For years when all this extra capacity existed, the railroads were unable to charge a rate that covered the cost of capital. Now that the demand exceeds the capacity the rails can raise rates to where they can have the funding to add the capacity - where it makes sense to do so. Take a listen to CSX's first quarter 2006 conference call replay, or take a look at the projects that are underway to improve capacity on key corridors. These were made possible by rates being up to where they should be.
http://phx.corporate-ir.net/phoenix.zht ... ID=1268506
Having Capacity closely match demand also allows the carrier to shed low/no margin business. For example, (again using the first quarter conference call as reference) CSX carried less intermodal in Q1 '06 compared to Q1 '05 - yet made more money doing so CSX also mentioned that they had capacity to give on their key intermodal lanes after shedding the lo/no margin business.
Finally, how long should an industry wait before shedding excess capacity? Do you keep capacity in a lane that may no longer be a key lane. For example, St. Louis used to be a key interchange point, but now much of that traffic is handed off at Memphis.
A parallell could be made with the domestic auto industry, the big three kept capacity in the hopes that they could regain share from the imports. Would they be better off now if they had been able to shed more capacity earlier - they would probably be in better shape.