WASHINGTON — Five of the seven Class I railroads operating in the U.S. last year were revenue adequate in 2022, the Surface Transportation Board said today.
Being revenue adequate means a railroads achieved a rate of return equal to or greater than the board’s calculation of the average cost of capital to the freight rail industry. The average cost of capital was 10.58% last year, the STB concluded.
BNSF Railway, CSX Transportation, Norfolk Southern, Union Pacific, and Soo Line — Canadian Pacific’s U.S. subsidiary — were all deemed revenue adequate.
That list left just Kansas City Southern and Grand Trunk Western, CN’s U.S. subsidiary, short of the revenue adequacy mark.
I would question the reliability of an assumption that there is a single cost of capital for the entire railroad industry.
GTW (CN owned) is somehow a separate entity Michigan lines only, but is a vital trunk line for CN operations. As far as on line customers, GTW has never been heavy in that department albeit the auto industry, and a lot of that traffic has dried up due to factory “just in time delivery” status. So, the Feds can give GTW all the negative figures it wants….because without it CN would be in deep doo-doo.
That is good on the capitalization side. How about some operational stress testing? Too many flame outs based on automation of controls.