Rail industry in 2025: NS rebound, CPKC IT problems among key stories

While it is impossible to summarize the rail industry’s year in a single article, there were certain key stories and themes worth highlighting. Given the amount of material, let’s get right to it. Some of these stories will be addressed in greater depth in the Top 5 stories of the year countdown that begins Saturday, Dec. 27.

Norfolk Southern’s rebound

Before Norfolk Southern became an attractive merger partner for Union Pacific, it made notable strides in rebounding from the tailspin triggered by the February 2023 derailment and hazardous materials release in East Palestine, Ohio. That was followed by other high-profile derailments; operational problems created by the cleanup in East Palestine and new train marshalling rules; a proxy fight led by activist investor Ancora Holdings that was only partially successful; and the ouster of CEO Alan Shaw over an inappropriate relationship with another NS executive.

Under Mark George, named to replace Shaw in September 2024, the railroad cut costs, reduced its operating ratio, and improved its operating metrics. Revenue remained below expectations as a freight recession continued, but NS had clearly regained its equilibrium by the time George and UP CEO Jim Vena announced plans to merge their railroads in July. That followed talks that began in December 2024 — just 11 weeks after George became CEO.

CPKC’s IT issues

Canadian Pacific Kansas City largely avoided the operational issues that marked previous Class I mergers — until May, when it cut over the former Kansas City Southern to CP’s computer system in the U.S. Varying degrees of chaos were almost immediate, with the system unable to handle basic functions like processing waybills. Within a week, dwell at the Shreveport, La., hub jumped from 35 hours to 68; shippers reported that interchanges that usually took 24 to 48 hours were taking a week; and other companies moved shipments to trucks or requested routings away from the former KCS.

The Surface Transportation Board ordered CPKC to provide a service action plan to address the problems, as well as regular operating updates. Local service performance had largely recovered by the end of June, but other issues took longer to tame. Ironically, the CPKC issues have provided ammunition for opponents of the UP-NS merger, who point to the service risks of a big merger. Among those who have cited such risks: CPKC CEO Keith Creel.

Infrastructure achievements

Aerial view of intermodal train on rail bridge, with two diamond crossings visible at ground level — A screen shot from a CSX video shows the first train to cross the Forest Hill Flyover, eliminating a bottleneck at the diamonds below. CSX

CSX completed two of the year’s biggest projects — the $450 million worth of work to increase clearance on Baltimore’s Howard Street Tunnel, and the $500 million restoration of the Blue Ridge Subdivision, the former Clinchfield line in eastern Tennessee and western North Carolina that was all but destroyed by flooding from Hurricane Helene in fall 2024. The projects were both finished ahead of schedule.

CSX also had the lead role in south Chicago’s Forest Hill Flyover, the double-track bridge that eliminated diamond crossings with tracks used by Norfolk Southern, the Belt Railway of Chicago, Union Pacific, and Metra. The location is often characterized as part of the nation’s worst operational bottleneck. The $380 million project is part of the larger 75th Street Corridor project.

Other notable projects included:

Norfolk Southern’s restoration of AS Line service to Asheville, also devastated by Hurricane Helene, and ongoing work to restore the line including the landmark Old Fort Loops.
Two major second-main projects: One covering 17 miles on Canadian National west of Edmonton, Alberta, on the Edson Subdivision; and another of 9 miles on Union Pacific in Southern California to support intermodal service out of UP’s Inland Empire Intermodal Terminal at West Colton Yard.

Short line reshuffling

Canadian National and lease locomotive with Iowa Northern locomotives on bridge — Canadian National ES44AC No. 2832 leads an Iowa Northern train at Rockford, Iowa. Chris Guss

While the short line industry may not be seeing as many railroads change hands as was the case a few years ago, there were still some notable transactions. Leading that list was the completion of Canadian National’s purchase of the 218-mile Iowa Northern, a deal announced in late 2023, approved by the Surface Transportation Board in January, and consummated in March. The short line, founded in 1984 using a portion of the former Rock Island, moves about 60,000 cars per year.

Notable in another way was Union Pacific’s decision to lease 1.25 miles of trackage in Kansas City to Jaguar Transport to create a new short line, the Kansas City West Bottoms Railroad. That followed the 2024 announcement of a deal to transfer operations in the Eugene, Ore., area to Genesee & Wyoming’s Central Oregon & Pacific. The possibility of further such spinoffs is one item cited by unions in opposing the UP-Norfolk Southern merger — although the merger application does not include any such plans.

Other short line deals of note:

Watco acquired Michigan’s Great Lakes Central Railroad, operator of 420 miles of state-owned trackage. Watco was already an equity investor in the railroad.
Regional Rail acquired the Minnesota Commercial Railway, the 86-mile railroad headquartered in the Twin Cities’ Midway that interchanges with BNSF, CPKC, Union Pacific, Canadian National, and Twin Cities & Western.
Investment firm FTAI Infrastructure announced it would acquire the Wheeling & Lake Erie Railway, at 840 miles the nation’s largest independent regional railroad, in a $1 billion deal.

— To report news or errors, contact trainsnewswire@firecrown.com.