UTU News Digest - Friday, February 5,1999

UTU Daily News Digest

Information of interest to operating railroad and transportation employees

Friday, February 5, 1999

Railroads’ performance varies with carrier

WASHINGTON – In the fourth week since publishing voluntary service data, the performance of major North American railroads was a mixed grab bag of results.

Three carriers ran trains faster while operations slowed on three others and two were unchanged.

The faster carriers included Union Pacific, which reported the fastest average speed at 25 mph, unchanged from a week earlier. Canadian Pacific was close behind at 24.7 mph, a small 1% improvement. The other rabbits included Kansas City Southern, which was 4% better at 23.9 mph, and Norfolk Southern at 16.1 mph, up 3%.

However, CSX train speed slid 6% to 17.8 mph, the largest decline among the major railroads. Burlington Northern and Santa Fe's trains slowed by 1% to 23.9 mph, and Illinois Central posted a 3% decline in train speeds to 22.1 mph.

The carriers decided to report performance data last year after widespread service problems prompted stiff customer criticism. They say that the data isn't comparable between railroads even if they operate in the same general geographic area.

Other broad performance indicator -- efficiency in switching freight cars between trains at major terminals -- presented the same uneven picture as train speeds. Of the 46 major terminals measured at the four largest U.S. railroads, 21 terminals switched cars faster, 21 had slower operations and four were unchanged.

In the switching area, NS managed to accelerate operation at eight of 11 terminals, with a 24% improvement in operations at Bellevue, Ohio, a major yard. Rival CSX lost ground at 10 of 12 terminals measured, improving only at Chicago and Toledo, Ohio. Russell, Ky., a major terminal for coal trains, saw switching operations slow by 40%.

Out West, UP was the picture of mixed results with faster service at six yards, slower service at six others and one unchanged. UP's busiest terminal, in North Platte, Neb., improved handling of eastbound trains by 14%, but was 12% slower on turning around westbound trains.

BNSF reported improvement at five facilities, with three of the other five terminals unchanged. The largest improvement was 25% faster car switching at Houston.

The railroads also report freight car inventory, which can be an indicator of potential congestion if the equipment count increases at the same time that train speeds decline.

Freight car counts at the four largest U.S. railroads and both Canadian carriers changed less than 1% last week. The only obvious difference was a 6% decline in the cars on line at Kansas City Southern.

Canadian Pacific to buy hotel company

NEW YORK -- Canadian Pacific Ltd., Canada's leading hotel company, is in talks to buy Fairmont Hotel Management L.P., operator of seven luxury properties including New York City's famed Plaza Hotel, according to sources familiar with the situation.

Terms of the potential transaction could not be determined, but the two companies have been in talks for some time, said the sources, who spoke on condition of not being named.

"There are definitely discussions going on. I think they are fairly well along," one source said.

Officials from San Francisco-based Fairmont and Canadian Pacific declined to comment. Calgary-based Canadian Pacific also owns a major railroad by the same name, a shipping operation, and oil and gas company PanCanadian Petroleum.

An acquisition of privately held Fairmont would be the latest move by Canadian Pacific to boost its hotel presence around the world. Last year, the company bought the luxury Princess chain from Britain's Lonrho PLC for $540 million.

Fairmont would give Canadian Pacific a solid footing in the U.S. urban hotel market, where tourists and executives are accustomed to paying high prices. The flagship Fairmont hotel is located in San Francisco and the company has properties in Boston, Chicago, Dallas, New Orleans and San Jose, Calif.

"It would certainly broaden their portfolio in a much more high-profile way. It would strengthen the position of Canadian Pacific as a serious and aggressive player in the hotel sector," said Jason Ader of Bear Stearns & Co.

Wall Street sources said it has been well known that Fairmont has been seeking a buyer. The company is 50 percent owned by Saudi Arabian Prince Alwaleed Bin Talal Bin Adbulaziz Alsaud. Hotel investment group Maritz, Wolff & Co. bought the other half last March.

Meanwhile, Canadian Pacific is expanding its hotel presence and has acknowledged the need to move into other countries. In addition to the Princess acquisition, the company also bought Canadian-based Delta Hotels last year.

"We've been almost solely a Canadian-based company because of our history. But the reality is that Canada is a small piece of the world, and if we're going to grow at a more rapid pace, we're going to have to look beyond Canada," Chief Executive David O'Brien said when the company announced the Princess acquisition last June.

After buying Fairmont, Canadian Pacific will likely have to keep its wallet open. Analysts said the company will need to invest large amounts of capital in hotel renovations, especially at the Plaza and the Fairmont.

"It's a very interesting combination. Some of those assets do need a lot of money," James Sullivan of Prudential Securities said.

KCS reports lower earning

NEW YORK Kansas City Southern Railway and its U.S. affiliates recorded operating income of $23.7 million, down 27% from $32.7 million in the fourth quarter of 1997, as revenue slipped 3%, to $151.1 million.

The Mexican rail operation partly owned by Kansas City Southern Industries, parent company of the railway, lost an estimated $10.8 million in the fourth quarter, compared with a loss of $19.4 million. Operating income of $200,000 from KCS' 49% share in Transportacion Ferroviaria Mexicana was a huge improvement over the $7.6 million loss from that business last year.

KCS Industries posted net income from continuing operations of $53.3 million, up 27%, on the strength of 80% higher operating income at its financial services subsidiaries.

The company attributed the railway results to a loss of traffic that had been rerouted over the carrier during Union Pacific Railroad's 1997 service problems. In addition, expenses increased 3%, largely due to two derailments and weather problems that produced systemwide delays.

For the full year, KCS Railway and its affiliates boosted operating income by 33%, to $113.9 million. Revenue rose 7%, reflecting higher coal traffic and increased agricultural and minerals traffic.

Losses from KCS Industries' Mexican rail holdings were $25.9 million in 1998 and $26.7 million in 1997.

The holding company's net income from continuing operations was $207 million, or $1.81 a share, in 1998, 44% higher than the $144 million, or $1.34 a share, posted in 1997.

Pennsylvania rail dollars doled out

HARRISBURG -- While Pennsylvania continues to focus money and new programs on high technology, the old reliable railroad is not being forgotten. A dozen railroad projects across the Commonwealth received more than $1.3 million dollars in transportation grants this week for rail-freight improvements.

Penn-DOT secretary Brad Mallory says most of the money is aimed at short-lines and regional railroads. They help connect industries to major freight carriers like Norfolk Southern, which has taken over most Conrail operations in Pennsylvania.

Mallory said the State Transportation Commission (STC) has authorized $1,305,683 in rail-freight assistance funds for 12 projects to improve railroads that serve existing employers and to construct rail lines to new facilities.

"Shortline and regional railroads play an integral role in moving goods throughout Pennsylvania," Mallory said. "These grants will support Gov. Ridge's economic development strategy by using rail-freight improvement projects to create jobs and get goods to market faster."

Mallory said applicants estimate the funding will help create more than 400 new jobs and retain about 800 employees. Also, railroads will be used to transport goods that would otherwise use about 30,000 trucks.

Mallory said the grants are made available under the Rail Freight Assistance Program authorized by the General Assembly in 1984. The program provides grants to preserve essential rail service where feasible and to preserve or stimulate economic development through new or expanded rail- freight service.

Pennsylvania leads the nation with 70 shortline railroads, which act as feeders to the major carriers and enable local businesses and manufacturers to quickly transport goods.

RailTex unit begins operations on Union Pacific lines

SAN ANTONIO -- RailTex Inc.'s Dallas, Garland and Northeastern Railroad unit began operations on 89 miles of Texas rail line leased from Union Pacific Railroad Co.

Financial terms weren't disclosed.

In a press release Friday, RailTex said it expects the lines, known as the North Dallas Lines, to add more than 15,500 carloads to Dallas, Garland and Northeastern's annual traffic.

RailTex's lease with Union Pacific includes an agreement with Dallas Area Rapid Transit, which owns certain portions of the North Dallas Lines.

RailTex is a short line railroad company providing freight services.

CPR in negotiations to sell Winnipeg welding operations

CALGARY -- Canadian Pacific Railway (CPR) today announced it is in negotiations with Kansas-based Chemetron Railway Products Inc. (Chemetron) for the sale of CPR's Transcona rail welding plant in Winnipeg.

Chemetron will operate the Transcona plant as one of several welding facilities it owns in Canada and the United States, providing a new supply center in Winnipeg for other prospective railway customers.

With plants in Winnipeg; Vancouver; Pueblo, Colorado; and Steelton, Pennsylvania, Chemetron will provide CPR with greater and quicker access to welded rail supplies for track work programs across its network. Currently, CPR's continuous-welded rail (CWR) supply is produced only at Winnipeg, with all of its premium-quality raw steel rail imported from Japan to the Port of Vancouver and then carried by the railway to Transcona before being hauled again to track-installation sites throughout the railway's 25,000-km (15,500-mile) territory.

"The proposed agreement with Chemetron is another step in our continuing efforts to sharpen our focus on core operations, while reducing expenses and increasing operating efficiencies," said Ed Dodge, executive vice-president of operations at CPR.

"Chemetron will provide CPR with a reliable, cost-effective supply of welded rail at several locations on our network, bringing increased productivity to our track-installation programs in Canada and the United States. With access to more welded-rail supply facilities, CPR will see reduced transportation costs and quicker delivery of rail to track-installation sites across our network."

CPR expects to conclude an agreement with Chemetron, a subsidiary of Progress Rail Services Inc., in the coming weeks, with full implementation by early June. In addition to the sale of the plant, the railway intends to lease to Chemetron a small section of the adjacent rail yard and some track required for welding operations at Transcona.

Implementation of the changes at Transcona will result in the expected net employment loss of 30 - 35 permanent positions. In addition to the reduction of 50 permanent positions at Transcona, effective June 4, 1999, CPR expects four positions in rail cutting and drilling will be created at the railway's nearby Weston shops. As well, it is expected that some employees will be offered employment opportunities with Chemetron when it takes over rail-welding operations at Transcona.

The remaining employees are eligible for benefits under their job security agreements with CPR, including severance payments, educational leave, early retirement, or bridging to early retirement.

Of the affected employees at Transcona, 49 are members of the Brotherhood of Maintenance of Way Employees (BMWE), and one is a member of the Canadian Auto Workers (CAW). These employees were notified today.

CPR currently employs about 1,800 in Winnipeg, including 525 at Weston shops, and a total of 2,216 in Manitoba.

Ohio RR crossings to be upgraded

COLUMBUS, Ohio -- State utility regulators have ordered Conrail and C-S-X Transportation to design and install flashing lights and gates at six railroad crossings across the state.

Two of the upgraded crossings will be in Wayne County, while the others will be in Versailles (ver-SAILS), Toledo, Cincinnati, and Salem Township. Federal funds will pay for the upgrades.

FedEx Pilots ratify contract

MEMPHIS -- Federal Express Corp. and the FedEx Pilots Association (FPA) announced this week that the union's membership has ratified a five-year collective bargaining agreement that takes effect on May 31, 1999, bringing the negotiating process to a successful conclusion.

"The vote affirms our pilots' commitment to serving our customers," said Ted Weise, president and chief executive officer of FedEx. "This contract keeps our pilots' compensation package competitive with peers at other major airlines, and it recognizes the vital contributions they provide in maintaining FedEx's leadership position in our industry."

Federal Express’ unmatched air route authorities and infrastructure make it the world's largest express transportation company, providing fast, reliable and time-definite transportation of more than 3 million items to 211 countries each working day. FedEx employs more than 145,000 employees and has more than 44,400 drop-off locations, 624 aircraft and 42,800 vehicles in its integrated global network. Federal Express reported revenues of $13.3 billion for its fiscal year ended May 31, 1998.

Highlights of FedEx - FPA contract

Length: Five years.

Effective date: May 31, 1999.

Pay increase: 17 percent over term of contract; 3.4 percent average annual increase.

Retirement: Enhanced benefits including relief from mandated ceiling on retirement earnings.

Scheduling: Direct pilot input on scheduling issues.

Work rules: Limit on types of trips scheduled during certain times of the day; assurances that pilots are in position to fly trips which begin outside their domicile.

Leasing of crews and aircraft: Current contracts will be fulfilled; discussions under way on flexibility in the length of contracts.