OMAHA, Neb. — Union Pacific and Norfolk Southern say their proposed transcontinental merger will take more than 2 million trucks off the road annually, boosting the combined system’s traffic by 1.4 million intermodal loads and 425,000 carloads.
The growth details are among those included in the 6,692-page merger application the railroads filed with the Surface Transportation Board on Friday (Dec. 19).
The combined railroad would see revenue growth of $4.2 billion three years into the merger, with nearly $1 billion in cost synergies. UP will spend $1.1 billion in capacity improvements, plus another $1.1 billion on technology integration and other investments.
“We look forward to working with the Surface Transportation Board as it reviews our historic application to create America’s first transcontinental railroad,” UP CEO Jim Vena said in a statement. “As time and technology continue to transform how freight is delivered, our industry must keep pace and move forward, reaching underserved markets with new rail solutions and strengthening the U.S. supply chain. Customers deserve stronger, more connected freight rail, and our merger will make that happen.”
UP and NS said their merger would help stem the loss of rail market share, which declined nearly 10% from 2014 to 2023, according to the Bureau of Transportation Statistics. The single-line service created by the merger will level the playing field with trucks, the railroads said — noting that rail’s market share is two to three times higher for single-line moves than for freight moving in interline service.
A transcontinental UP system will create 10,000 new single-line service lanes, which will eliminate the costly and time-consuming interchange of 2,400 carloads and containers per day at gateways from Chicago to New Orleans. UP also points out that interline merchandise traffic moving between 1,000 and 1,500 miles costs an average of 35% more than a comparable move involving just one railroad.
UP sees significant growth in the so-called watershed markets — the vast swath of the American heartland that lies within a few hundred miles of the Mississippi River, the de facto dividing line between the Eastern and Western railroads.
Eliminating interchange friction, short hauls, and revenue division challenges will enable 105,000 carloads of merchandise traffic to shift from road to rail in the watershed, UP said, citing estimates from the Oliver Wyman consulting firm.
UP’s operating plan creates new trains with streamlined movement through mid-continent gateways.
Union Pacific and Norfolk Southern anticipate adding several routes, including two new daily intermodal train pairs connecting the East and the West with more direct service – reducing estimated transit times from Southern California to the Ohio Valley and Northeast by up to 20 hours and from Southern California to the Southeast by more than two days. To meet expected intermodal growth, the combined company plans to introduce a total of six premium intermodal lanes operating seven days a week.
A new intermodal train connecting Southern California to the Ohio Valley and the Northeast will use UP’s Sunset and Golden State routes to Kansas City, where it will get on Norfolk Southern’s former Wabash main line to Butler, Ind., the connection with the NS Premier Corridor main line to the East Coast. Eliminating the Chicago interchange will shorten the trip by up to 252 miles and reduce estimated transit times by up to 20 hours.
In another example, UP and NS will shave approximately 70 hours of transit time on intermodal traffic moving from Southern and Northern California to the Southeast, including Georgia, Florida and North Carolina, and approximately 95 hours on traffic moving in the opposite direction by routing traffic via the Shreveport, La.-Meridian, Miss., Meridian Speedway rather than via Memphis.
The combined railroad also will introduce six new manifest trains to bridge the East-West divide more efficiently, reducing over 600 daily car handlings.
UP and NS said their combination would enhance railroad competition. Only three customer locations — out of more than 20,000 — are served by UP and NS but no other railroad. UP says it will provide the three locations with competitive options.
The railroads said they will keep all current gateways open. “Committed Gateway Pricing,” the railroads said, will streamline pricing for interline moves that otherwise may not directly benefit from the merger.
UP will not divest any principal routes after the merger. But it will divest shares of the Terminal Railroad Association of St. Louis and the Peoria & Pekin Union Railway to prevent what otherwise would become majority ownership post-merger. In addition, UP says it will eliminate potential competitive concerns involving TTX — the railcar pooling company — by reducing its TTX stake to not greater than 50%.
To avoid the disruptions that have accompanied other major railroad mergers, UP and NS say the transition to a combined system will move forward in phases. They also said that the end-to-end nature of the merger reduces the risk of service disruptions because most traffic moving on the two networks will not be affected, and that most yards and terminals will not experience any significant merger-related increase in traffic.
The application also outlines how the railroads will combine best safety practices under a safety integration plan that was created in conjunction with the Federal Railroad Administration.
More than 2,000 letters of support — including 700 from customers — are included in the merger application.
Add all this up, UP says, and the merger meets the regulatory requirements for approval: It enhances competition and is in the public interest, the two higher hurdles that are part of the STB’s tougher 2001 merger rules. The UP-NS combination is the first to be judged under those rules, which were put into place after rapid and initially chaotic mergers in the 1990s.
The STB now has 30 days to accept the application as complete or reject it as incomplete.
— Updated at 7:45 a.m. CT with additional details. Updated at 7:58 a.m. with graphics. To report news or errors, contact trainsnewswire@firecrown.com.
