Railway Age, January 1995

Don't limit yourself to a single Class I connection

Last week, I had a conversation with a short line owner who was thinking about abandoning part of his line. The track was in urgent need of some significant rehabilitation, and there was little or no business along a 20-mile stretch. "All this track is good for,&auot; he said, gesturing toward his spreadsheets, " is access to a second Class I. Do you suppose we could get by without it?"

To help him assess the value of the second ocnnection, I went out to talk to other short lines with a variety of access situations.

The first was Chuck Allen, General Manager of the Indiana Harbor Belt Railway. This line, itself owned by two Class I's, moves a staggering 160,000 cars a year and has 23 Class I, regional, and short line connections. Chuck didn't have to think twice about his answer: " if you have two connecting lines and think you only want one, that's a stupid concept. If you only have one now, go for two, depending on customers and destinations." Although most of his customers set their own routes, Allen maintains a three-person marketing department to handle the business.

Allen is not alone. RailTex's Bruce Flohr says he won't even look at a potential short line acquisition if it doesn't connect with more than one Class I. South Central Florida's Dick Conley insisted on access to two Class Is as part of the line sale agreement. The Michigan Southern interchanges with another short line to break the monopology of its one connecting Class I. And in Ohio, Bill Strawn's Central Ohio Railroad laid new track to gain access to Norfolk Southern.

Why do these short line managers go to such lengths to get the very access that my short line owner friend is thinking of throwing away?

Access to more than one Class I means competitive access: it gives you and your shppers options, and encourages Connecting Class Is to think twice before taking a particular piece of business for granted.

Tom Williamson of Transportation Consultants in Overland Park, Kansas, tells of a major feed mill situated on a two-connection short line -- CSXT at one end and NS on the other. The mill draws grain from origins on both Class Is at very competitive rates, of course, but there's more: car management benefits. The mill owner leases grain cars, which it puts out to origins according to need and availability. A train coming in off CSXT can be sent empty to another country elevator on NS for reloading, or vice versa. According to Tom, the ability to switch trains between Class Is enhances fleet management. It also means the owner will send grain to this mill in preference to some of its other mills -- so the serving short line gets more business.

Competitive access means Class I responsiveness. Spurred by the prospect of losing the move to a competitor, Class Is can deliver creativity, rate flexibility, customized contracts, and improved service reliability. The two-line short line can pick and choose among the strengths each Class I has to offer. One Class I may have strengths in serving particular destinations -- or one Class I may be particularly strong (or weak) in a particualr product line. (Of the Class Is I deal with, most have strong grain groups, while elsewhere in the same organization, there are other commodity groups whose standards of excellence fall short of the mark.)

Competitive access can mean a farewell to what Forrest Van Schwartz of the Massachusetts Central calls "phone jail" -- the place where you wait, and wait, and wait, for your phone calls to be returned. " your customer gets tired of waiting, so he calls a trucker," says Van Schwartz. And he's not the only short line general manager who has seen business lost to competing modes as a result of slow response from the Class I on a rate request.

Chuck Allen, though, with his 23 connections at the IHB, doesn't find that too much of a problem. "We'll put out a rate request to three of my Class Is," he explains. "Typically, one of them doesn't get back to me, and I'll choose the better of the remaining two. I'd hate to run a railroad with just one connection, though -- they'd have one hell of a grip on you." Although nothing can ever completely wipe out the evils of the unreturned call, competitive access does encourage Class I reps to boost responsiveness.

Adding connections opens markets. Delaware Valley Railroad's Ed Robinson observes that his road's new CSXT haulage arrangement to Park Junction, with access to CP, provides outlets to a wider choice of destinations with fewer crriers involved in each move. According to Mike Connor and Bill Strawn of the Ohio Central, multiple connections have "proven to be a lifesaver in the face of pricing and service lapses." They recently built a spur just ouside of Columbus to get that critical third connection -- to Norfolk Southern.

With Norfolk Southern's Bob Gentzel championing the project, a joint capital program was developed and the track laid in record time. Traffic that previously got to NS via Conrail and Cincinnati now goes directly to NS outside Columbus. The connection eases some of the capacity constraints Conrail now feels in the Columbus area. What's more, Strawn notes, as Ohio Central's traffic base grows thanks to competitive access, so will Conrail's share of the pie. As if that weren't enough, Ohio Central's access to three Class Is creates rate and route combinations never before available in its service area -- a real plus when it comes to economic development.

So, what can I tell my friend about the value of his second connection? As we've seen here, the overwhelming consensus is: if you have competitive access already, by all means keep it. If you don't have it, use trackage rights or line acquisition -- or even new construction -- to get it. Because more than one carrier gives you options. For your customers and communities, yes. But most of all, for yourself. Return to:

Created December 6, 1995. Send comments to lblanchard@aol.com