I read that CMQ Job #1 is now running 3 times a week (Brownville Jct-Farnham), and Job #2 twice a week, (Farnham-Brownville Jct). This is reflective of a nationwide slowdown, and will certainly not help profitability.
Railroad Forums
CMQ Profitability
- Discussion of present-day CM&Q operations, as well as discussion of predecessors Montreal, Maine & Atlantic Railway (MMA) and Bangor & Aroostook Railroad (BAR).
Moderator: MEC407
You can operate profitably at those service levels. Meeting your operational capacity to best accommodate the traffic reduces costs and is typically a large factor to maintaining or increasing profitability. If you run 6 trains with 50 cars or 3 trains with 100 cars, which is more profitable? Assuming customers accept the slightly increased transit time (considering alternatives I'm sure they're fine with it) it's not a bad move.
I also want to remind folks that the Conn River traffic was/is to be a end result of a successful STB ruling for Pan Am Southern against the rate hike for trackage/haulage rights on NECR which has still not yet been resolved. With that, Vermont Railway was/is to seek haulage rights from White River Jct to Bellows Falls to meet PAS. This would create a rate that would be quoted CMQ-VRS-PAS/NS as a western gateway IF the STB ruling works in their favor. Also, this is all made evident by CMQ's letter of support filed with the STB for VRS and PAS to gain those rights.
The rule of thumb is that a railroad must have a minimum of 100 carloads per mile every year. With 480 miles of trackage, the CMQ is well below this number. According to their financial report there were 6688 loads in the first quarter (does this include bridge traffic?), on a yearly basis this would be 56 loads per mile. That there are not enough carloads to allow daily trains on the Moosehead weekdays is not a good sign, and with fewer trains this means carload velocity slows down. Perhaps it is a seasonal thing, but hopefully business improves to allow 5 day a week trains, hard to maintain a mainline like the Moosehead with only trains every other day or so.
Rule of thumb is you want a maximize your highest earning segments but also have them subsidize the cost of your low-to-no earning services (Which you gotta have or you'll drive away your customers by cherrypicking). CMQ is essentially three systems, the Quebec portion, the Maine portion from Brownville south, and the Bridgeline inbetween BJ and Farnham. What you want to focus on is revenue per carload subdivided by each commodity within each of the three lanes. That is to say, a carload of paper running over 50 miles of track from BJ to NMJ likely earns more $$ than paper traveling 250 miles over a different lane when you come down to the cost/ton (which is what the shipper is interested in depending on the lane). A rate table easily determines all of this, but alas I'm doubtful we'll get one of those from CMQ 
Also, depending on what they are hauling, you can see huge rate differences.
So basically, not all things are equal as you suggest.
Also, depending on what they are hauling, you can see huge rate differences. So basically, not all things are equal as you suggest.
Yes, I understand your point. But consider this, Irving is the source of many of the loads on the eastern portion of the CMQ. They are famous for squeezing the last penny out of everything. Irving has several choices of routes, including CN. This is bridge traffic, which historically pays less, especially compared to originating or destination loads. They might give you enough to keep you alive but not much else. If my numbers are correct, fifty some loads per mile, this is not good, considering Maine is not a cheap place to operate a railroad (weather is often bad, and taxes high).
CN, I don't understand what you are suggesting in your last post. Cross subsidy is not a recipe for success and average revenue per car is a fine measuring stick, but can't be judged in a vacuum.
Sure it is and actually does serve as a viable model in transportation today (especially intermodal as they try to lure truck-to-intermodal conversions). The goal is to pickup business you wouldn't otherwise have by rating all lanes, with some being low-to-no revenue and others being your primary revenue streams. The hope it to get all the business, even if its not all profitable, you'll still have other parts of that business that are much higher earners. It's a market entry strategy used by new/emerging companies, and eventually once you've established some business presence in the market you can invoke price increases. Hopefully by then you have enough customer loyalty and they've seen your services as proven, that they'll stick with you. If not, at least you'll eventually scrape off those lines of business that aren't the most profitable. I've actively been a part of companies that have used that strategy in transportation.
It is not all that hard to understand, Irving knows both CN and CMQ are desperate for their business out of St John, and this competition drives down carload revenue. Railroads make a lot more on captive loads. Bridge traffic is historically revenue weak. As a former BAR director, I do have some understanding of how this works. I do appreciate the fine effort CMQ is making, and that these lines have been preserved.
Certainly interested to hear your perspective on the CMQ!
I believe that Irving doesn't provide customers with their own rates, I believe they use rates from their partners. All of their connecting roads have haulage rights over their lines so I believe they just sit back and collect the coin and termination/origin/switch fees. As I recall their pricing and business structure is that of an essentially oversized terminal RR. Of course this could be all garbage or changed in recent expansions. I do know that each line of business is handled as its own (MNR, EMRY, NBSR) although they pool services and resources.
I believe that Irving doesn't provide customers with their own rates, I believe they use rates from their partners. All of their connecting roads have haulage rights over their lines so I believe they just sit back and collect the coin and termination/origin/switch fees. As I recall their pricing and business structure is that of an essentially oversized terminal RR. Of course this could be all garbage or changed in recent expansions. I do know that each line of business is handled as its own (MNR, EMRY, NBSR) although they pool services and resources.
What you are describing is more common with truck-oriented, large bid, multi-OD pair contracts. You will have a hard time finding any railroads that consider running freight below a 1 revenue:variable cost ratio a smart business practice. You are also making the assumption that CMQ's business is largely based on big "all or nothing" contracts. This is (very) doubtful.
Sometimes railroads are in such a strong position they simply turn away business because it does not meet their minimum revenue objectives. But you must understand CN in eastern Canada and CMQ are neither in this position. Since Irving originates much of the traffic out of St John, they are in control. If they turn you off, you would feel it immediately. Of course, Irving must also compete with producers of similar products, so when they get lower shipping rates they can move their products further and it keeps the plants humming. CN and CMQ are going to fight like hell to get the business and this means low rates to Irving. I dont think I said anything about big, all or nothing contracts. Irving did have a ten year deal with CN, but with others they preferred short term contracts (this is my understanding and could be wrong). Irving wants to keep all their options open, it serves them best to have as many rail options as possible, they will feed CN and CMQ to keep them alive, which is good news, but my bet is that the rate they pay is a good one for them.
I don't think I said anything about big, all or nothing contracts.gpp, my comments were not directed to you, but to CN. What I'm saying, with respect, that I don't get this:
CMQ is essentially three systems, the Quebec portion, the Maine portion from Brownville south, and the Bridgeline inbetween BJ and Farnham. What you want to focus on is revenue per carload subdivided by each commodity within each of the three lanes.Let's take this one step at a time...
So what you're saying is: A car of propane comes in from Sarnia ON over western connection and runs over "bridgeline" to "Brownville south" to a receiver in Hermon... so in analyzing traffic/profitability, etc. one would need to apportion the revenue between the two segments, correct? If so, how would you do it in this case, if the entire CMQ division was, say, $1,000/car.
According to an article in ATLANTIC NORTHEAST RAILS & PORTS, the CMQ had a loss of $243,000 in the second quarter, loads were 6,688 and revenue 7.7 million, or an average of $1,151 per load. So essentially, the quarter did not create a net profit.
On a YOY basis, CMQ gained in three of seven commodity categories. (Pulp/paper and propane had good gains. However, building products gain is probably a comp issue, as Q2 2016 includes Rockland branch business.) Where are their paper loading gains coming from? Irving?