Webcast zeroes in on UP-NS merger application's prospects, implications
1/12/2026
By Jeff Stagl, Managing Editor
When it comes to the proposed Union Pacific Railroad-Norfolk Southern Railway merger, the focus for now isn’t on the main event, but on the weigh in.
That’s the boxing analogy Tony Hatch used Jan. 8 during a RailTrends® webcast to describe where stakeholders’ and observers’ attention currently is turned: the Surface Transportation Board’s (STB) scrutiny of the merger application that was submitted by UP and NS on Dec. 19.
Titled “Reflections on the STB Application: A Virtual Salon,” the webcast featured comments and interpretations from four speakers on the application process and the proposed merger itself. In addition to Hatch — an independent transportation industry analyst, RailTrends co-founder and Progressive Railroading columnist — the presenters were Rick Paterson, an independent analyst and featured RailTrends panelist; Farrukh Bezar, a managing partner with Lynwood Partners LLC and former chief strategy officer for CSX; and David Woodruff, an associate with Rubicon Strategy Inc. and a former assistant vice president and head of U.S. public and government affairs for CN.
Hatch’s 'completeness’ take
What interested parties want to know is: Did the fighter make their weight, said Hatch, referring to the STB determining if the application is considered complete or not. The board has 30 days to make that determination.
Accounting for the Martin Luther King Jr. federal holiday on Jan. 19, a decision might fall on Jan. 20, which happens to be Hatch’s birthday. He hopes that doesn’t happen since it might spoil his special day, Hatch joked.
Given that the application seems vague at times and lacks some data that UP perhaps didn’t want to release publicly, “I feel it’s not complete,” he said.
“I think data is an issue with the completeness,” Hatch said.
Rival Class Is and some shipper groups claim the application isn’t complete for various reasons, such as that UP and NS failed to include sufficient data and information, didn’t explain how the proposed merger meets the public interest standard on its merits and included an incomplete network map that omits overlapping lines in the watershed area. That area is an upper Midwest region where trucking often is the only viable option.
Tony Hatch shared his remarks from Hollywood, Florida, where he was attending the National Railroad Construction and Maintenance Association’s annual meeting.Progressive RailroadingUP and NS then countered that talk in what essentially constituted a three-word retort, Hatch said.
"Their response was, ‘We did so!'" he said.
BNSF and CN later filed motions with the STB to prompt UP and NS to provide additional information, such as the full extent of competitive harms that could result from the merger.
But now it’s really up to the board, which might require UP and NS to provide clarifications, explanations or additional data, Hatch said.
“Let’s see what the STB says and if they ask for modifications,” he said.
He believes in the independence of the STB as a federal agency. There is no partisan nature to rail issues — it isn’t relevant if a politician is a Republican or Democrat — so that could factor into the merger’s chances of succeeding, Hatch believes. Plus, the Trump administration hasn’t stated a position on the merger.
“They are just going to wait for a decision and then show up for the ribbon cutting,” Hatch said.
Paterson’s ‘growth’ perspective
Following Hatch, Paterson dove into some of the information provided in the application. In the second paragraph of the introduction, UP and NS state “the merger is fundamentally about growth,” Paterson said.
However, volume growth at those Class Is has been “fairly underwhelming,” he said. Over the past 10 years, their volume has been flat.
“Erratic service partially explains the flat growth,” Paterson said.
The volume growth forecast in the application that was developed by Oliver Wyman includes various assumptions, such as that the combined entity’s traffic would increase more than 11% by Year 3, including a more than 8% climb in intermodal volume.
“It’s overwhelmingly an intermodal story, contributing 77% of expected volume growth in the first three years,” Paterson said.
But there are two risks to intermodal’s volume contribution within three years. The first is shippers’ expectation of price reductions by UP-NS.
“Rate decreases are not in these company’s natures and would also generate criticism from investors,” Paterson said.
The other presenters were Rubicon Strategy’s David Woodruff (upper right), Lynwood Partner’s Farrukh Bezar (lower right) and independent analyst Rick Paterson (lower left).Progressive RailroadingThe other risk is that customers might be reluctant to give UP-NS meaningfully more business ahead of a cutover of NetControl — UP’s modern transportation management system (TMS) — at NS in 2028 and 2029. The highest risk wouldn’t be on Day 1 of the merger but in the second half of Year 2, Paterson said
“UP conducted a successful internal cutover to NetControl from old legacy systems in 2024, so they’re confident,” he said. “However, it’s easy to envision a situation where they’re in the process of rolling out NetControl across the NS property and the network is hit with the usual challenges, such as winter, flooding, hurricanes, fires or bridge outages, and then something goes wrong.”
For perspective, CPKC last year failed to smoothly roll out its own TMS across five states and a handful of yards on the old Kansas City Southern property in the southern U.S. NS spans 22 states and has many yards, Paterson said.
Bezar’s, Woodruff’s intriguing comments
Bezar and Woodruff then served as a two-man presentation during which each posed questions to the other.
Here are some of Bezar’s remarks:
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“I am not pro-merger or anti-merger. Give them credit, there is risk here. I applaud them for taking on the risk.”
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“This is a way to unlock growth on the highway. There are expecting 1.4 million more container loads. That will be challenging.”
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“I am moderately skeptical. Will they be in the position to do what they want to do in a pricing perspective? It will be driven by what the overall macro environment is in the market.”
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The productivity improvements after the merger are clear. How will they utilize those productivity improvements? Will they pass them onto customers? Historically, we haven’t seen that from railroads.”
Woodruff mentioned that when it comes to supporting or criticizing the merger, the “loudest voices in the room” are shippers, labor, local leaders in the watershed area, the Republican party and Vice President J.D. Vance.
“Vance has been active on rail issues in the past,” he said. “But he has yet to weigh in on the merger.”
Congress likely will follow the merger closely and then figure out how to address it, such as to ensure it maintains rail competition, Woodruff said. A bigger issue to many legislators is how the merger will affect their own congressional districts, he added.
In terms of shippers, there isn’t a “one size fits all” approach proposed in the application, Woodruff said. Instead, it’s a mixed bag.
How UP-NS would function would be “super clean” for domestic intermodal shippers but “not clean” for intermodal marketing companies that use a number of railroads, said Woodruff.
Meanwhile, merchandise shippers want to learn more about the merger process and how it would impact them.
“They are wondering what happens with pricing going forward,” Woodruff said.
