Productivity, Pricing and Profitability in the U.S. Rail Freight Industry, 1995-2004

This study examines historical trends concerning productivity, prices and profitability in the U.S. rail freight industry during the period from 1995 to 2004. Although rail industry productivity grew by 7% per year from 1984 to 1995, most industry benefits were offset by reductions in rail rates and the increasing need for capital expenditures. From 1995 to 2004, productivity improved 5% per year, prices continued to fall, and financial performance was flat or declining. There is no doubt that productivity improvements helped railroads make very significant reductions in their costs during this 20-year period. However, by 2004, the long-term trends were coming to an end. The rate of productivity improvement was declining, rates were starting to rise, and capacity and service problems were becoming more serious. With higher rates, many of the Class I railroads were coming close to earning their cost of capital. The combination of increasing profitability, declining service and inadequate capacity is unlikely to be sustainable. Railroads will need financial and planning assistance from public agencies at the local, state and federal levels as they seek to provide sufficient capacity to handle the predicted growth in rail freight traffic.

Language

  • English

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Filing Info

  • Accession Number: 01042326
  • Record Type: Publication
  • Files: TRIS
  • Created Date: Feb 26 2007 11:58PM