Eastern Railroad Discussion > Potential New Class 1 Merger Analysis

There is a fascinating article in FreightWaves about the recent renewed interest in Class 1 rail mergers due to a more "friendly" political climate under Trump administration (see link below).

In particular, London-based analyst MKP Advisors discuss various outcomes and mentioned only three, CSX-UP, NS-UP, and NS-BNSF as possible with all other combinations facing insurmountable challenges. I found it odd they thought CSX-BNSF was too difficult while UP-CSX was fine or any combination of BNSF or UP with NS is fine!?!?!

Don't get me wrong as I fully get why CN and CPKC wouldn't happen given Trump administration America first stuff but can somebody explain to me how CSX-BNSF is that much more difficult than CSX-UP, NS-UP, or NS-BNSF?!?!

https://www.freightwaves.com/news/uk-investor-sees-not-one-but-two-pathways-to-rail-mergers

MKP makes an interesting argument, and raises many good points.  But, starting with the premise that "another round of mergers will improve service" strikes me as hollow, in light of the results of past mergers.

By just about every metric, the sequence of mergers has resulted in worse service, higher costs, and more business lost to trucks, etc. Many industries are complaining about service, the do-nothing Congress holds empty hearings, nothing changes for the better.

What another round of mergers will do is line the pockets of the investment banks which facilitate these mergers.  Howard Lutnick and the other billionaires in the Cabinet will like this, but it won't resolve the problems we see every day.

I believe an excellent case can and should be made for breaking up the current railroads, and creating some meaningful competition in the US.  It's pretty clear that the reasonably effective oversight exercised in Canada won't fly here since the regulatory mechanism is corrupt and captured beyond redemption.

Lackawanna484 Wrote:
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> But, starting with the premise that
> "another round of mergers will improve service"
> strikes me as hollow, in light of the results of
> past mergers.

Good point, but Wall St. has the shortest memory of any segment of society. The natives are getting restless and looking for more easy money and see it here, as if new suckers might be persuaded, but I ask how can a structurally sound investment like the railroad industry be able to keep offering huge returns continually through constant consolidation? Even if they do suceed in a final round of class 1 mergers, what then? Finally start going after new business and make incremental improvements? They could do this now and avoid all the uncertainty of pushing a merger through. New churn is easier than long burn, but I don't see it happening right now myself.

As for CSX-BNSF, no difference there than with the others, just another investing rountable of experts babbling mumbo-jumbo that will likely not play out, even as they admit the remoteness of possibility. The only sure way to rightfully squash all this talk now and forever is the shipping community/lobby banding together to make their displeasure heard much more loudly with the folks in charge, since everyone knows (including the rails) shippers have the ability, knowledge and evidence to clearly demonstrate the folly of these giant combinations, and that most of their previous promises regarding mergers have never panned out...

JG



Edited 2 time(s). Last edit at 07/05/25 10:16 by jgilmore.

The folly of the last piece mergers could open up possibilities for the future.

If a group of large investors could be put together, spun off secondary lines could be rebuilt into an open access network with 21 Century standards.

A couple thoughts...

Until railroads actually decide to move freight like they were created to do, I am a no on further consolidation.  Incessant cost cutting will kill one of the class 1's in the no so distant future.

Warren Buffet could cut a check for NS, today.

Eng.Shadetree

The biggest mistake I've seen is when the FEDS allowed UP to buy the WP.  Never, ever should have let that happen.  That WAS your competition--WP/RIO GRANDE/BURLINGTON into Chicago and points between.

Also, the Milwaukee was mishandled by all--a superbly engineered line allowed to fade away--at one point, it was faster and better than both the BN and UP.  So how does that disappear???

I'd like to see what could happen with open access.

Allowing Chessie to exercise its control over the Western Maryland and abandon most of it was another "mistake."  N&W would have been the most logical suitor so that it could access Baltimore and improve its reach into other parts of the Middle Atlantic States; however, under the regulatory climate at the time, Norfolk's Jack Fishwick wanted no part of WM or any other railroad east of Pittsburgh or Buffalo.  

Yes, the STB should think carefully before seriously considering future Class 1 mergers.

Yet I'm a bit surprised that BNSF and NS haven't spoken out yet.  A merger between those two would create a potential rail superhighway between Calif points and NY-NJ points in the east.  WB trrains take the BNSF transcon to KC, then NS ex-WAB via Decatur to either Ft. Wayne or Butler, IN.  Then east on the NS Chi Line or ex-NKP to the east.  With doubletracking and other improvements traffic could cross  the continent in record time since chokepoints like Chicago and St Louis are bypassed.

That would cause serious problems for UP and CSX.  They could avoid Chicago but not St.Louis.  If BNSF and NS announce merger plans, expect UP especiallly to fight it tooth and nail.  

calumet Wrote:
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>  A merger between [BNSF and NS] would
> create a potential rail superhighway between Calif
> points and NY-NJ points in the east

...and they could probably do that now - if they wanted to.

Didn't Conrail and Santa Fe bypass Chicago with the "Streator Connection" back in the early 1990s?

Today's semi-monopolist railroad leadership doesn't seem to have the hustle which characterized railroads back in the 1970s and 1980s. Back when you had to deliver good service to earn and keep business.

pennsy3750 Wrote:
-------------------------------------------------------
> calumet Wrote:
> --------------------------------------------------
> -----
> >  A merger between would
> > create a potential rail superhighway between
> Calif
> > points and NY-NJ points in the east
>
> ...and they could probably do that now - if they
> wanted to.


They don't have to; some passenger outfit wants to do it for them.

Another article from Freightwaves:
https://www.freightwaves.com/news/this-new-la-ny-passenger-train-will-carry-long-haul-trucks-too

It'll be all well and good until they 'stop real quick and pick up an ethanol train' while passing through the Midwest.

 

pennsy3750 Wrote:
-------------------------------------------------------
> calumet Wrote:
> --------------------------------------------------
> -----
> >  A merger between would
> > create a potential rail superhighway between
> Calif
> > points and NY-NJ points in the east
>
> ...and they could probably do that now - if they
> wanted to.

Yes, but BNSF doesn't  wamt to do that (and similarly for other roads).  They make more money the longer the train remains on thieir own tracks.  So instead of handing it off at KC they'll run it all the way to Chicago despite all the congestion and delays. 

Now if it were all the same RR, it would be a different matter.
 

Lackawanna484 Wrote:
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> Didn't Conrail and Santa Fe bypass Chicago with
> the "Streator Connection" back in the early
> 1990s?
>
Yes, but only for expedited shipments.  For most moves, it was SF all the way to Chi and CR would pick it up there (usuallly after a lot of classification while there).  The Streator moves were few in number, and probably even less now.

calumet Wrote:
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> Yes, but only for expedited shipments.  For most
> moves, it was SF all the way to Chi and CR would
> pick it up there (usually after a lot of
> classification while there).  The Streator moves
> were few in number, and probably even less now.

In the early 1990s, the service usually was one manifest train each way a day. Westbound from Elkhart it had GM business for Oklahoma City, so it was a pretty hot train. Sometimes you would get a second train either direction.

 



Edited 1 time(s). Last edit at 07/06/25 15:36 by ts1457.

AaronJ Wrote:
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> If we ever get to the point of a BNSF-NS merger,
> you can pretty much guarantee most, it not all of
> the ex-Wabash is going to be forced into joint
> ownership to a point a BNSF-NS combo doesn't even
> have a majority stake in order to meet the
> "increased competition" clause.

I don't see why the STB would demand ownership.  Yes, CN would surely want to access KC.  But why can't the STB simply require that they be provided with trackage rights?

As to a UP-CSX getting access, I think that's less likely.  The STB could point to having its own roughly parallel route to the WAB, viz. the Big 4 route from St.Louis to Indy to Cleveland.  It's not as good as the WAB, but it's certainly plausible that the STB finds that it meets the conditions of "enhanced competitiion."
 



Edited 1 time(s). Last edit at 07/06/25 09:20 by calumet.

This seems to me like the attempt of investment firms and consultants to try and gin up interest in such a mega meger round.  While the current political climate is more friendly to the interests of billionaires, it isn't clear which set of billionaires has more clout - shippers or the railroads.   Put another way, would the administration or family benefit from a large railroad merger?  I don't think so.

So What a UP-CSX merged railroad be called? CUP perhaps? With a BNSF-NS it would be easier, it could be BNSSF for Burlington Norfolk Southern Sana Fe.

Or BNSF

Has all the letters already

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          Any nerger of these big 4 would turn transportation into sludge and at the same time line pockets of most congress, senate and big money bag types with amounts you cannot count high enough to even get close. Has nothing to do with better business other than while collar theft.

Good thread.

There are many points of convergence. Any of which could be dominant.

It is possible that STB/DOJ could require reinstatement of terminal railways in some markets as their price.

There is good evidence that Conrail Shared Assets works. And Ron Batory knows that.

The administration could get its union busting chops in by requiring some lines to be spun off and run by G&W, Watco, Herzog, etc

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