AAR Responds to Oberman Criticism

The Association of American Railroads is seeking to refute comments made by U.S. Surface Transportation Board Chairman Martin J. Oberman that suggested that Class 1 railroads are more interested in profits than market share lost to trucking companies.

A letter written by AAR CEO Ian Jefferies and posted on the STB website said railroads have sought to maintain and grow traffic volumes and continue to invest in their networks.

Jefferies says AAR data shows that rail ton-miles were up 9 percent from 2006 to 2019 when coal is excluded from the tally.

“Making up for the loss of coal volume will take time, but to imply that railroads have not worked to grow volumes, especially in the face of steep coal declines, is simply not the case,” he wrote.

Jefferies also said rail volumes should not be measured against the U.S. gross domestic product, but rather the goods-related GDP. The goods-related share of the overall economy has declined over the past 15 years.

“That’s important because rail traffic growth is correlated quite closely with goods-related GDP,” Jefferies said. “Thus, one cannot draw the conclusion that railroads have not sought to grow their volumes from overall GDP data.”

Obeman in speaking to the North American Rail Shippers convention said railroads have lost market share to trucks over the past 15 years and have put shareholder interests above those of other key railroad stakeholders such as customers, employees, and the public.

Using STB waybill data Oberman said excluding coal rail freight traffic has declined since 2006.

Jefferies said railroads have devoted on average nearly 19 percent of revenue over the past decade toward capital spending, which he said was six times higher than the manufacturing industry’s average.

 “It is an unavoidable fact that shareholders and lenders will seek the highest return possible commensurate with the risk involved,” Jeffries said. “No law or regulation can force investors to provide resources to a firm whose returns are lower than what the investors can obtain elsewhere.”

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