CSX Acquisition of Pan Am Railways

Most of the remaining larger Maine customers are on the main lines and/or near serving yards like Rigby or Northern Maine Jct, so I would imagine that CSX has no intention of letting their business slip away. The more marginal business, say on the Saco Industrial or on the branch to Augusta may be a little more at risk, but will still likely be serviced weekly at a minimum.

Considering Pan Am has already implemented their version of "PSR" and there are only two freights in each direction per day Ayer to Rigby going down to one is not that big of a change. They is also only one general freight between Deerfield and Ayer down from 3-4 in each direction per day when I worked there. However, for operational reasons (complexities of combining two mile long trains, commuter trains in the way, etc) you may still see two freights a day on the Portland Division. We aren't talking about serious efficiencies gained here like going from Buffalo to Albany - it's only a 100 miles.

As for what CSX thinks of the little guys, there aren't that many left. Pan Am did a good job of assisting many "back country" customers become rail served at easier locations to handle. I don't see a wholesale shedding of them, but impossible to tell this early.

CSX has said as recent as this year their strategy is intermodal and carload volumes to compete with trucks . Same with CP

https://trn.trains.com/news/news-wire/2 ... h-csx-says

The other thing that makes it more likely that you will continue to see 2 trains each way South of Rigby is that CSX is likely to increase the business coming out of Maine and the Maritimes by a fairly significant volume which would even put more pressure on running just one train.

If CSX went down to one train a day I think NS would not to happy about that. If CSX did that it would have to block cars for NS to Ayer. Then they would have to split the train in Ayer for NS to take there cars west. The only other way is to let NS run there own train to Maine. I would think that NS would prefer to have CSX run a second train with just NS cars on it. This way they do not to pay for a crew to Maine .It also makes easier in Ayer they would only have to switch engines or run though the power.

Well, Pan Am already is doing that - and the reality of interchanging with another railroad (Pan Am Southern) is that you have to block cars for them. So CSX (after the the acquisition is complete) either continues that process and keeps running them separate or they run it as one train to be combined/set off. Either way they will need to keep blocking the cars. Not much of a way around it.

I could see them running an expedited pure Selkirk train and then a second train to handle Lawrence, Ayer and PAS/NS blocks.

Remember the change-in-control provisions give NS control over PAS, so presumably NS will take over operation, dispatch, maintenance, signals in PAS territory.

How do present CSX rates compare to PAR rates? Does CSX have rates that are consistent nationally or is everything "whatever the market will bear"? Obviously the MOW costs will soar initially, but crew costs should fall if velocity increases.

roberttosh wrote:I could see them running an expedited pure Selkirk train and then a second train to handle Lawrence, Ayer and PAS/NS blocks.

This may the most sense for CSX to do . The only thing this will do is make the NS trains slower over the road. The NS route is already longer because NS has to use the Delaware AND Hudson to go west. I wonder how much cars are handle between Lawrence and Portland vs Lawrence and Ayer.

Not only is there Maine and Maritime traffic moving to Ayer and Lawrence, but I believe that anything from CSX going directly to ST over Barbers for Ayer or Lawrence goes all the way to Rigby for classification before heading back West. So I would imagine that there are sizable blocks for both yards coming down from Maine.

Ayer blocks going to Rigby depends on how much room is available at Ayer, or if the Ayer traffic is souped into the train. If it's all together, and there's room, they'll set it out in Ayer. Lawrence/Lowell/Boston/Northern traffic typically does go to Rigby to be classified, when I was working there they'd typically send the Lawrence/Boston stuff down one day, Lowell/Nashua stuff down the next, etc.

The CSX Q4 earnings call is in about an hour. Let's see if anything is said about Pan Am.

Here's the link to the CSX Q4 2020 analyst conference call - surprisingly to me, no mention of Pan Am was made by analysts or CSX:
https://seekingalpha.com/article/440029 ... transcript

There is this statement by Jim Foote re: planned 2021 capital expenses: :

We project full year CapEx of $1.7 billion to $1.8 billion. This spend reflects ongoing investments in our core infrastructure, combined with several high-return growth investments for technology and sales and marketing initiatives. We will continue to evaluate attractive growth investment opportunities as they arise. But from a network perspective, we still have ample line of road and terminal capacity.

Lastly, we remain committed to returning excess cash flow to shareholders. We will repurchase shares through our ongoing buyback program and we will look to be opportunistic with share repurchases as we utilize our roughly $6 billion of buyback authority.

I guess the rumored $700M purchase cost of Pan Am could be part of the 2020 to 2021 increase in Capex from $1.626B to $1.7B or higher. But I would have thought that given such a large outlay of funds, some analyst might have questioned the acquisition's impact on traffic, revenue, headcount, property upgrade expenses, anticipated headwinds from customers, competitors (esp NS), STB, etc.

The aquisition may not be part of the ongoing CAPEX but may be treated as an aquisition expense (later to be capitalized on the p&l), and they might not even believe the deal will close in 2021.

Given the need for regulatory approval and the NSC/PAS situation I wouldn't be surprised at all if the anticipated closing date is a year out. I am somewhat surprised that management didn't mention the transaction at all. You'd think the potential addition of Maine to the route map, with its forest product and paper traffic, would be worth of at least a sentence or two.