Out of difficulty, opportunity - point of view - Column

Railway Age, August, 2003 by Linda J. Morgan

The past several years for the rail freight industry have clearly been some of the most challenging in its history. Public and private responses to the dislocations associated with the extensive restructuring of this period could have had a devastating long term effect on the nation's transportation system. Instead, however, common sense and long-term thinking prevailed, and out of difficulty we found opportunity, with the result that the rail network in many ways is stronger today than it has been for a long time

What can we carry forward from the experience of the past several years to further the opportunity for an even stronger and more responsive rail freight network than what we have today?

In answering this question, it is important to remember that the goal of any action taken in connection with the freight rail industry should be to ensure a financially sustainable industry best able to provide the type of rail service that transportation customers want. We have learned from the challenges of the past few years that there are at least three keys to attaining that goal: service reliability, adequate infrastructure, and public and private cooperation.

The experience of the past several years clearly demonstrated that railroads had fallen out of touch with the customer. Challenged by merger integration problems and without the distraction of more mergers, the railroads have intensified their focus on service reliability and the needs of the customer. Service levels are much improved now. Going forward, the industry must continue to keep its eye on the needs of the customer, mindful that customers are struggling to compete the same way the carriers are. Only through service responsive to customer needs can the industry hope to sustain and grow its business. And if further consolidation is pursued, it should be because customers want it. The industry must make sure that such restructuring does not reverse all the progress to date.

The past several years also have served as a stark reminder of the fragile nature of rail infrastructure. While the industry's finances cannot sustain excess capacity; there must be enough infrastructure to handle customer needs over time. Striking this balance Railroad is a constant challenge. Recent restructuring has must further streamlined the rail physical plant, and rail line viding additional capacity where the marketplace thinks it makes economic-sense.

Going forward, the industry must continue to use its existing infrastructure wisely, and economic policies should continue to be fostered that ensure the revenues to sustain necessary infrastructure turn. And for those initiatives focused on adding infrastructure to accommodate a public benefit that may not justify private investment alone, public/private partnerships targeted to specific projects that include both public and private benefits would seem appropriate.

The difficulties of the past several years also brought about new initiatives by railroads to work with one another, with customers and employees, and with the communities through which they operate. These efforts have resulted in improved relationships critical to the industry's future position in the nation's economic development. An excellent example of the benefits of such initiatives is the recent agreement between the City of Chicago and the rail industry. Concerns about serious congestion could have spiraled out of control. But cooperation among railroads and government interests has produced a plan to significantly improve rail operations in and around Chicago, creating a benefit for the railroads and their customers and enhancing the quality of life for the citizens of Chicago. This type of win win initiative among stakeholders is key to ensuring that rail-roads remain valued and respected players in the transportation world.

The rail industry has emerged from the past several years more focused on the customer and more determined to find ways to further streamline operations and use infrastructure more efficiently. It has also made significant strides in working out arrangements that benefit all of those impacted by its operations. Even with all of these positive steps, however, there are customers who are still not satisfied, particularly about their rates. And at the same time, concern remains that the industry is still not earning what it needs to make to sustain itself and provide the kind of service hat is desired into the future.

Initiatives and policies must continue a be pursued that maintain the proper balance of these oftentimes competing interests. Only then can we be sure that we have maximized upon the opportunity that these past several years have prepared to us.

Linda J. Morgan is the former chairman of the Surface Transportation Board.