im Symes was upset. Early in 1955, the president of the
Pennsylvania Railroad heard from his minions that
archrival New York Central had cut the schedule of a
key late-evening train from Chicago so that deliveries
could be made to New York City freight customers on
the second morning — a one-day improvement. A St. Louis-New
York City schedule got the same haircut. Further, Symes was irked
that Central President Al Perlman had told someone that these ex-
pedited trains were not costing NYC more to operate because they
ran at 125 cars in length and brought in lots of revenue, whereas
Pennsy’s people observed only 40-55 cars on the two eastbound
trains. So, in a letter to Perlman, Symes wrote: “If my informants are
correct, it would seem to be a very costly arrangement for the East-
ern Carriers to quicken schedules to the point of having to haul such
light trains in order to maintain schedules — and with everyone
meeting everyone else (which they will do), the net result will be
approximately the same revenues but with considerable added cost.”
It’s not known what, if anything, Perlman said in reply, but NYC
didn’t back down, and the Pennsylvania felt compelled to match the
timings. Next, the Central instituted second-morning Chicago-Bos-
ton service in partnership with the Boston & Maine east of Mechan-
icville, N.Y. Pennsy’s answer was to establish similar Chicago-Boston
service with the New Haven Railroad, the cars being ferried across
the Hudson River to Bay Ridge, N.Y., on a routing 171 miles longer.
I read this batch of letters and memos, discovered in the Hagley
Library in Wilmington, Del., by my intrepid friend Ira Silverman,
and marvel at the ways railroads once competed against each other
with service, because they all were parties to rate bureaus and
charged the same price. It brings to mind the frantic telegrams to
Cotton Belt president Dan Upthegrove from his Frisco and Missouri
Pacific counterparts on the eve of the smaller railroad’s inauguration
in 1931 of an overnight package-goods train, the Blue Streak, from
East St. Louis, Ill., to Pine Bluff, Ark. Said the Frisco’s boss: “Have
tried to reach you on telephone, without success. Sincerely hope you
will be able to avoid putting on this service, as it will force Missouri
Pacific, Frisco and no doubt Illinois Central to meet the schedule,
causing all to lose money.”
In those eras, railroads were desperate for revenue. The railroad
network then being overbuilt, they fought each other more than
they did the trucking industry, and service was their weapon. This
being the case, who was right in each instance? Obviously, Al Perl-
man and Dan Upthegrove. Strapped for cash, New York Central
matched (or perhaps bettered) what the highway could accomplish
then, and Cotton Belt’s Blue Streak was revolutionary for its time,
setting out boxcars of less-than-carload merchandise at towns on the
way to Pine Bluff, the contents to be delivered to homes and stores
by the railroad’s truck subsidiary the next morning.
You cannot help but relate these stories to today’s railroads. Gone
are the rate bureaus that set prices, outlawed by the Staggers Act that
largely deregulated railroads in 1980. So now railroads are free to
compete by price, but do they? Not really. To the contrary, now that
excess capacity has been wrung out, they raise rates while slapping
demurrage charges on customers who don’t unload cars the instant
they appear on the property. To the degree that railroads compete by
price at all, it’s to keep rates on truck-competitive traffic just below
what the truckers get, as the price they pay for inferior service.
Moreover, railroads aren’t acting as if they are hungry for busi-
ness. In a softening industrial economy, traffic levels have fallen
throughout 2019, particularly on the intermodal side. Nor is
demand likely to bounce back anytime soon, what with the U.S. and
China slapping on stiff tariffs, Midwest farmers being unable to
grow healthy crops because of abnormal weather and electric utili-
ties forsaking coal. When business goes south in trucking, the truck-
ers lower rates to keep their fleets busy. When the same happens in
railroading, the railroads store locomotives rather than adjust rates.
Forgive me for missing the Al Perlmans and Dan Upthegroves —
leaders who took risks and made bold decisions in the face of adver-
sity. With some exceptions, the large railroads today seem unboth-
ered that their market shares will recede. So far, pricing power keeps
profits propped up. Alas, this way of doing business works only in
the short term. 2The bad old days compelled railroads to act boldly.
Today they play it safe
Competition,
then and now
TrainsMag.com 13COMMENTARY
Fred W. Frailey
[email protected]
Blog: TrainsMag.comJ
Cotton Belt’s Blue Streak merchandise train, like this one at Garland,
Ark., in 1950, was revolutionary for its time. R.S. Plummer