CSX-bc and "merger"

True enough, Conrail had zero debt for quite a while after the IPO in the mid-'80s.

Respectfully as well, CSX's lack of capital investment in the property has been going on quite a bit longer than the assumption of 42% of CR. One of the major concerns that CR leadership had about the long-term viability of a combined CR/CSX (the merger that never was) was this very situation, as well as the new debt being taken on.

The CSX system had never effected the major modernizations that would optimize their system -- and they had not kept their railroad up to snuff since the combination of SCL/L&N and Chessie. Instead they chose to diversify across the transportation industry (remember Sea Land?). All of that occurred long before the "premium" they paid for their portion of Conrail. It's expensive and difficult, they're discovering, to "catch up," too.

The availability of a better lending environment was/is not, I believe, a big part of this issue. CSX's operating ratio is out of whack -- 78.6% vs. 73.8% for NS for the same period. Why doesn't NS have the same problem?

NS did have some of the same problems, they just recovered faster. NS sat on a relative pile of cash for a long time so had more flexibility in how much money they might need to borrow. Unlike CSX, the merger between Southern and N&W was just about an end-to-end combination, and the two railroads were often strategic partners rather than competitors. I fundamentally agree that L&N / SCL / C&O / B&O never reached a full level of integration and that was a part of the new CSX's ongoing trouble. I also agree with what I think your position is, that NS management has been better than CSX's.

NS, like CSX, did look for acquisitions that added diversified revenue. That was the SeaLand driver for CSX, NS had their own small disaster with the purchase of North American Van Lines. I often wonder about NS's move to acquire Piedmont Airlines as well.

Also, I wasn't trying to say that money was any tighter or easier to obtain, just that to go to the capital markets was more difficult for them say five years ago than it may be today, as perhaps now they may choose to use profits from ongoing operations to partially fund capital investments, the investor community would have punished them previously. Climate is better for railroads now, even the worst performer is viewed differently, as the entire sector looks like (according to the investment companies) an opportunity for growth.

It's a good point about operating ratios, but remember this is a financial model that the railroad community uses as a measure of health. The financce guys look at it, but it's one part of an analysis. For years, no matter what buisness you may be in, debt to equity, return on investment, and especially in the case of capital investment, net present values are all that the money folks look at.