Who's Next on the Merger List?

That's another reason why UP + NS looks enticing.

And yes, I'm kind of fixated on the possibility that the new road would be called Southern Pacific.

Union Pacific does own the still active Southern Pacific trademark. I guess that means the merger is coming.

From Hyatt Regency Old Greenwich CT--

First, ready to start the trek home.

At Breakfast yesterday with Jeff, the subject of the "ultimate duopoly" came up. We established that NS is smaller by operating revenues than CSX. and likewise BNSF is smaller than UP.

Also and this is quite unscientific on my part, judging from Containers and "Pigs" I've noted, it seems that UP-NS and BNSF-CSX just seem the preferred routes. But then let me note I have nothing factual at hand to support such.

But, even if I'll be gone, I still foresee the E-W duopoly coming.

Now a point Is what of the Canadians? Both have a "T-Bone" route structure extending to the Gulf, but CN has two maritime ports - Halifax and Prince Rupert to themselves, but otherwise they are "balanced".

Mexico is the "wild card"; will BNSF seek access? Will the Government decide they want back in the railroad business and kick CPKC (KCS-M) out (patronage, a possible MEXTRAK). Will there be sufficient political stability in the future to allow Lazaro Cardenas, Mich to become a viable West coast maritime port?

Questions,questions questions.

Not going to happen anytime soon.

Gilbert B Norman wrote: ↑Tue Jun 13, 2023 5:58 am But, even if I'll be gone, I still foresee the E-W duopoly coming.

Not for a moment, Mr. GRS, am I suggesting the duopoly will happen on the quick.

As noted, not in my remaining lifetime (I'm 82).

A NdeM comeback... I'd genuinely move to Mexico and become the most ardent AMLO supporter.

Mr. Constance, yes, it is correct that I did suggest in my June 13 posting, a possible return of the NdeM to the public sector. Considering how the two private sector rail operators in Mexico have shown the extent of waste, inefficiency, and patronage pits the Federally owned NdeM and FCM had become, I don't see how anyone's interests could be served by such a move. While the financial statements of KCS-M and Ferromex (Uncle Pete has a 25% interest) are not as readilly available as those of the "six-pack" up here (BNSF still reports on a 10-K; CN and CPKC are NYSE listed, as are of course NS CSX, UP), we can only presume that the private sector is "making book".

So I'd be interested to learn your reasoning as to why you would like to see these rail properties, or at least the NdeM as you note, returned to the public sector which could occur upon expiration of the franchise CPKC/KCS-M holds to operate such.

NdeM had built out a full-on electric mainline system that was quite literally scrapped where it stood. The fact it was a public service is reason enough, even if it was an imperfect one.

Admittedly off topic, but here's a video regarding your immediate point, Mr. Constance:

https://www.facebook.com/story.php?stor ... tid=T3FBdp

The 100 klick electrified NdeM line from Santiago de Queretraro QE to CDMX, DF suffered, I believe, from the same fate befalling any attempted mainline electrification in the US.

Had such been extended the full length of the NdeM line to Nueveo Laredo, NL, the story might have been different. Who knows how the story would have unfolded had the PRR extended theirs over the hills to Pittsburgh and even Chicago, or "my MILW" plugged the Avery-Othello gap?

Instead, US electrification has been one limited to where there is a high volume of passenger trains or overriding environmental concerns.

Either way, NdeM 2 would be at the very least be exciting to take pictures of.

In my mind, there are two major barriers to any future Class I consolidation: shippers and the rules; however, I don't think these are insurmountable.

One of the many reasons why CP-CSX and CP-NS failed was the near-total lack of shipper support. The combination of poor service under PSR and the slow rise in rates has made shippers weary of any large-scale consolidation. However, as railroads continue to shed PSR and focus more on customer service, I think you'll begin to see the attitude toward large-scale consolidation change. In fact, you've already seen it to a certain degree. Shipper support for smaller consolidations such as CSX-PAR and CP-KCS has been far, far greater than for CP-CSX and CP-NS. Heck, an often-forgotten fact about the whole CN-CP-KCS battle was that CN-KCS actually had more shipper support than CP-KCS!

The current Class I merger rules state that any merger must expand competition and not just keep it as-is. This is a high hurdle to cross, as shown by the CN-KCS merger attempt. (KCS was the only railroad exempt from the rules, but CN foolishly decided to have the merger judged under the new ones.) Any Class I merger would have to include a degree of open access and loads of trackage rights as concessions.

All of this being said, I still think we're 5-10 years off from any Class I merger not facing a large amount of opposition.

Mexcio is interesting. BNSF has not been quiet about their desire to expand south of the border, even trying to gain direct access to Laredo as a concession of CPKC. There are the Isthmus and Maya projects which could go up for grabs once they are completed.

I think in the near term you'll continue to see the remaining independent medium-to-large regional railroads be eaten up by the Class Is. One factor that the CMQ, PAR, MRL, and KCS all had in common is that they were decent-sized railroads that weren't a part of any large holding company like G&W or WATCO. FEC being owned by Grupo Mexico is safe.

I too am curious as to what happened the the "great CSX garage sale" back in 2018.

-Shortline

Until and unless the STB changes its stance, we're not going to see any mergers between today's Class I railroads. They made it clear that CP-KCS was the last one. Any new ones will require so much in the way of concessions to maintain competition that they won't be worth implementing.

Something says the concessions for a UP-CSX or BNSF-CSX merger would be minimal given the lack of overlaps. Sure, they might have to give up some facilities in Chicago but there's also going to be a bit of duplication they wouldn't mind getting rid of regardless.

There's only so much power granted to the agency, and if push came to shove, the agency's goal is to increase competition: coast to coast trucking firms are really the competition these days, not the other railroads.

Mr. Moldover, the potential mergers, UP-NS and BNSF-CSX (or v.v) will not happen in my lifetime. I won't see it, but the youngsters around here will.

These combinations are different than the proposed CP-NS or CSX. They represent an East-West end to end with each serving every major traffic source. The rail competition will be there at every major source save agriculture and mining, which have long (not saying heartily) accepted that there's only one road available.

By contrast CP/NS or CSX would be a Tomahawk Steak configuration. The "meat" would be CSX or NS crammed between CP's now Lakes to Gulf line, and their Eastern network. Then with one thin line to a West Coast Canadian Port, they would be "coercing" their CSX or NS shippers to divert their business consigned to the West Coast over the CP.

Ask me - dumb!!!!

So I’m not prepared to accept on the strength that CP/CSX or NS wisely went nowhere, that a one day East West duopoly will not.

eolesen wrote: ↑Sat Sep 09, 2023 2:04 pmSomething says the concessions for a UP-CSX or BNSF-CSX merger would be minimal given the lack of overlaps...

Strictly speaking the only overlap between the eastern and western Class Is that really matters is Norfolk Southern between Kansas City and St. Louis and BNSF between Memphis and Birmingham. In the event we see east-west mergers, expect trackage rights to be given to the Canadians along these lines.

eolesen wrote: ↑Sat Sep 09, 2023 2:04 pmThere's only so much power granted to the agency, and if push came to shove, the agency's goal is to increase competition: coast-to-coast trucking firms are really the competition these days, not the other railroads.

Just because rail-truck competition is the greater factor, doesn't mean the STB will ignore rail-rail competition. The current Class I merger rules state that any application must increase competition and that includes competition between railroads. Giving token trackage rights to mostly keep things "as-is" isn't going to cut it before the board. Any Class I merger is going to have to involve sizable market extensions and/or greater open access for competing railroads. (I do agree very much that rail-truck is the bigger competitive area nowadays; however, rail-rail is still very important and can't be sidelined.)

Gilbert B Norman wrote: ↑Sat Sep 09, 2023 3:34 pmSo I’m not prepared to accept on the strength that CP/CSX or NS wisely went nowhere, that a one day East West duopoly will not.

The Canadian-Eastern combinations have always seemed awkward to me. It's a case where the railroads go "75% of the way there." If I recall the main reason CP went after CSX and NS is that it was far more "doable" than merging with UP or selling out to BNSF, even if it made less broader sense.

-Shortline