Amtrak: Gary Pancavage Call it a Clocker, call it a Metroliner – it’s still a fast train on the Northeast Corridor, here pausing briefly in Wilmington, Del. a couple of years ago with HHP-8 No. 651. That’s an 8,000hp critter. It looks like Amtrak is getting considerably more dollars than the House offered up, less than the Senate voted for, and $600 million less than CEO David Gunn and the directors asked for. Now the question is, how far will $1.2 billion take Gunn et al in fixing up the system? After all, it is more than Amtrak has ever received in a single-year appropriation.

Amtrak gets ‘limp along’ budget

Congress has landed on a figure of $1.22 billion for Amtrak in fiscal year 2004. That is a “compromise” between the Senate’s $1.34 billion and the House’s “shutdown” $900 million. The fiscal year began October 1.

Of course, it falls far short of the $1.8 billion Amtrak requested as the first in CEO David Gunn’s five-year plan for bringing America a first-class passenger railroad.

Gunn has issued a statement saying it will be a month before the company determines how to fill the $600 million gap in the funding of the first installment of his program to upgrade the passenger train service. Some things are candidates for deferral.

Add to the $1.22 billion another $100 million in a government loan whose repayment has been postponed by the lawmakers’ “compromise.”

In line with Gunn’s effort to make Amtrak more like a business, $200 million in working capital was carried over into the new fiscal year. The Washington Post quotes “sources” as saying the very existence of that money allowed the House-Senate conference committee to cut more from the Senate figure “than it otherwise might have.”

Does this mean Congress is punishing Amtrak for acting more businesslike, as Congress has demanded?

In an interview with D:F, Amtrak spokesman Dan Stessel refused to use the term “punish.”

“[I] don’t want to comment directly on that. I will say that with many of the capital programs, the lead time for ordering materials… explains why much of the funding was carried over into the new fiscal year.”

Moreover, he noted, the $200 million doesn’t bridge the gap at all, even under the most optimistic scenario for the coming year.

Last year, in a lengthy interview, Gunn told D:F that he was brought on board to bring Amtrak up to a state of good repair and give Americans a first-class passenger railroad. Nothing fancy or extravagant – just a customer-friendly train system in whose reliability the public can have confidence. He added he would continue to do that until Congress tells him to stop.

So has Congress told David Gunn to stop? Here is Stessel’s answer:

“By virtue of the fact that Amtrak has not received the $1.8 billion, there is a message – intentionally or not – a message that Amtrak should just limp along for now, and should, in fact, defer some of the maintenance and the capital improvements that were proposed.”

Stessel added everyone at Amtrak knows these projects are “critically needed.” Further, he reminded us that “absent adequate funding, we can’t move forward. That’s the reality of it.”

Will customers, Amtrak’s passengers, suffer?

Stessel emphasized that in the past year, “a lot of progress was made on a budget that was not his [Gunn’s] budget.” This progress included a “back to basics” approach to running the railroad, along with “streamlined service,” and new “management efficiency.” All of these have “reaped dividends,” such as “dozens of miles” of concrete tiles on the Northeast Corridor, rebuilding cars, air conditioning systems improved over pervious years. All positive, though not at as rapid a pace as Amtrak “would have liked.”

However – and here we quote the Amtrak spokesman – “does that mean the railroad is at an increased risk of failures that will affect reliability? Yes, absolutely. Equipment failures, infrastructure failures; we’re increasingly prone to all of those because we’re not moving at the pace we would like. That is a function of not receiving the $1.8 billion.”

Amtrak, therefore, “will continue to take steps to improve the reliability of the railroad. After all, “that’s what Mr. Gunn was hired to do and will continue to do.”

Neither Stessel nor anyone else will say this, on or off the record, but some who know of Gunn’s determination to achieve a goal once he has defined it are suggesting to D:F that the Amtrak boss just may come back for more money before the fiscal year is over.

Either that, or as some have indicated, he can go ahead with his five-year plan while scheduling the work in such a way that the bills are not due until next year. That in turn could lead to a larger appropriations request for fiscal 2005, though Stessel won’t comment on any of that.

The budget leaves no wiggle room for the unexpected, such as a terrorist attack or an economy that goes south.

At this writing, the economic outlook is positive.

Terrorist attack? That is the biggest unknown.

High winds blew down trees, kicked up the surf, and knocked out power Thursday to thousands of homes and businesses across Connecticut, and Metro-North Railroad reported delays during the morning commute. A fallen tree in New Canaan knocked out a signal, forcing the railroad to use buses to transport passengers there, said spokesman Dan Brucker. By 8:30 p.m., 5,694 Connecticut Light & Power Co. customers were without electricity, down from a high of more than 5,700 at 6 p.m. Waterbury had the most outages, 1,035, while Stamford had 721 and Bloomfield, Newtown and Somers had more than 400 apiece.

NCI: Leo King CSX and Norfolk Southern are in the news this week – each got a boost from an investment house, but CSX is laying off managers. Other STB decisions led to other actions, too.

Federal safety investigators are renewing their push for technology that can be applied nationwide to automatically stop trains if they violate signals, saying it is long overdue.

In a letter sent on Thursday to the AAR, the National Transportation Safety Board (NTSB) recommended the freight rail industry organization establish priorities and aggressively work to resolve long-standing technical obstacles, Reuters reported.

“While the safety board understands that (train control technology) is complex and expensive, the board remains convinced that these systems provide the best approach to reduce human-error collisions,” board chairman Ellen Engleman said.

The recommendation was prompted by the board’s finding last month that crew error most likely caused a Burlington Northern Santa Fe Ry. train to ram a commuter train last year outside Los Angeles, killing two people. Investigators said an automatic train control system would have prevented the accident.

The FRA is working on standards for train control technology, but an industry source said regulators would not likely set a deadline for implementing them and would probably leave it to freight companies and equipment manufacturers to resolve the most important issues.

Although the safety board has investigated 30 collisions since 1999 where control systems might have prevented the accidents, there is little or no consensus outside that agency that they are needed across the country – but there is some agreement the enhancement would boost efficiency by letting railroads run trains closer together.

The most modern train control systems use global positioning satellites to monitor separation and systems to engage brakes if a locomotive runs past a stop signal or a stop-and-proceed indication, as well as operating faster than a signal indication permits.

For years, Amtrak and all other trains on its heavily traveled Northeast Corridor between Washington and Boston have used less sophisticated technology for automatically stopping trains if they violate signal indications.

An FRA spokesman would not disclose details of the pending U.S. regulation, but said the rule would address the thorny problem of how to operate control systems seamlessly nationwide.

There is a national freight network but tracks, signals and trains are operated by individual railroads. Most have similar equipment and systems but they are not identical. Amtrak operates over freight railroad-owned tracks outside the Northeast Corridor.

AAR spokesman Tom White, in Washington, would not comment on the safety recommendation.

“There is no one answer to that question now, but it has to work. It can’t be 90 percent effective, and you have to makes sure it is something you can afford,” White said.

He said the industry is testing a system in Illinois, which probably will not be completed for a couple of years. “This is not off-the-shelf technology. It requires a great deal of testing.”

CSX said on November 11 it is laying off between 800 to 1,000 management employees. Most jobs lost will be in the Jacksonville, Fla., area where the carrier is headquartered.

The railroad stated in a press release it is realigning its “management structure at a number of its companies, eliminating organizational layers and realigning certain functions.”

“Our goal is to create smaller, more responsive and streamlined organizations focused on driving operating income up and better realizing our full potential. This effort will allow us to deliver stronger results more quickly,” said CSX boss Michael J. Ward.

Ward said “The streamlining will reduce management layers from 11 to no more than eight and increase the number of direct reports for many managers.”

Ward, who is CSX’s CEO, said the “reductions will be made over the next six months through a structured process, one layer at a time, beginning at the top of each organization.”

He added, “Outplacement services and benefits will be provided to those who do not have a place in the redesigned organization. The estimated cost of the program is expected to be in the range of $60 million to $80 million, most of which will be recognized over the next two quarters. The full effect of the savings will be realized mid next year. “

Despite revenue growth over the past three years, Ward said, “I am not satisfied with our efforts to control costs and improve productivity. The initiative will result in broad changes in the way we do business.”

Ward said the plan is to “put managers and decisions closer to our customers, increase accountability at every level and establish a far more competitive cost structure.”

CSX Corp. operates over 23,000 route-miles in 23 states, D.C., and two Canadian provinces.

When the Pennsylvania Railroad was the show in town around Harrisburg, Pa., Enola Hump Yard was a spectacular piece of railroading.

Enola was a freight car classification facility since 1905 for the former Pennsy, then Conrail, and now Norfolk Southern. Conrail severely downgraded Enola in the 1990s, including removing the hump, but NS is putting the yard back into working order – even though current work won’t restore it to its former glory. Nevertheless, it will be bigger than it was.

We learned through the pages of the Harrisburg Patriot-News of October 4 that NS, which took over sections of the Conrail system in 1999 (along with CSX Corp.), including many of the railroad’s tracks and facilities in Pennsylvania, is immersed in improvements.

Harrisburg anchors one corner of a somewhat triangular-shaped NS network. The other corners are in Atlanta and Chicago.

From Harrisburg, much like an airline hub, trains arriving from the South fan out like wheel spokes to northern New Jersey, Philadelphia, Baltimore, Binghamton, N.Y., New England, Cleveland and Chicago – and vice versa. About 970 NS employees call Harrisburg home.

The renewal project grew out of a computer-modeling study of how to integrate Conrail with NS that was conducted shortly after the acquisition, according to David A. Brown II, general manager for NS’s Northern Region.

The study showed that more car sorting needed to be done at Harrisburg than could be done without the Enola Yard in operation, so NS set up a 15-track “class” yard at Enola. That increased the number of cars that could be handled daily from 125 to 725.

“Now we’re going to do the next phase, and that is to take the 15-track classification yard and automate it so we can classify cars more in an automatic process manner,” Brown said. “That’s the project we’re starting now, and we’ll actually go until next summer until it’s completed.”

Enola Yard will again become a hump operation, where freight cars being sorted into new trains roll down inclined tracks. Previously, cars were flat-switched, and conductors used paper switch lists and human intervention to get the cars where they needed to go. Brown hopes the yard will be able to handle 1,200 rail cars daily when the work is done.

“Under the new system, the computer will look at where the car goes and route it by changing switches,” Brown said, “and the human part of it is to oversee that. They’ll still separate the cars. They’ll be involved in slowing the cars down as they automatically roll... but it’s more of an automated process.”

He said “not a whole lot” will change in terms of the number of jobs in the Enola Yard as a result of the changes, but conceded that there might be a “slight reduction.” About 380 employees work at Enola in all categories.

Overall, NS is hiring workers for some of the best-paid blue-collar union jobs in the region.

Remote control locomotives are plying the yard. They are controversial among the rail unions because it enables one or two workers to do what a crew of several employees did previously. Ken Kertesz, chairman of the Pennsylvania Legislative Board of the Brotherhood of Locomotive Engineers, said the union lost an arbitration with the United Transportation Union over jurisdiction over remotely controlled engines.

Kertesz said remote control has been used in Canada for 10 years and argued that it has not been as big a money-saver as the railroads hoped. NS uses remote control power at Reading, Philadelphia and Enola as well as other locations systemwide.

The other big project underway is the $5 million “Lemoyne Connector,” a new track that will allow NS trains from Hagerstown, Md., to avoid a circuitous, congested route through Harrisburg to get to Enola. Those trains now must make a right turn onto the distinctive old Reading Railroad bridge across the Susquehanna River, then proceed through Harrisburg and up to the Rockville Bridge, where they cross the river again and proceed south to Enola.

“Lemoyne is one of the linkages (we need) to make an efficient network,” Brown said. “Especially with Enola back in operation.”

Under Conrail, a connector was less important because of the location of its network main lines and the decision to phase out Enola in the 1990s.

The boroughs of Lemoyne and Wormleysburg have expressed concern about the connector project because a small piece of Memorial Park would be needed for the half-mile rail line and because of noise concerns. Most of the line would go across undeveloped land on the edge of the park. NS is seeking an easement of 1.65 acres.

“Most of the connector will be on property we have now,” Brown said. “It’s just at the real tip of the park, where there’s a walking path. We’re going to need part of that. The other non-railroad property is really not used anyway. They call it ‘waste area.’ The impact should be minimal.”

NS spokesman Rudy Husband said Enola Yard, even after the connector is built, will process a fraction of cars daily that it did in its heyday. He said between six and eight daily trains will use the connector, and most of that traffic will be at night.

CSX and R.J. Corman Railroad Co. have agreed to share tracks on the Memphis Line and another route.

The STB okayed the plan on November 12.

The STB noted a “written master trackage rights agreement” of October 15, gave CSX rights to operate over 33 miles on Corman’s Memphis Line between CSX milepost F-118.74 (which is also Corman’s MP LF-118.74) at Memphis Jct., Ky., and Corman’s MP D-152 at Lewisburg, Ky.

Meanwhile, CSX has given trackage rights to Corman’s Central Kentucky Lines to operate over about 35 miles between CSX MP VB113.81 at Winchester, Ky., connecting to CSXT’s CC Subdivision at MP KC96.1 and CSXT MP KC131.0 at Berea, Ky.

The deal was done on November 1.

Both carriers stated “The purpose of the trackage rights is to provide run through unit train service between Berea and Louisville, and between Louisville and Lewisburg, Ky.”

The STB stated any employees affected by the agreements will be protected by the conditions imposed in Norfolk & Western Ry. Co. – Trackage Rights – BN, 354 I.C.C. 605 (1978), as modified in Mendocino Coast Ry., Inc. – Lease and Operate, 360 I.C.C. 653 (1980).

Led by another sharp increase in intermodal traffic, total freight volume on the nation’s railroads was up during the week ended November 8 the Association of American Railroads (AAR) reported Thursday.

Intermodal traffic totaled 210,118 trailers or containers, up 9.6 percent from the comparable week last year. Trailer traffic registered an 11.8 percent gain, while container volume rose 8.7 percent from last year.

Carload freight, which does not include the intermodal data, totaled 335,614 cars, up 0.1 percent from last year with volume up 0.5 percent in the East but down 0.3 percent in the West. Total volume was estimated at 30.4 billion ton-miles, up 2.7 percent from last year.

Thirteen of 19 carload commodity groups registered gains from last year, with farm products other than grain up 83.8 percent from last year; coke up 28.3 percent; and stone, clay and glass products, up 13.6 percent. Loadings of metallic ores were down 27.9 percent.

The AAR also reported the following cumulative totals for U.S. railroads during the first 45 weeks of 2003: 14,691,692 carloads, down 0.1 percent from last year; intermodal volume of 8,613,873 trailers or containers, up 6.6 percent; and total volume of an estimated 1.3 trillion ton-miles, up 1.2 percent from last year’s first 45 weeks.

Railroads reporting to AAR account for 88 percent of U.S. carload freight and 95 percent of rail intermodal volume. When the U.S. operations of Canadian railroads are included, the figures increase to 95 percent and 100 percent. Railroads provide more than 40 percent of the nation’s intercity freight transportation, more than any other mode, and rail traffic figures are regarded as an important economic indicator.

Both intermodal and carload freight were also reported up on Canada’s railroads during the week ended November 8. Carload volume totaled 69,901 cars, up 9.2 percent, while intermodal traffic totaled 45,566 trailers or containers, up 6.8 percent from last year.

Cumulative originations for the first 45 weeks of 2003 on the Canadian railroads totaled 2,810,596 carloads, down 0.1 percent from last year, and 1,882,055 trailers and containers, up 6.7 percent from last year.

Combined cumulative volume for the first 45 weeks of 2003 on 15 reporting U.S. and Canadian railroads totaled 17,502,288 carloads, down 0.1 percent from last year and 10,495,928 trailers and containers, up 6.6 percent from last year.

The AAR also reported that originated carload freight on the Mexican railroad Transportacion Ferroviaria Mexicana (TFM) during the week ended November 8 totaled 8,363 cars, down 6.0 percent from last year. TFM reported intermodal volume of 3,442 originated trailers or containers, down 6.0 percent from the 45^th week of 2002. For the first 45 weeks of 2003, TFM reported cumulative originated volume of 379,200 cars, down 2.1 percent from last year, and 156,097 trailers or containers, up 14.2 percent.

KCS

Kansas City Southern (KCS) directors on November 7 declared a regular dividend of 25 cents per share on the outstanding KCS 4 percent non-cumulative preferred stock. It is payable on January 20, 2004, to preferred stockholders of record at the close of business on December 31, 2003.

Norfolk Southern Corp. said last week it had reviewed an STB ruling in Duke Energy Corp. vs. Norfolk Southern Ry. Co. that upheld the railroad’s rates on some coal movements. The STB invited Duke Energy to initiate a proceeding to determine whether the phase-in constraints of the “Constrained Market Pricing Guidelines” should apply – and the result is NS can’t forecast its earnings for the quarter.

NS stated it would “continue to monitor future developments in the case and evaluate their financial impact.”

The carrier added it is “continuing to bill and collect amounts based on the challenged tariff rates consistent with its past practice. Due to the passage of time, however, the ultimate outcome could have a significant effect on the results of operations in the particular quarter or year resolved.”

Norfolk Southern operates 21,500 route miles in 22 states, the District of Columbia and Ontario.

CSX sold 400 million in two-part debt, said joint book-running manager Credit Suisse First Boston on November 12, Reuters reported. Citigroup was the other joint book-running manager for the sale. Both “tranches” were completed on Wednesday. A tranche is one of a set of classes or risk maturities that comprise a multiple-class security.

In the first tranche, the amount borrowed was $200 million with a coupon set at 2.75 percent. It will mature on February 15, 2006. The issue price was $99.95 with a first payment date of August 15, 2004.

The second tranche, in bonds, was also $200 million, with a coupon value set at 5.30 percent. It matures on February 15, 2014. The issue price was $99.274 with a first payment date of August 15, 2004.

Standard & Poor’s Ratings Services said on Thursday it assigned its “BBB” rating to CSX Corp.’s (CSX) $200 million of 2.75 percent notes due February 2006 and $200 million of 5.30 percent notes due February 2014.

“Ratings reflect CSX Corp.’s (BBB/Stable/A-2) strong competitive position as one of the two large eastern U.S. railroads and the better-than-average business risk profile of the U.S. freight railroad industry,” said Standard & Poor’s credit analyst Lisa Jenkins.

“These factors partly offset a sub-par financial profile, which reflects the substantial debt burden CSX incurred in 1997 to acquire 42 percent of Conrail Inc., its subsequent post-merger integration problems, and recent operating inefficiencies,” the analyst continued.

She explained, “Ratings incorporate an expectation that management’s initiatives to improve operating performance will lead to improved financial results over the near to intermediate term.”

Jacksonville-based CSX operates the third-largest rail system in the U.S. It also operates a marine services business. CSX has about $9 billion of lease-adjusted debt.

CSX Transportation Inc., includes rail and intermodal operations, domestic utility coal, chemical, and intermodal traffic.

In 1997, CSX and Norfolk Southern Corp. jointly acquired Conrail Inc., with ownership split 42 percent and 58 percent, respectively. CSX and Norfolk Southern began to operate their respective portions of the Conrail assets on June 1, 1999.

CSX experienced significant congestion problems following its merger with Conrail and spent the years following the merger on improving service metrics and financial results. The company was successful in improving both operating results and the financial profile of the company during the 2000-2002 period. However, the improving trend has stalled this year, stated S&P, with the surface transportation operating ratio (operating expenses, including depreciation, as a percentage of revenues) deteriorating to 88.3 percent during the third quarter of 2003 (adjusted for unusual charges). Although this is better (lower) than the 90.2 percent reported in 2000, the year following the Conrail merger, it remains higher (worse) than average among large North American freight railroads.

Significant increases in fuel costs and increases in other expense categories as a result of decreased operating efficiency have also contributed to the deterioration in operating performance.

“Management remains committed to resolving operational issues, and has initiated personnel and organizational changes and other process improvements,”. Jenkins said.

The company’s managerial reorganization over the next six months “is expected to result in improved operating efficiency over time. This, coupled with management’s commitment to debt reduction, should lead to improved credit protection measures, although costs of the various initiatives could put pressure on financial results over the near term. The company has estimated that the streamlining program will cost in the $60 million to $80 million range, with the full effect of the savings to be realized in mid-2004,” she said.

S&P stated current ratings assume that ongoing initiatives to improve operating performance and reduce debt and management’s commitment to improving the financial profile of the company will result in improved credit protection measures over the near to intermediate term.

NCI: Leo King Conrad Yelvington Distributors, Inc., based in Daytona Beach, Fla., is building a new facility in Dothan, Ala., which will employ 11 people. The firm distributes aggregate rock used to build roads and other projects. The plant is expected to be fully operational by summer 2004. Construction will begin in January, reports the Dothan Eagle. Since the company began in 1981, the firm has grown to a 23-terminal distribution network including Florida, Mississippi, and Alabama. The firm owns its own locomotives, as in this facility in Sanford, Fla., with a direct connection to CSX’s “A” Line, its main track between Miami and Jacksonville.

Burlington Northern Santa Fe (BNI) is seeing a good pickup in year-end car loadings and expects fourth-quarter share profits to be at the “top end” of a mid 50-cents range given earlier, the leading U.S. railroad’s chief financial officer told Reuters on Thursday.

“With the loadings that we have seen in the first half of the quarter, we believe it now looks like (share profits) will be at the top end of the mid-50 cents range,” CFO Thomas Hund said at an analysts meeting in Chicago.

The Fort Wort-based freight railroad had been expected to earn 56 cents a share in the current quarter, with a range of 54 to 61 cents, according to analysts surveyed by the Reuters Research unit of Reuters Group Plc. The company earned 54 cents a share in 2002’s fourth quarter.

On October 21, when reporting a 5.7 percent rise in three-quarter net income, the No. 2 U.S. rail group said fourth-quarter earnings would be in the “mid 50s” range.

Hund said during the meeting, monitored on the Internet, that three of BNSF’s main business groups were putting up stronger revenue in the quarter than a year earlier.

While full-year 2004 results were difficult to forecast, he said, BNSF’s share earnings could rise by “the mid double-digits” next year if fuel prices stabilize and the U.S. economy grows at a reasonable rate.

Analysts expected the railroad, which earned $2 a share in 2002, to earn $2.04 a share for all of the 2003, according to a consensus estimate from Reuters Research.

Santa’s sleigh slips down the iron

Santa Claus is making his list and checking it twice as he prepares to once again leave his home at the North Pole and make his annual railroad journey through Appalachia. For the 61^st year, Santa will help launch the holiday season on November 22 (a Saturday), by riding the Santa Special over CSX tracks, a one-of-a-kind train that brings gifts and joy to remote areas of Kentucky, Virginia and Tennessee.

Santa and his elves are expected to distribute more than 15 tons of gifts to thousands of children at 15 designated stops along the 110-mile route. Residents living in or near these 15 communities are encouraged to gather at the stop locations to welcome Santa.

The train begins in Shelby, Ky., with stops in Marrowbone and Elkhorn, Ky., and the Virginia communities of Tom’s Bottom, Haysi, Clinchco, Fremont, Dante, St. Paul, Dungannon, Ft. Blackmore, Speers Ferry, Kermit and Waycross, before arriving in Kingsport, Tenn.

The Santa Special is co-sponsored by CSX and the Kingsport Area Chamber of Commerce. The special train gives Kingsport merchants a chance to thank area residents for their business throughout the year, and CSX believes the tradition is a way for the railroad to make a positive contribution to the communities through which its freight trains pass every day.

For more than 60 years, this tradition of giving has brought happiness to the young and the young at heart. In more recent years, the generosity of people and organizations has allowed the Kingsport Chamber to establish a scholarship fund. Each year, one or two high school seniors living along the train’s route are selected to receive a four-year, $5,000 scholarship. So far, about $84,000 in scholarships has been awarded to 18 students.

The Santa Special’s route is part of the Carolina, Clinchfield and Ohio line, formerly known as the Clinchfield Railroad, a CSX predecessor railroad. Today, the train operates on CSXT’s Central Region, and its employees continue Clinchfield’s tradition. CSX has about 6,300 employees in Kentucky, Tennessee and Virginia.

Dear Editor:

“Later, the engines wound up in commuter service in the Massachusetts Transit Authority. That was before the Kingston Trio drove management crazy with poor Charlie getting lost in the MTA tunnels underneath the streets of Boston…”

Actually, Charlie got lost more than 15 years before the PAs showed up in Boston – but you just wanted to know if anyone reads all the way to the end of your excellent publication!

James F. Boylan
Tyburn Railroad