Promote Investment in Nation's Freight Rail Network, CSX Executive Urges STB - Global Trade Magazine
  July 24th, 2015 | Written by

Promote Investment in Nation’s Freight Rail Network, CSX Executive Urges STB

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  • CSX exec: “Revenue adequacy should be a benchmark of railroad health, and not a tool for re-regulation.”
  • CSX CFO urged the STB to promote re-investment in locomotives, freight cars, terminals, and tracks.
  • CSX has devoted 60 percent of its discretionary cash to infrastructure and equipment upgrades.

Forcing revenue-adequate railroads to cap their shipping rates would discourage the substantial and mostly private investment in the nation’s critical rail transportation infrastructure, Fredrik Eliasson, executive vice president and chief financial officer of CSX, told the Surface Transportation Board earlier this week.

“Revenue adequacy should be a benchmark of railroad health, and not a tool for re-regulation,” Eliasson said. “To apply revenue adequacy to companies in competitive markets as a rationale to cap rates is to diminish incentives to aspire to innovation, efficiency and quality service. Railroads today are healthier and benefits are flowing to customers, shareholders, employees, and the communities we serve. Let’s keep it that way.”

Eliasson urged the board to promote re-investment in locomotives, freight cars, terminals, and tracks, and to make railroads more attractive to shareholders, who own the publicly traded companies and invest in them with the expectation of a competitive return.

The Staggers Act that partially deregulated railroads in 1980 balanced regulation and free market incentives, according to Eliasson, which gave U.S. railroads the ability to re-invest and today are “the envy of the world.” At the same time, shipping rates on an inflation-adjusted basis declined. That makes rail attractive to customers and policy makers, who see public benefits in converting freight from congested highways to fuel-efficient rail.

The STB evaluates each railroad’s revenue adequacy, or its ability to earn a return equal to the industry’s average cost of capital. Eliasson urged the commissioners to consider revenue adequacy as a barometer of industry health, not a basis to limit pricing and investment. He also asked the STB to promote differential pricing and preserve the railroads’ ability to price based on the marketplace value of service.

Elisasson also noted that CSX has devoted an average of 60 percent of its discretionary cash to infrastructure and equipment upgrades over the last 10 years “to support freight movement from U.S. manufacturers to consumers here and abroad.”

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