Posts Tagged ‘James Foote’

CSX Willing to Give up PAS Ownership

September 11, 2021

CSX CEO James Foote said during a conference this week that his company is open to giving up its half ownership of Pan Am Southern if it is allowed to acquire Pan Am Railways.

PAS ownership is currently split between Norfolk Southern and Pan Am. PAS provides NS with access to Boston.

CSX has proposed keeping its PAS ownership but giving operating control of it to a neutral party, a subsidiary of short line railroad conglomerate Genesee & Wyoming.

However, some critics of the CSX-Pan Am deal have argued that the G&W subsidiary – Berkshire & Eastern – is not necessarily a neutral party.

Speaking to the North American Rail Shippers conference on Thursday, Foote said, “It was our partner in that initiative that thought we should do it this way.”

PAS oversees the former Boston & Maine west of Ayer, Massachusetts, and a north-south route along the Connecticut River in Vermont, Massachusetts, and Connecticut.

Among those opposing CSX plans for PAS are the U.S. Justice Department, Canadian Pacific, and Vermont public officials.

All have said the manner in which CSX has proposed to handle PAS raises competitive concerns, saying CSX is already the dominant freight railroads in New England.

Foote said he is baffled by why CP wants to route its New England traffic through the Hoosac Tunnel, which cannot accommodate double-stack intermodal traffic.

 “We’ve got a super deluxe double-stack railroad, but they don’t like it for some reason,” Foote said about his company’s Boston & Albany route.

Inside CSX’s Hiring Difficulties

August 7, 2021

During an earnings call with investors last month to discuss second quarter financial results, CSX CEO James Foote talked about the difficulty his company was having hiring new workers.

CSX set out early this year to hire 500 new conductors and have them on the job by July.

But it fell well short of that goal, hiring only about 200 conductors. It continues to seek new conductors and has posted help wanted signs at 48 locations.

To hear Foote tell it, the railroad’s difficulties in hiring are not unlike the problems that other employers are having.

“It is an enormous challenge for us to go out and to find people that want to be conductors on the railroad, just like it’s hard to find people who want to be baristas or anything else,” Foote said. “It’s very, very difficult.”

Of course conductors at CSX or, for that matter, every other Class 1 railroad are paid far more in salaries and benefits than the typical restaurant or coffee shop worker.

But Foote said good pay isn’t enough to attract and keep workers.

CSX is not necessarily alone in having hiring troubles among Class 1 railroads, but an analysis published on the website of Trains magazine suggested that it is in a class by itself compared with its peers in having difficulties attracting workers.

Trains reported that Norfolk Southern is seeking new conductors at 30 locations to fill vacancies caused by attrition.

“We are facing some spot labor shortages, but they’re just that,” said NS CEO James Squires during his company’s second quarter earnings call.

To attract new hires, NS has upped its training wage and offered signing and retention bonuses to some new employees.

BNSF is not seeking to hire conductors; Union Pacific is hiring conductors at five locations;

Canadian National is hiring conductors at 30 locations, and Canadian Pacific is hiring conductors at 19 locations.

Both Canadian Class 1s have offered signing bonuses at a few terminals. Kansas City Southern, is hiring conductors at seven terminals.

Now you might be wondering how CSX could be having difficulties filling jobs when in recent years it has furloughed large numbers of train and engine crews.

CSX has recalled furloughed workers but to its dismay fewer of them returned to work than it expected.

Some furloughed CSX workers opted to take jobs in the construction industry where they also enjoy good pay and benefits with the added bonus of being able to sleep in their own bed every night.

The latter point underscores something Foote said last month about how the nature of the job is hindering hiring and retention.

Foote said many people don’t want to work nights, weekends, holidays, and outside in all kinds of weather. “People before liked that,” he said. “They don’t want to do that anymore.”

Nick Little, managing director of the Railway Management Program at the Eli Broad College of Business at Michigan State University, told Trains that he has seen the same dynamic play out in the trucking industry, which has a persistent shortage of drivers.

Like railroading, trucking involves being on the road a lot and away from home a lot.

Little suggested that anecdotal evidence indicates there is something about the work culture at CSX that is resulting in fewer furloughed workers wanting to return and some workers wanting to leave their jobs.

Many workers disliked the changes that came with the move to the precision scheduled railroading operating model.

“Feeling uninspired can make people leave,” Little said. “They want to feel valued. I’m not sure CSX does that as well as some of the other railroads do.”

Little cited a conversation he had with a CSX locomotive engineer who retired as soon as he could.

“He didn’t like the management relationship and he felt that he’d had enough. They [workers] were being asked to do more for less all the time.”

The latter point is not something exclusive to CSX or even the railroad industry.

In an era in which cost cutting is akin to a religion in corporate America, workers in a wide range of fields face expectations of doing more with less as companies reduce their payroll numbers through layoffs and attrition, a process they euphemistically refer to as “right sizing.”

Statistics released by the U.S. Surface Transportation Board show CSX had 1,129 fewer train and engine employees in the second quarter of 2021 compared with the second quarter of 2019.

During the same period, overall traffic levels were similar, with second-quarter 2019 volume 0.63 percent higher than this year.

What has changed is the mix of traffic with coal down 19 percent and crude oil volume also down significantly. That somewhat reduces the need for train crews.

CSX through June was operating with about 109 crews per million train-miles (train-miles annualized).

That places it as the second lowest in the industry but since the beginning of 2019 it has averaged 108 crews per million train-miles.

Little also thinks CSX has a tougher time than its peers because many of its terminals are located in areas where it traditionally have been harder to find workers.

“I think CSX would always have a tougher job — marginally tougher than NS but certainly a lot tougher than UP or BNSF — to retain its people and then to get new employees that will stay with them,” he said.

Matching a labor force with the ability to meet market demand has always been a challenge for railroads because of the nature of the industry.

Rick Patterson, is an industry analyst at Loop Capital Markets, once worked as a railroader. He said matching employment levels with market demand has long been a problem in the railroad industry.

“Crews are too expensive to have sitting around,” he said. “So it’s quick to furlough, then being perennially surprised when the economy turns out to be stronger than expected, and a bunch of the furloughs either don’t pick up the phone or have gone off to work for McDonald’s. Railroads have been making this mistake for a century and will continue to do so.”

Peter Swan, am associate professor of logistics and operations management at Penn State Harrisburg, told Trains that railroads have no incentive to invest in excess capacity to better handle growth or disruptions.

“The problem for shippers and the country as a whole is that railroad assets take a long time to develop,” he said. “Crews take time to hire and train. Locomotives take time to manufacture. Upturns in business are often unfortunate events for railroads.”

Figures released by CSX and contained in reports to the U.S. Surface Transportation Board show the consequences of not having enough workers.

Trip plan compliance in the second quarter at CSX was 69 percent for carload traffic. That is up slightly from the 67 percent of the first quarter but well below the mid-80 percent level CSX had in 2019.

That led Patterson to conclude that where CSX is having difficulty with crews is in local service.

“If local crew shortages are indeed the problem I’d expect to see trip plan compliance weak relative to overall service metrics, and a large gap between intermodal and carload trip plan compliance, given the former doesn’t have local service,” Paterson says. “Arguably, both have occurred.

Foote said last month that his company needs to figure out a way to make jobs more attractive. Although he didn’t specify how that could be done, one idea has already surfaced in the industry.

Class 1 railroads are seeking to get their unions to agree to one-person crews for most trains.

Rather than ride in the locomotive cab, the conductor would be assigned a geographic territory and supervise train operations in that territory from the ground.

The advantage is that conductors would be home every night and the job would become more set shift oriented rather than being subject to being called to work at all hours of the day.

Yet railroads operate 24/7/365 so that means shifts would still be assigned during times when many workers want to be off the clock rather than on it for an employer.

And railroad work will always be outdoor-oriented and subject to varying weather conditions from extreme heat to extreme cold.

In the meantime, though, CSX continues to seek new conductors and trying to maximize its existing work force.

It reached an agreement with the SMART-TD union to increase the availability of conductors by offering them a weekly bonus for perfect attendance. The bonus is, reportedly CSX stock or cash, the latter said by unofficial sources to be $500.

Still, the effect of crew shortages will be around a while. Noting that it takes six to nine months to find, hire, train, and place a conductor,” Paterson said the low hiring numbers of the second quarter will continue to show up in fourth quarter figures when crew attrition potentially exceeds new conductor placements in the field.

“So CSX may be running OK today  . . . but management is worried about tomorrow,” Patterson said.

CSX Struggling to Hire New Conductors

July 22, 2021

The second quarter financial picture for CSX had many positives but also one large negative.

On one hand the railroad’s traffic volume an earnings have recovered nicely from the downturn introduced last year by the COVID-19 pandemic.

Taking into account adjustments for the effects of one-time items, operating income grew 62 percent, while revenue jumped 33 percent, to $3 billion.

Earnings per share were up 82 percent, to 40 cents. The adjusted operating ratio fell to 55.1 percent compared with 63.3 percent a year ago in the second quarter of 2020.

As for traffic volume, it grew in every category, although that comes with an asterisk because the comparisons are with a period of 2020 when rail traffic fell due to the pandemic.

Nonetheless, CSX set a record for intermodal volume and merchandise traffic rose by 21 percent. Even coal traffic showed a 44 percent increase.

Yet hanging over all of this is a challenge that CEO James Foote said won’t be easily resolved.

CSX won’t be able to reach pre-pandemic levels with its merchandise traffic until it hires more train and engine crews to handle strong volume growth.

Foote said the labor market is tight and the railroad has struggled to hire conductors.

“It is an enormous challenge for us to go out and to find people that want to be conductors on the railroad, just like it’s hard to find people who want to be baristas or anything else,” he said during an earnings call. “It’s very, very difficult.”

Last January CSX projected having 500 new conductors on the job by mid summer. Instead it has hired just 200 new conductors and crew attrition has been higher than expected in the first half of the year.

CSX management also acknowledged during the earnings call that its earnings received a boost from from the $349 million gain on the sale of property rights in Virginia for new passenger operations.

Also hindering rail operations were declines in operating metrics, which CSX executives said reflects significantly higher volume than a year ago and crew shortages.

Train velocity in the second quarter fell 16 percent while dwell time was up 18 percent.

On-time train originations slipped by 11 percent to 78 percent, while on-time arrivals fell 20 by percent to 67 percent.

Carload trip-plan compliance declined  to 69 percent from 81 percent a year ago, while intermodal trip-plan compliance was 89 percent, down from 94 percent a year ago.

Although intermodal performance is improving, carload service lags. “On the carload side the reliability isn’t where we need it to be,” said Jamie Boychuk, executive vice president of operations.

Foote said getting merchandise service back to an 85 percent on-time performance by the end of the year will be tough unless the hiring situation changes dramatically.

In the meantime, CSX has reached a new conductor availability agreement with the SMART-TD union that has increased the availability of conductors.

It also is offering incentives to current employees to refer applicants to the railroad.

Boychuk said those in railroad families understand job its lifestyle.

That includes working nights, weekends and holidays in all kinds of weather. Foote said many would-be railroaders don’t want to do those things.

He said those incentives have increased the application pool from a few hundred to more than 1,000.

CSX management is still seeking to figure out how to make train operating jobs more attractive but said, “throwing money at people these days is not the answer.”

Other changes at CSX during the quarter included a 39 percent increase in the use of distributed power.

Autonomous track inspection miles rose by 27 percent and the use of drones to inspect the infrastructure increased by 80 percent.

The personal injury frequency index improved 13 percent, while the train accident rate improved 34 percent to a new record low for the second quarter.

CSX distributed 9,000 tablets to employees to help them share information in real time.

Fertilizer Shippers Want More STB Oversight of CSX

June 8, 2021

Fertilizer shippers told the U.S. Surface Transportation Board recently that a shortage of train crews at CSX has led to widespread service problems.

The Fertilizer Institute asked the STB to conduct enhanced oversight of the carrier, which the trade group acknowledged was trying to fix its network.

The letter from the group said the service problems have been ongoing for several months and are hindering the fertilizer industry’s ability to serve its farmer customers.

“In the aftermath of widespread implementation of precision scheduled railroading, it may be that the rail industry is trying to do too much with too little,” the group wrote. “CSX — like other Class I carriers — has reduced its operating costs through a series of measures, including reductions in staff, such as train crews. We have all had some surprises in the past year, but a rebound of shipping volumes should not be one of them.”

CSX has acknowledged having crew shortages and one consequence is that it has been unable to put stored locomotives back in revenue service.

Transit times have lengthened to two to four days longer than usual. The crew shortages have also led to local service in some areas being reduced to once a week from five days per week, and delays to the movements of unit trains.

CSX CEO James Foote in a speech to investors last week said the railroad is seeking to hire and train new crew members as part of its efforts to improve service.

However, he said that all transportation modes are facing more demand than “there is transportation product supply. It’s as simple as that.

“The transportation product is struggling in our case for one reason and one reason only: We’ve been trying to hire since the beginning of the year.”

Foote said CSX in the past year has lost through attrition 7 percent of its train and engine crews and was unable to hire at the height of the COVID-19 pandemic.

Social distancing requirements hindered the railroad’s ability to hold training classes for new conductors.

Foote said it takes time to train conductors and CSX won’t cut safety corners to rush new hires to work.

“None of us are happy with the decline in velocity and dwell. We worked really, really hard to get this railroad to be running as well as it was, and we’re going to get this railroad running back not to where it was but even better,” Foote said.

Foote said CSX has plenty of track capacity and can put into service hundreds of locomotives now in storage to meet expected traffic increases.

At the same time, he said CSX is being cautious not to hire too many new employees, which Foote said could cause the carrier to misses a quarter’s financial targets.

“If you want to have a long-term reputation in the marketplace as a quality service provider, you better be there for people when they need you,” Foote said.

Foote Confident Pan Am Sale Will be OKed

June 4, 2021

CSX CEO James Foote expressed optimism this week that his company’s plan to acquire New England regional Pan Am Railways will be successful.

The U.S. Surface Transportation Board has twice complicated spurned CSX’s efforts to buy Pan Am, most recently saying its merger application was incomplete.

“We’re just in the early stages of seeking authority to complete the transaction from the Surface Transportation Board,” Foote said in addressing the Bernstein Strategic Decisions Conference.

“And I’m confident just because of the positive nature of it. Clearly it improves the overall rail transportation network, especially in the New England region.”

CSX announced last November its plans to acquire Pan Am. The STB in March ruled the transaction was a significant one that would thus receive a more comprehensive regulatory review.

The two carriers had sought to have the merger treated as a minor transaction that would have received less stringent review.

CSX said it is pulling tougher more information to share with the STB, including a full analysis of how the deal will affect railroad competition and rail-truck competition in New England.

A decision by the STB on the merger is not expected until sometime in 2022.

Foote says he doesn’t believe the proposed Canadian National-Kansas City Southern merger will trigger a round of Class I railroad mergers.

“You can make a case that consolidation might be good,” Foote said.

He pointed out that in 1980 there were 61 Class 1 railroads, some of which were not in good financial condition.

“They were a basket case, their service was horrible, there was no capital investment,” Foote said. “And over the years the railroads consolidated into what they are today and the core infrastructure of the rail industry now is significantly better than it was. And, No. 1 and most importantly, the seamless nature and the single line service provided today is much better than it was.”

CSX Optimistic About Traffic Growth

April 21, 2021

In taking a closer look at the financial performance of CSX in the first quarter of 2021, it becomes apparent that profits and revenue fell because declines in merchandise and coal traffic overwhelmed intermodal growth.

Nonetheless, during a conference call on Tuesday, company executives expressed optimism that traffic will grow overall this year due to a recovering economy shaking off the effects of the COVID-19 pandemic.

“We entered the year projecting volume growth in excess of GDP and still expect to achieve this target,” CEO James Foote said.

“We will continue to attract demand throughout the year, and based on the combination of the strengthening economic outlook and our focus on converting additional volumes off the highway, we now expect to achieve double-digit full year revenue growth.”

Quarterly operating income fell 7 percent to $1.1 billion while revenue declined 1 percent to $2.81 billion. Earnings per share slid 7 percent to 93 cents.

The operating ratio crept up by 2.2 points to 60.9 percent as expenses rose 2 percent.

CSX executives attributed the latter to the effects of employee COVID-19 infections, harsh winter weather, and a fuel surcharge lag.

Overall volume was up 1 percent for the quarter with intermodal traffic growing 10 percent on the strength of an increase in imports at East Coast ports.

Yet merchandise traffic fell 6 percent, largely driven by a 16 percent decline in automotive traffic and an 8 percent decline in chemicals traffic.

A global shortage of computer chips has hamstrung auto production in North American. The chips are placed in new vehicles.

Declines in chemical traffic were prompted by falling crude oil and frac sand shipments.

Coal traffic was down 5 percent, which CSX attributed to fewer exports.

Foote said going forward CSX is focused on improving its train velocity performance, noting that the pandemic and winter weather adversely affected crew availability.

Train velocity was down 11 percent while terminal dwell time was up 30 percent.

On-time performance, based on trip-plan compliance, fell for both intermodal and carload traffic.

Figures released by the company showed 85 percent of intermodal shipments arrived on time, down from 96 percent a year ago.

Merchandise carloads fulfilled their trip plans 67 percent of the time, down from 81 percent a year ago.

CSX operated a record 101 trains per day with distributed power and continued its trend of operating more freight on fewer but longer trains.

During the first quarter train length was up 13 percent and employment down 7 percent due to reduced need for train crews.

CSX Earnings Dip in 1st Quarter

April 21, 2021

CSX said Tuesday that during the first quarter of this year it earned $706 million, or $0.93 per share.

That was a decline of 8.31 percent from the same period in 2020 when it posted earnings of  $770 million, or $1.00 per share.

The Class 1 carrier said first-quarter revenue of $2.813 billion was down 1.47 percent from the $2.855 billion recorded in the quarter last year.

Intermodal and other revenue growth “was more than offset by declines in merchandise, coal and fuel surcharge revenues,” CSX officials said in a news release.

Expenses rose 2.09 percent on a year-over-year comparison to $1.712 billion and operating income declined 6.54 percent for the quarter to $1.101 billion.

The operating ratio of 60.9 percent was an increase over the 58.7 percent posted in first-quarter 2020.

CSX management expects to achieve “double-digit full-year revenue growth,” this year and that it projects “full-year volume growth in excess of GDP.”

Capital expenses in 2021 have been set at $1.7 billion to $1.8 billion.

 “Looking forward, the strengthening economic momentum is providing added visibility into volume growth, and we are taking the necessary steps to ensure we are ready to handle these volumes and provide our customers with an industry-leading service product,” said CEO James M. Foote in a statement.

Wall Street May be Backing Away From OR Obsession

March 20, 2021

A Wall Street analyst said this week that some institutional investors have begun to move away from their obsession with ever lower railroad operating ratios.

Most North American Class 1 railroads have in recent years striven to drive their quarterly operating ratios into the 50s.

The operating ratio is a measure of what percentage of operating revenue is spent on operating expenses and is widely viewed as a measure of efficiency and profitability.

The quest for a lower operating ratio has driven management into taking aggressive cost-cutting measures, including selling real estate, closing and consolidating facilities, and operating longer trains manned with fewer crew members as a way of reducing labor costs.

An analysis published on the website of Trains magazine said the shift in thinking would represent a major change for how Wall Street investors view publicly-traded railroads.

One implication of what some have termed “the cult of the operating ratio” is that railroads have sacrificed traffic gains in order to focus on the most profitable commodities that they haul.

Allison Landry of Credit Suisse said the new outlook on Wall Street is a desire for railroads to focus more on attracting higher traffic volume.

The Trains analysis noted that analysts in the recent years have seen unconcerned that railroad freight volume peaked in 2006.

Instead, their objective was to see earnings growth driven by rate increases, cost-cutting, and share buybacks.

The popularity of precision scheduled railroading, which had aggressive cost cutting as a byproduct in how it has been implemented at most railroads, played into that line of thinking.

Now, the Trains analysis said, investors seem to be concluding that PSR was a one-trick pony.

“While there is still plenty of room (particularly for the U.S. rails) for margin expansion, at some point, expense cuts will . . . bottom out; whereby the O.R. will approach a number for which it will not go below,” Landry wrote in an outlook note to clients earlier this year.

“The bottom line is that long term rail valuation will be dictated by growth; the margins at which the growth comes; and how much it costs to maintain the asset base.”

The Canadian Class 1 systems, Canadian National and Canadian Pacific, have already moved in the past couple of years toward giving a higher priority to traffic growth.

CSX, Norfolk Southern and Union Pacific may not be far behind as railroads seek to reverse a steady loss of market share to trucking companies that has been ongoing for decades.

In January CSX CEO James Foote hinted at a change in thinking when he said, “If we wanted a 50 operating ratio, we’d have a 50 operating ratio. We would do it . . . quickly. I’m not sure what would be left of the company in the process.”

Railroad management is not going to give up its laser focus on keeping down costs because otherwise it might lose some competitive edge. Railroads are, by nature, a high fixed costs business.

Nor are railroads going to stop turning away low margin business.

However, the fixation on ever lower operating ratios has meant sacrificing some profitable volume growth.

The average operating ratio last year for North American Class 1 railroads was 60.4 percent, an improvement of 10.4 percentage points since 2012.

Todd Tranausky, vice president of rail and intermodal at FTR Transportation Intelligence, a freight forecasting firm, told Trains that even if operating ratios were to skyrocket into the 70s there would still be plenty of profitable business for railroads to seek to capture.

Some railroad executives, among them Union Pacific CEO Lance Fritz, have argued that the cost cutting of recent years has created a situation in which business that once didn’t look attractive now looks good because UP has a lower cost structure.

CSX’s Foote Optimistic About Traffic Growth

January 24, 2021

Like any chief executive officer, CSX’s James Foote put his best foot forward last week when addressing investors and the business press in discussing his company’s fourth quarter financial results.

James Foote

He spoke about returning to growth, record low operating ratios and booming intermodal traffic.

There were a few bits of good information in the fourth quarter numbers.

Operating income rose by 5 percent to $1.22 billion even as revenue dropped by 2 percent to $2.8 billion.

Earnings per share were flat at 99 cents. But traffic volume during the quarter rose 4 percent, helped by an 11 percent growth in intermodal traffic.

Merchandise traffic was flat and coal volume tumbled 9 percent.
As for the operating ratio, which measures expenses as a percentage of revenue, it improved by three points to 57 percent.

All comparisons are with the fourth quarter of 2019.

For 2020 as a whole, the news was more grim. Operating income fell 12 percent to $4.3 billion. Revenue dropped 11 percent to $10.5 billion and traffic was down 5 percent.

Intermodal was a bright spot with a 2 percent improvement while merchandise traffic declined by 6 percent and coal volume plunged by 24 percent.

The 2020 operating ratio was 58.8 percent, a slight rise of 0.4 points over 2019.

Foote expects both intermodal and merchandise traffic to outpace the country’s economic growth this year.

He said diverting traffic away from trucks will make that possible.

CSX executives expect merchandise traffic growth to exceed industrial production and they even think coal volume will show growth from 2020 levels.

Chief Financial Officer Kevin Boone said CSX is stepping up hiring locomotive crew members to be prepared for increased traffic volumes and to replace workers lost through attrition.

That might suggest more trains out on the road, yet crew starts in the fourth quarter were down 11 percent.

The railroad set a capital budget of $1.7 billion to $1.8 billion for this year, slightly above last year’s $1.6 billion.

CSX plans to rebuild 67 locomotives this year, a process that includes adding Trip Optimizer and distributed power capabilities.

Foote said technological advancements will make CSX “smarter, faster, and more reliable.”

This will include increased use of automated train and track inspection, new dispatching and fuel saving systems, increased intermodal terminal automation, new digital tools for employees and customers. 

CSX to Acquire Pan Am Railways

December 1, 2020

CSX said on Monday that it plans to acquire Pan Am Railways, a move that will extend its network into Vermont, New Hampshire and Maine.

Although terms of the deal were not announced, Trains magazine quoted unnamed sources as saying the sale price was about $700 million.

The deal drew immediate concern from Norfolk Southern, which said in a statement that the deal might hinder competition in New England, where NS has a joint venture with Pan Am.

Pan Am is a privately held company with 1,700 miles of track and haulage rights agreements that stretch from Albany, New York into Maine.

Known until 2006 as Guilford Transportation, Pan Am includes the former Maine Central, Boston & Maine, Portland Terminal, and Springfield Terminal railroads.

Pan Am connects with CSX, Norfolk Southern, Canadian National, and Canadian Pacific as well as 14 short lines.

It hosts commuter trains of the Massachusetts Bay Transportation Authority in Boston and Amtrak’s Downeaster trains between Boston and Portland, Maine.

In a statement, CSX CEO James Foote described Pan Am as a strong regional rail network,

He said the acquisition will provide “new efficiencies and market opportunities for customers.”

CSX is reported to have bested two other companies bidding to buy Pan Am, which put itself up for sale earlier this year.

Pan Am connects with CSX at Rotterdam Junction, New York, on its former New York Central Water Level Route, and near Worcester, Massachusetts, on its former Boston & Albany route.

The latter is the busiest freight route in New England. 

Pan Am has been profitable every year since Guilford Industries began acquiring its components in 1981 despite declines in manufacturing in New England.

Its traffic and revenue has been growing in recent years aided by Maine paper mills shifting production from paper used in printing to paper used in packaging.

Other commodities handled by Pan Am include propane, biodiesel, municipal solid waste, aggregates, and Poland Spring water.

The regional railroad also has considerable land holdings in Boston.

The deal is expected to face some opposition when it is reviewed by the U.S. Surface Transportation Board.

NS is expected to be among those appearing before the STB because it holds a joint venture arrangement with Pan Am.

CSX said in its statement that it plans to acquire Pan Am’s half of the joint venture with NS, known as Pan Am Southern, which includes 437 miles of rail lines and trackage rights routes between Mechanicville, New York, and Ayer, Massachusetts.

NS has used the joint venture to gain access to the Boston area.

Rail industry observers have pointed out that under the CSX-Pan Am deal only a couple of shippers will go from two-railroad access to one, and no short lines would go from two Class I connections to one.