On the Right of Way by Tony Hatch: Five thoughts on rails now that spring is almost here

As we begin to thaw out and remove ourselves from hibernation, my thoughts turn to railroads — well, baseball and railroads. With spring nearly here, I see five major themes:

1. The UP-NS Transcon: The waiting game gets longer. UP’s attorneys have filed with the STB their intention to re-file the UP-NS merger application on (or before?) April 30. The reasons why are not crystal clear, but UP clearly is taking this second application very seriously.

This represents the fourth delay. Filed later than expected, the initial application was rejected on the grounds of incompleteness. The re-filing had been expected sometime in March.

As we have said repeatedly about the timing of the various merger review procedures: Bet the over! In the meantime, we wait in the rumor-filled silly season, amid a duel of speeches and press releases.

2. Transport companies, rails in particular, essentially met or beat Q4 estimates, but lowered guidance for 2026. Some pretty dismal and confusing economic outlooks have been offered up of late. Witness the Wall Street Journal the day after the “PMI Surprise,” that “U.S. manufacturing is in retreat.” But wait! The jobs report was up for January, re-stated down for 2025! But wait! Housing sales last month dropped over 8% year over year.

Meanwhile, political uncertainty rages on (see Theme No. 4). Some of us may be getting used to it, but that doesn’t mean shippers are.

There’s also uncertainty in Rail Country due to the proposed UP-NS merger. All dealmakers have been called to their respective “war rooms.”

That said, there could be a few silver linings. Domestic intermodal has regained some share momentum; from the supply side, we could see improved truck dynamics by the year’s second half. Truckload spot rates are up over 20%, but a sustained turn needs to be driven by demand more than supply.

3. Railroads have cut capex by double digits. That’s because, in part, they’ve completed major projects the past couple years (Think: CSX’s Howard Street Tunnel) and have excess capacity (today, anyway). The hope is they didn’t cut in response to the economic/volume outlooks.

4. Political and trade uncertainty and the future of the Canada-United States-Mexico Agreement. Trade is critical for transport companies and healthy economies. The upcoming tri-partite negotiations on the renewal of the USMCA are crucial. Trade-weighted rail loads make up more than half of freight-rail volumes. But this won’t be the simple, friendly negotiation/ratification it should be.

Meanwhile, there’s the Gordie Howe hat trick and dispute over the new international bridge between Ontario and Michigan — a sign if anyone needed that the key word to replace “diplomacy” is “transactional.” Instead of Goal Assist and Penalty, we now look for Transactional Performative and Revenge. The owners of the competing bridge (the one that links Detroit-Windsor) spoke to POTUS recently; the White House subsequently threatened to shut down the GH project. (Might this have any rail M&A implications? Who knows!)

And then this happened: The U.S. House recently voted against the Canadian tariffs! That action goes to the Senate, then to a veto, but perhaps it’s a start of economic sanity. Perhaps.

5. RailTech: The FRA is reborn! One unambiguously good development has been the renaissance of rail technology, with Class Is and short-line holding companies pushing autonomous track and car inspection technologies. FRA Administrator David Fink has been a breath of fresh air.

They’re also testing and investing in some of the intriguing start-ups that we have featured at RailTrends, such as Railspire, Intramotev and Parallel Systems, among others. There’s also been an explosion of activity at MxV Rail. The Class Is, too, are super busy, revamping strategies (BNSF), working with academia (NS), going cloud-based seemingly without a hitch (UP), among other ventures.

Bottom line: Between the merger distraction, the political uncertainty and the sluggish economy, 2026 doesn’t look spectacular for freight rails. But if railroads continue to improve their service levels and don’t shrink capacity too much during the sluggishness, thereby setting themselves up to fail in the inevitable upturn — and if merger concessions don’t damage rail economics — then the future looks brighter than it appears. You just have to look hard to see it. n