Class I railroads are on track to spend $13 billion in 2012 capital expenditures, says AAR

By Jeff Berman, Group News Editor
January 30, 2012 - LM Editorial

The Association of American Railroads (AAR) said today that the seven North America-based Class I freight railroads are on track to invest a record $13 billion in capital expenditures for 2012, with the capital going towards expanding, upgrading, and enhancing the U.S. freight rail network.

The AAR also reported that these seven railroads plan to hire more than 15,000 employees in 2012, with many of these positions allocated towards replacing retired workers and new positions.

In May 2011, the AAR released a report, entitled “Great Expectations 2011, Railroads and Continued U.S. Economic Recovery,” which stated that the seven Class I’s were planning to spend $12 billion in 2011 capital expenditures, following a $10.7 billion investment in 2010.

An AAR spokesperson told LM that a final 2011 figure was not available at this time, adding that a figure may be available later in the fourth quarter.

“Unlike trucks, barges or airlines, America’s freight railroads operate on infrastructure they own, build and maintain themselves so taxpayers don’t have to. And this year they are investing at a record rate to meet the demands of the recovering economy,” said Edward R. Hamberger, AAR President and CEO, in a statement. “These investments help businesses get their goods to market more efficiently and affordably, so they too can innovate, invest and hire. That’s how freight rail spurs the American economy and supports jobs all across the country.”

AAR officials added that with hundreds of infrastructure projects underway, privately-owned freight rail networks are maintained through these capital expenditures that have been at record levels for the last three years. And they explained that these investments have gone towards things like intermodal terminals that facilitate truck to train transport; new track, bridges, and tunnels, modernized safety equipment; and new locomotives and rail cars, among others.

Some notable examples of this spending at work include:
-the Heartland Corridor, a public-private partnership between NS and Virginia, West Virginia, Ohio, and the federal government to create the shortest, fastest route for double-stack containers moving between the Port of Virginia and the Midwest; and
-the National Gateway, a roughly $850 million public-private partnership (PPP) infrastructure initiative designed to provide a highly efficient freight transportation link between the Mid-Atlantic ports and the Midwest. Class I railroad CSX is a major stakeholder in this effort.

The AAR also pointed out that over the past few years these Class I railroads have invested about 17 percent of their annual revenue on capital expenditures, whereas the average U.S. manufacturer spends about 3 percent on capital expenditures.

These capital expenditure investments, said the AAR, are funded by private capital and not taxpayer funding, adding that the railroad industry owns, maintains, improves and pays taxes on their rights-of-way.

Other costs included in capital expenditures include maintenance, with 20 cents of every revenue dollar going back into maintaining, expanding, and improving the U.S. rail network over the last ten years.

What’s more, these investments come at a time when the AAR has voiced concern over myriad pieces of legislation that threaten their ability to continue to make investments at these levels. Examples of this legislation include the Positive Train Control mandate, legislation attempting to remove antitrust exemptions currently only granted to the railroad industry; and an ongoing push to expand truck size and weight.

While the railroads continue to plead their case for federal regulations to remain in their current form, railroad shippers and rail shipper groups continue to maintain that they are suffering from increased rates and decreased quality of service.

“For too long, the market has been blocked from setting fair prices for shipping products via rail, which has hurt shoppers, exporters, farmers and manufacturers,” said Glenn English, chairman of Consumers United for Rail Equity (CURE), a railroad shipper group.

But railroad executives continue to counter that theory, explaining that the existing regulatory railroad environment for has produced—for North American railroad shippers—a freight railroad system that is the best in the world. And if the railroad industry lost the ability to earn its cost of capital it could have a negative effect on capital investments to support traffic growth and reverse the strides made post-Staggers Act in the areas of rail safety and service reliability.



About the Author

Jeff Berman headshot
Jeff Berman
Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).


Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

“U.S. Port Update: Investing in the Future” will feature a panel of three industry leaders from the East Coast, Gulf, and West Coast discussing their relative challenges and opportunities.

Zebra gains instant access to complimentary technologies. But first, it needs to integrate a former partner that is 2-1/2 times its size.

The U.S. Army Corps of Engineers issued a final Chief’s Report approving the Jacksonville Harbor Deepening Project, clearing the way for congressional authorization in an upcoming Water Resources Development Act.

Logistics Management Group News Editor Jeff Berman recently caught up with Doug Waggoner, CEO of Echo Global Logistics, a non-asset based freight brokerage company and a provider of technology-enabled transportation and supply chain management services on various topics impacting freight transportation and logistics.

Carloads—at 295,294—were up 7.2 percent annually, and intermodal trailers and containers were up 9.3 at 264,382.

Article Topics

News · Rail · Rail Freight · AAR · All topics

About the Author

Jeff Berman, News Editor
Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman.

Comments

Post a comment
Commenting is not available in this channel entry.


© Copyright 2013 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA