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6/30/2004



Rail News: Rail Industry Trends

Alliance in action: CPR, NS to trade trackage rights, share some Northeast freight moves and yards


Today, Canadian Pacific Railway and Norfolk Southern Corp. announced they've agreed to exchange trackage rights, and share freight hauls and yard
operations to increase operational efficiency and improve service in the Northeast.

The Class Is will consolidate freight marshalling at Buffalo and Binghamton, N.Y., yards, enabling CPR to cease yard operations in Buffalo and NS to shift its Binghamton yard operations to CPR's East Binghamton yard.

Under a haulage agreement, CPR will move NS' traffic between Rouses Point and Saratoga Springs, N.Y., and NS will move CPR's traffic between Binghamton and Buffalo. NS also will operate its trains over CPR's Saratoga Springs-to-Binghamton line.

The moves will generate more revenue and reduce costs for both railroads, and provide NS a substantially shorter route to Canada's Quebec and Maritime provinces, the Class Is' officials believe. CPR will save $15 million per year in cost reductions and $10 million in cash during the next 18 months.

In addition, CPR will operate over NS' new Detroit-to-Chicago corridor, providing CPR a shorter route between the cities.

"This is an excellent example of railroads cooperating to better serve our customers," said NS Chairman, President and Chief Executive Officer David Goode in a prepared statement.

A year ago, CPR announced a restructuring of its northeastern U.S. operations — operated as the Delaware and Hudson Railway — to increase freight volumes, reduce operating costs and improve earnings.

"This agreement opens up new opportunity to move our northeastern
U.S. franchise into a position of profitability," said CPR President and CEO Rob Ritchie. "We are prepared to examine additional measures that, in concert with our NS agreement, will further optimize our assets and drive up profitability."

The Class Is will begin implementing the plan in fall and complete implementation in late 2005. The trackage rights agreements and discontinuance of some rights require Surface Transportation Board approval.


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