UTU News Digest - Monday, September 14, 1998

UTU Daily News Digest

Information of interest to operating railroad and transportation employees
For
Monday, September 14, 1998

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KCS rebuts UP claim it causes delays in service

WASHINGTON – The latest battle in the war of words between Kansas City Southern Railway Co. and the Union Pacific Railroad seems almost too real to be true. UP claims KCS is causing delays in its trains.

However, KCS has rebutted claims that it was causing substantial delays to Union Pacific Railroad trains that use KCS tracks in eastern Texas and western Louisiana.

In a letter to the Surface Transportation Board, KCS said that during a 10-week period from mid-June to late August, 93% of the UP trains moving over 46 miles of KCS lines between Beaumont, Texas, and DeQuincy, La., were not delayed.

The smaller KCS, which was an outspoken opponent of UP's 1996 acquisition of Southern Pacific Rail Corp., has been feuding with UP for three years.

UP had said in an Aug. 31 service report to the STB that Kansas City Southern was causing "increasingly severe delays," citing 45 cases where trains did not move for four hours or more. UP also said "the situation has been getting worse, not better" on that 46-mile stretch.

The KCS letter to the STB earlier this week called UP's allegations "unsupported assertions." KCS submitted an appendix that described the circumstances surrounding dozens of delays in which UP derailments, equipment problems and required relief of train crews were blamed for service problems.

Over the past year, KCS and UP have battled over service quality issues and the ongoing effort by the smaller carrier and its affiliates to gain more access to Texas customers of UP and better routes through that state.

NWA pilots claim they won a decisive victory

MINNEAPOLIS – Pilots at Northwest Airlines claimed a decisive financial victory this weekend, which ended the longest strike of the 1990s against a major domestic passenger airline.

The pilots gave up about $32 million in lost wages during the 15-day shutdown of the nation's fourth-largest airline. By the union's calculations, the sacrifice won them $156 million in improvements over the company's final pre-strike contract proposal.

"I'm proud to say we have accomplished our contract goals," said Capt. Steve Zoller, chairman of the Master Executive Council of the Northwest Air Line Pilots Association (ALPA). "We achieved the pay that we felt returned us where we deserve to be."

Zoller said he phoned Northwest President and Chief Executive Officer John Dasburg after the 17 voting members of the executive council unanimously ratified the proposed four-year contract at the Radisson Hotel in downtown St. Paul. The union council spent most of Saturday reviewing the deal line by line and agreeing to a back-to-work plan that immediately returns all 6,200 Northwest pilots to the payroll.

"Northwest will now place into action plans to restart service," Zoller said.

The airline said it expects to resume 25 percent of its flights Wednesday, and to return to its full flight schedule by Sept. 21. During the strike, more than 2 million passengers were grounded or rerouted.

To settle the strike, both sides compromised from their final pre-strike contract proposals. But the strike was far more costly to Northwest. ALPA negotiators said they were told Wednesday by Northwest's chief financial officer that the strike and an earlier work slowdown by disgruntled mechanics will cost Northwest nearly $1 billion. The figure includes losses Northwest will incur over the next several months to restart flight operations and recover from lost bookings.

But Wilson and Zoller said Northwest can afford the new four-year contract, which will increase pilot labor costs $543.1 million, or 16.6 percent, over the life of the agreement. It includes a 12.6 percent compounded pay raise (annual raises of 3 percent), potentially lucrative stock options, a new profit-sharing plan, a lump-sum retroactive payment that will average $9,200 per pilot, per diem increases, more money for probationary pilots, work rule improvements, the near elimination of vacation cancellation by the company, and better retirement benefits.

In addition, ALPA negotiator Mike Maza said the union won on two vital issues -- the gradual phase-out of the lower-tiered B-scale for new hires and job security issues involving expanded use of regional jets and Northwest's proposed alliance with Continental Airlines.

Northwest pilots obtained language prohibiting Continental's lower-cost flight operations from growing faster than operations at Northwest -- a benefit that will be shared de facto by all other union employees at Northwest. On the issue of regional jets -- one of the major unresolved items leading into the strike -- ALPA allowed Northwest to add an unlimited number of the small planes, which are flown by lower-paid regional affiliates. But growth in regional jets, which feed passengers to Northwest's mainline route system, must be tied to net gains in narrow-body planes at Northwest, according to the agreement.

From the outset of negotiations two years ago, ALPA vowed to win an "industry-leading" contract. Northwest pilots would be paid better than pilots at United, US Airways and Delta -- but not as much as pilots at American. During the course of the four-year deal, other pilot groups could leapfrog Northwest pilots in pay, he added.

The pilots thanked other unions at Northwest for supporting the strike and pledged solidarity in return. Five other labor groups, including the 27,000-member machinists union and the 10,000-member flight attendants union, still await contracts. The machinists have said they will strike to get a better contract than the one they rejected in July.

CN president says Canada puts up too many barriers that hurt competition

SARNIA, Ont. -- Dismantling tax and regulatory barriers to railroad competitiveness would enhance the trade and transportation benefits of Canadian National’s bold steps to build an integrated North American rail network, says CN President and Chief Executive Officer Paul M. Tellier.

Tellier, speaking to the NAFTA (North American Free Trade Agreement) Superhighways Conference here last Friday, said inconsistent regulation of the North American trucking industry, and the heavier rail tax burden in Canada than in the United States, hamper the competitiveness of Canadian railroads in the NAFTA marketplace.

CN has taken two important strategic initiatives to improve rail services to accommodate rapidly growing north/south trade flows stimulated by NAFTA. It has signed a definitive merger agreement with Illinois Central Corporation (IC) that will provide shippers with efficient, single-line service between Canada, the U.S. Midwest and southern U.S. The merger, which is subject to regulatory approval in the U.S., will enhance the shipper benefits of a second initiative, an alliance CN has struck with IC and Kansas City Southern Railway Company (KCSR). The alliance is offering shippers coordinated, through-train service between Canada, the U.S. Midwest and the U.S. South, and a connection to Mexico’s largest rail system.

"We’re creating a rail corridor for NAFTA – one that enables trade to reach deeper into the geographic and economic hearts of both countries," Tellier said. "But making a NAFTA railroad competitive requires more than simply mergers and alliances. It also requires a level playing field – between modes and between countries."

Tellier said governments in Canada should address a number of key policy issues in planning for a balanced NAFTA transportation system:

Inequitable taxation of railroads. Canadian railroads pay 40 per cent more in tax for fuel, property and capital than their U.S. rail competitors. In Canada, taxes represent 14 per cent of gross rail revenue, but only eight per cent for motor carriers. In Canada, the capital cost allowance for railroads is one-third of the rate applied to trucks. U.S. railroads can depreciate their locomotives faster. The result: the average age of U.S. locomotives is 15 years, versus 23 years in Canada;

Truck-size-and-weight and hours-of-driving regulations vary from province to province in Canada. In the U.S., interstate trucking rules are more consistent and more stringent;

Longer and heavier trucks on highways discourage intermodal traffic – the transportation of highway truck trailers and containers on railroad flat cars. Regulators and planners should consider the benefits of intermodalism in designing a NAFTA transportation system. Intermodal transportation can remove truck traffic from already burdened highways.

Tellier said the CN/IC combination has a compelling rationale. It will deliver clear, uncomplicated and timely benefits to shippers, with no anti-competitive effects, abandonments, service reductions or interruptions, capacity constraints, or significantly adverse labor, safety or environmental effects.

The U.S. Surface Transportation Board (STB) is scheduled to vote in March 1999 on the CN/IC combination, Tellier said, "and I’m optimistic it will find that this is a merger that increases competition and improves rail service."