with a broad, systems wide brush, I suspect there is enough knowledge on this board to lend an opinion for the geographical area(s) for which you are familiar.
I recall, in the very early stages of the split negotiations I noticed much more track work activity along the Cleveland short line and former Big 4, which went to CSX. So in my simple minded logic thought CSX received a lot of track improvements at Conrails' expense and hence a better deal in and around Cleveland.
I'd enjoy some input/opinions from those that study the rail industry side of railfanning.
Rich S.

RichS wrote:

> A comment down several threads by halfmoonharold spurred this
> question, which has crossed my mind on occasion the last 3
> years. Halfmoon stated
> (paraphrasing)that NS got the better deal via the Conrail
> split.
> Realizing this question may not be painted with a broad,
> systems wide brush, I suspect there is enough knowledge on
> this board to lend an opinion for the geographical area(s) for
> which you are familiar.
> I recall, in the very early stages of the split negotiations
> I noticed much more track work activity along the Cleveland
> short line and former Big 4, which went to CSX. So in my simple
> minded logic thought CSX received a lot of track improvements
> at Conrails' expense and hence a better deal in and around
> Cleveland.

Remember though, that CSX spent about 250 million
re-double tracking the ex-B&O line from Willard
to Chicago, while NS got a line that was already
double track along the same route.

Yeah, but remember that NS has to navigate through a lot more urban contestion than does CSX. Once CSX gets through Cleveland they have smooth sailing to Chicago, NS still has to deal with Toledo and Elkhart/South Bend.

-Brian

In my opionon. CSX got the better deal. They got the line that had the best grades, they got the traffic, and they got salesmen. where as NS got the most track, cars, and engines, they also got the line that take more money to maintain.

CSX may have received a higher percentage of the intermodal, but not traffic in general. Since they cut the rate on traffic that was already rate challenged, it's hard to call this a victory. Salesmen? Aden Adams (with the old CSX) bragged about gains that were made but failed to point out the great expense incurred to gain this traffic (in the form of rate cuts). CSX has had to aggressively raise rates the last few years to try to improve yield. NS is raising rates as well but less aggressively. What's more, they couldn't raise them at all if CSX wasn't out in front on this issue.

Why would anyone think that the congestion is a negative on the NS route? The congestion represents business! If this were a big downfall, CR would have favored the PRR over the NYC not the other way around. Indeed, both companies wanted the NYC into Chicago. CSX had scraped their ST Louis line so they had no choice but to go after CR's. This left them little room to deal. In the end, NS got far more access to the CR customer base. The are far more markets that can be reached off of the PRR than the NYC. CSX has some of the access via the B&O. However with the exception of New England, the PRR offered NS better access markets than the CSX.

humm interesting question....

Form the shareholder prospective, CR shareholders cleaned up - $110 per share... CSX and NS shareholder return remains negative at this point and in the end, the company who makes the profit wins...

Time well tell... I suppose the easist measure will be which road UP decides to buy... which will be a final decry of which provided great value for the dollar at the final curtain call.

FYI - The CR track improvements prior to the split where funded by the purchasing road that would benefit - the Cleveland short;line work was pd by CSX, work done on the Soutehrn tier was pd for by NS. Niether was a freebie...

Wasn't it a 60/40 deal, with NS getting the most of the assets?

NS got more CR routes than CSX did. I think it was closer to 52% versus 48%. The two systems (NS and CSX) therefore ended up with systems having roughly the same number of route miles.

There are, of course, other measures of measures of productivity. Does anybody have any figures on traffic (ton-miles), operating revenue or profits? In order to raise the money for the CR purchase, both NS and CSX bet the (proverbial) ranch on generating additional business. Did any of it ever materialize?

My information is admittedly somewhat dated, measuring traffic changes during 2000, but traffic on the Metropolitan Subdivision increased by 40% after The Transaction and traffic on the Capital Subdivision increased by 60%. I don't have current information and, of course, there aren't any NS lines that lend themselves to easy comparisons.

Those would be my measures of which system got the better deal: what extra business was generated and did it contribute to their bottom line?

NS got (and paid for) 58% of the Conrail assets that were split up. CSX got 42%. If there is any current debate as to which got the "better half" then the edge would have to go to CSX because NS paid 38% more for their portion than CSX did... The numbers that I have seen indicate that NS hasn't gotten 138% of the traffic that CSX has...

- BCM

"Why would anyone think that the congestion is a negative on the NS route?"

What congestion are you talking about? Horseshoe Curve used to be a busy place and now it is often so quiet so can find birds building nests on the rails.

Mike Helenek

How often do you go there? Last week I stopped in Altoona for two hours on my way to a business meeting and saw 9 trains in two hours. Other times have been as good or better. Yes it can have its dead times, but it did under CR as well. CSX in upstate NY can be very busy but it can also die for hours. What‘s more, the country has been in a recession for must of the time that the line has been under NS ownership.

The congestion I was referring to, however was the type caused by industry. The ex NYC from Toledo to Chicago is far more populated by industry than the ex B&O. My point is that this type of “congestion” is not a negative.

NYSWSD70M

"The numbers that I have seen indicate that NS hasn't gotten 138% of the traffic that CSX has..."

What? Your numbers don't make sense. Did NS end up with 58% of Conrail's traffic is more relevant. NS was smaller to begin with and remains slight smaller even after the take over. The only way you logic would work would be to take entire eastern share of CSX and NS and add 42% and 58% to the numbers and see how they compare. I think that it is generally a 52-55% CSX to 45-48% NS market share split these days.

Unfortunately, it is hard for the public to gain meaning from any of this. However, you can ask these questions: Did NS get 58% of the asset base? By most measurements, yes or close to it. Did they get 58% of the traffic? Intermodal no, the rest yes. Since CSX cut rates, this is a victory mainly for the fans. Did NS end up with 58% of the gross? Well how do you want to measure it? Since both cut rates to gain the business, the sum of the two parts did not total 100%. Thus, no NS did not and it is hard to measure this due to the fact that most contracts are confidential.

The fact that CSX was busier on the B&O after the split should surprise no one. Any of the business that they gained to former CR points south of New York was going to move over the B&O. The B&O would have gained even if CSX had only secured 20% of the business.

While CR was still in exsistance, the then Harrisburg/Pitt. Div. was the "place to be" to see the highest concetration of trains in the daylight. After the Double stack project, CR ran 40+ trains on a consistant basis in the daylight on Wed-Sat. I know the "Trains on the Curve" schedules were not all that accurate. But it did show one thing. Very little traffic ran through Altoona in the dead of night..............And NS runs trains ALL NIGHT LONG! Which will take away from daylight traffic levels.

CSXT kicked NS's proverbial a** on east-west intermodal. Spend a day west of Greenwich on the old B&O and you'll see a steady parade of trailer trains and stacks. This is especially true in the evenings around Deshler, OH where you can go 3-4 hours with intermodals every 10 minutes one way or the other.

NYSWSD70M wrote:
> What? Your numbers don't make sense.

They make plenty of sense... The 58% part that NS paid for their share of CR is 138% of the 42% that CSX paid for their part (58/42 = 1.38)...

To have gotten an equal amount of business per dollar spent NS would currently have to be hauling 1.38 times (or 138% or 58/42) the amount of ex-CR traffic that CSX is (58% or more of the total ex-CR business)...

> Did NS end up with 58%
> of Conrail's traffic is more relevant.

And that is the exact number that we are talking about...

If NS were getting 58% percent of the ex-CR traffic then CSX would be getting 42% of the ex-CR traffic. NS would thus be getting 138% (58%/42%) of the amount of ex-CR traffic CSX is getting (or 38% more than CSX is getting) - and frankly that isn't happening.

Most of NS's recent dramatic traffic gains have been in the automotive sector as served by lines that were already NS before the Conrail split...

- BCM

mp57 wrote:

> CSXT kicked NS's proverbial a** on east-west intermodal.
> Spend a day west of Greenwich on the old B&O and you'll see a
> steady parade of trailer trains and stacks. This is especially
> true in the evenings around Deshler, OH where you can go 3-4
> hours with intermodals every 10 minutes one way or the other.
>
> [%sig%]

Again this all depends on how you look at it. CSX had cut their rates so low and got a lot of container business from that. When I asked someone with contacts with NS intermodal why we did not so we would get more of the business the answer was, "Why should we, our trains are beating the CSX to the west by two to three days. The customers will pay the higher rate to get them there faster." As it turned out a lot of that traffic did come back to the NS. The business came back as CSX slowly raised the rates back to the level it was before. From what I was told the CSX rates had been so low that there was little to no profit from moving these intermodal trains. The CSX thinking was that once they got the business it would stay with them once they raised the rates back up.

I guess NS isn't talking about Norfolk to Chicago traffic anymore since they lost so much of it they had to cancel two trains that carried it (before CSX initiated their Norfolk to Chicago service which is several hours faster than NS because of NS's circuitous routing which had been through Bristol and Bellevue)...

And north-south intermodal on NS through Virginia isn't half of what is was in pre-Conrail acquisition days. Trains through Manassas are off 50% compared to five years ago... (and the Valley line has yet to see any of the drastic traffic increase predicted - sort of like the Southern Tier)

- BCM

What about in the northeast?

For example, I have heard for some time now that NS has been eyeing purchasing Guilford (ex-B&M) as a way to compete with CSX into the Boston area.

Is this true? If so is NS still trying to do this?

What about all the improvements that NS has done on the Lehigh Line into New Jersey as opposed to what CSX has sone with the ex-Reading line.

Regards......

Some thoughts ...

1) NS got the better merchandise franchise out east. NS got Delaware, Maryland, and Pennsylvania, while CSX got New York and southern Massachusetts. That's a no brainer of a choice. NS also has the better route out of Philadelphia and Pavonia.

2) CSX has a seeming inability to beat NS on rates. When I've priced out traffic, CSX is usually $200-300 above NS on basic east-west and north-south routes from Chicago and Buffalo gateways.

3) Intermodal is a very low margin business. Its no great loss to NS to miss out on some of this if it picks up more merchandise.

4) Seems to me that NS has more of the coal traffic out of Shire Oaks.

5) Trains over Horseshoe Curve are down because of Enola reopening. No more doubling over the mountain for traffic from the northeast and Buffalo to get to Roanoke and Linwood.

6) If NS does buy Guilford, it will have the better New England franchise and the better Massachusetts franchise.

7) Much of the traffic is locked into multi-year contracts that won't expire for a couple more years. It will be interesting to see what changes occur then.

8) NS is presently the fundementally healthier railroad. Just look at the percentage of revenue that becomes earnings.

9) The only real inter-railroad competition is in and out of Conrail Shared Assets, jointly served shortlines, and the gateway interchanges. Everything else comes down to the marketing department making a case against the truck.

Andy Byler

Some couterpoints...

> 3) Intermodal is a very low margin business. Its no great
> loss to NS to miss out on some of this if it picks up more
> merchandise.

Correct. And roadrailer margin is even lower. That is why I've always wondered what all the hype was on the NS Triple Crown service where a very heavy backhaul load ratio is needed to even break even...

> 5) Trains over Horseshoe Curve are down because of Enola
> reopening. No more doubling over the mountain for traffic from
> the northeast and Buffalo to get to Roanoke and Linwood.

Anybody who lives in Hagerstown or Front Royal (or anywhere inbetween) can tell you that traffic using the "Hagerstown Gateway" to/from Roanoke or Linwood is way down from pre-Conrail acquisition days...

- BCM