What happens if Pan Am collapses?

QB 52.32 wrote:I generally agree with the musings, especially with consideration of how Irving would look at the opportunity. However, I don't see CSX, with a leading market position, rolling over to accept a secondary position Ayer-Portland with trackage rights over NS.

With unfettered trackage rights between Ayer and Rigby, CSXT could still continue to run their Q426/427 pair (or additional trains for that matter) between Portland and Selkirk and would be able to thus maintain their Maine/Maritimes franchise. There's not many big customers left between Ayer and Portland, which is evidenced by the fact that the vast majority of what CSXT runs up the Worcester line is bound to or from Maine. Again, I don't think they'd be too concerned about not getting access to the East end of the B&M, especially since they still have good access into the Boston metro area through their own Boston line. There are quite a few locations across the country where major class one main lines use trackage rights along the way, so as long as their aren't restrictions, I think CSXT would be fine with it. Granted they would lose access to NU at Bow, but it's been years since they handled that business and am not so sure they even want to run 100 car coal trains over the Berkshires.

The operative word would be unfettered, but generally trackage rights don't provide unfettered access (especially between competitors). Generally a trackage right tenant plays second fiddle and/or has to live with limitations (or worse!). While anything could be negotiated, diminishing your access from a neutral 3rd party originating carrier to reliance upon a competitor for access to a market would be a step back requiring something meaningful in return. For CSX I doubt they'd be anxious to help out NS or put themselves in a position relying on their good will, especially with a situation that would likely provide an easy fight....unless there was something meaningful in return. Similarly, I'd have to think the new Pan Am owner's preference would also be to maintain balanced competitive access between its two most important Class 1 connections.

Some valid points, but I'm sure that in any deal where ownership of the line was transferred to the NS, the STB would see to it that the NS maintained adequate service windows for CSXT and it isn't like the line to Portland is at capacity, especially outside MBTA territory and during the overnight hours. BNSF runs pretty decent service over UP at Tehachapi as does UP over BNSF at Cajon and between Portland and Seattle, so it isn't like trackage rights don't work. Would NS have the upper hand, perhaps very slightly, but surely not enough to really effect the quality of what is basically manifest/carload service for CSXT.

I'd have to believe CSX would not only be looking at today, but at the future, too, where capacity and/or schedule issues and new commercial opportunities might present themselves. Trackage rights work best where two carriers are not head-to-head competitors or find themselves in that structural, historic situation with no alternative. You'd be asking CSX to step down to tenancy with a head-to-head competitor landlord in a situation they could probably fight with relative ease, where there are alternatives probably preferred by other players in the mix, and where there'd be a subtle but meaningful strategic shift, too, if PAS became NS ...what would be in it for them to accept this and would the STB really view such a move positively through the prism of improving railroad competition? Kind of curious, too, why Ayer-Portland would be more attractive to or justified for NS than CSX (why not flip the landlord and tenant)?. If you want to give NS direct competitive access to eastern MA and the Boston area (or NH) those rights could simply be sold/created independant of Ayer-Portland. Anyone for a game of Rail Baron, lol?

I guess I was thinking it made more sense for the NS to get Ayer to Portland since the line is more of a natural extension of the Fitchburg route vs one of the B&A and Worcester line and with CSXT already controlling the lines south of Boston, the addition of the line east of Ayer would really give them complete dominance in Eastern MA. Who knows though, maybe the NS has no interest in operating beyond Ayer and would gladly let CSXT take over? In a perfect world, perhaps that 3rd party would operate the line all the way from Ayer, but it seems like Portland is a natural interchange/division point as the former MEC territory is more of a load gathering/terminal/switching property whereas the B&M side is more of a run through main line operation. One thing I've always thought could happen is that NS would completely take over Ayer west and then PAR would just run from Ayer to Keag. One thing is for sure, as it stands now, on traffic going beyond Ayer, the NS-PAS-PAR routing is not working from a rate standpoint vs CSXT via Barbers and such an arrangement would certainly help level that playing field.

by MEC407 » Mon Jun 27, 2011 5:34 pm

You tryin' to put me out of work, jaymac?

Not a chance!

roberttosh wrote:I guess I was thinking it made more sense for the NS to get Ayer to Portland since the line is more of a natural extension of the Fitchburg route vs one of the B&A and Worcester line and with CSXT already controlling the lines south of Boston...

Certainly reasonable logic to make the case, Mr. Tosh. Well, no doubt an unlikely Pan Am collapse could trigger some strategic wrangling amongst the players! I'd be curious what the marginal cost vs. marginal benefit for Pan Am (or unlikely successor), both on-going and strategic, of owning/operating the connection between Rigby and the 2 gateways and/or local operation east of Ayer vs. jettisoning one or the other or both to someone else? If there were a desire for either carrier to extend eastward from Ayer without agreement with the other (except, perhaps, for NS getting the local operation), I'd think there'd be a good chance the trump card would be the alternative of keeping an independant carrier in the mix, and most likely in this case, Pan Am's successor.

I don't think Pan Am is anywhere near collapse. If anything happens here it will most likely be in the fringe areas, branches that lose their remaining business etc. The business for any railroad in New England seems to be on a downhill slide in many cases and most if not all of these cases have little or nothing to do with the service offered by the existing railroad but have a lot to do with the general decline in business that relates to railroad use in New England. We have already seen this in Western and Southern Connecticut and it could well spread to a large part of New England. Growth possibilities exist in Pan Territory as well, trash and IM to name a couple. This company has to be doing at least some things very right to even remain in Connecticut. I have to think that they are considerng the possibility of trash business in Connecticut and that might make things more secure and profitable here too. Years ago I don't think anybody could forsee the nearly collapse of railroad freight business in Connecticut west of the Connecticut River, I know I couldn't, but today it is a fact, no business remaining in Danbury west of the museum area, a bobtail local from Plainville to Waterbury once or twice a week, almost nothing remaining between Waterbury and Devon, only one freight customer between Bridgeport and the New York State Line on the Metro-North New Haven Line and much more. I think much of the surrounding areas around Boston will eventually meet the same fate as this part of Connecticut has met. As industries and freight customers close or relocate, there is nothing to take their place except stuff that will not need railroad freight service.
In closing, I don't think Pan Am will collapse but I think operations will probably be somewhat more reduced over the coming months and years. I hope I am proven wrong but I don't think I will be.
Noel Weaver

I think if PAR were in any kind of trouble there'd be an asset selling spree long before the company were ever put for sale. They have a number of chips to put in play.

1) Its CT lines. Frankly it would make good business sense to put those open to bid right now since their interest in serving that market is about nil, and with them seemingly relegating the Conn River Line to a mostly PAS service it's getting further and further out of the way for them to go south of Springfield. CT would certainly buy the Highland, PAR's portion of the New Departure branch/Terryville Loop, and the tiny active portion of the Canal Line to consolidate the last contiguous lines (excepting the self-sustaining NECR and P&W mains) not yet locked up under gov't control, and hold it as a long-term commuter rail option. CSO, CNZR, and Naugatuck would almost certainly bid on the trackage rights since it's valuable territorial expansion for them and would give them new interchanges. Plus there's more business to be had by putting in something better than the eighth-arsed effort PAR did, and CSO and CNZR in particular have been pretty aggressive about signing on new customers. It makes no sense for a Class II to own and operate those lines. It makes a lot of sense for a plucky shortline to do it on state-owned track.

2) Marginal branchline dump. Not that they have many left, but there's still a few low-margin lines they still own where flipping them to the state for ownership consolidation would relieve maintenance and tax costs. Talking a motley low-mileage assortment like these: South Reading Line in Peabody, Medford Branch, OOS Moran Terminal lead track, Adams Branch, Lawrence and Westford industrial tracks, OOS Lowell industrial track. Maybe the Nashua-Milford trackage in NH since the state already owns the line from Milford-Newington. State of MA has pretty much locked down every other ROW under public ownership save for the freight-only Class I/II/III mains (PAS west of Fitchburg, CSX west of Worcester, NECR, P&W's twin mains, Housatonic), the Class I/II interchange branches (CSX Framingham Secondary, CSX Agricultural Branch, PAR Worcester Branch, Conn River Line), and the shortline mains (G&U, PV) where those are the tiny operators' main hard assets. They've already got an agreement in principle to take the Watertown Branch off PAR's hands whenever they can get Newlyweds out of their contract. They would certainly be willing to offer a package deal for all these stubs that a major buyer like NS would have zero interest in owning...both to keep the viable ones (South Reading, Adams) operating and to preserve the ROW's that are going by the boards. You'll probably see more of that even if PAR is healthy, as the state strategically wants things like the Moran terminal track and I certainly can't see malformed stubs with hardly any business like Medford staying active much longer.

3) Passenger asset consolidation. The T is most likely going to snap up the Wachusett extension of the Fitchburg Line sooner or later. It's their MO to own every single piece of track they run on, and the 5 miles of new extension is currently foreign territory. They already paid for trackage rights on the Worcester Branch as a long-term hold. I could see them taking it a step further and eventually buying even with a healthy PAR just because it's a dual Class I/II interchange branch critical to the state freight rail plan. If PAR can't be compelled to get the speeds up, the state certainly will and will broker more traffic from CSX to make it worth everyone's while. Certainly the Conn River Line is a strategic asset. Amtrak much prefers running on gov't-owned track, and that's a significant piece of NEC-branchline infrastructure to reel in. Not to mention there's a whole lotta business the state can drive on it by negotiating directly with NS and giving PV a little more leeway to fill the local vacuum PAR is leaving. Amtrak, NHDOT, and MEDOT would probably take the hit to buy up the Western Route to Brunswick. MEDOT already owns everything beyond to Augusta if they're hedging on still more Downeaster expansion. NHDOT would certainly buy the NH Main to Concord where the MBTA has already secured passenger rights in a prior deal. For all their squeamishness about passenger trains NH has also been excellent about snapping up ROW's. They own just about everything non-PAR except for NECR's short in-state jog and the mains for the St. Lawrence & Atlantic and NH Northcoast shortlines...plus have everything abandoned in the last half-century landbanked under state control. PAR's ownership of those two critical trunklines, plus the Eastern Route/Hampton Branch (required to be reactivated to Seabrook in 20 years for decommissioning of the nuclear plant) and the Portsmouth Branch are ones they'd flag as very high-priority purchases.

4) Real estate. Certainly any abandoned lines they may still claim land ownership on would be up for a pennies-on-dollar dump, if there are any left. But they still own a good deal of former yard property. Nothing of Northpoint caliber, but I'm sure they'd broker off what they had because yards are nice big parcels and often had towns grow up around them so surrounding population density makes them attractive redevelopment choices. CSX is a quasi- real estate company with how it staggers out asset sales for a price premium. It's still got a number of holdings in the northeast to milk for future sales, and the states will overbid to secure those RR properties.

5) Mainline. NS would obviously want all of the non-passenger portion plus Ayer, Gardner, Mechanicsville to itself. I think there's little doubt about that. They might even be willing to go to Lawrence as an east-end interchange if they're not keen on operating the MEC and want an exclusive interchange. Would be a little easier to manage traffic if they had Lawrence so some interchanges don't have to plow against passenger traffic all the way to Ayer.


Only lines I think would be dicey are the MEC branches. Southern New England I think the states would probably welcome it if they left, NS took over full-time and actually maintained the main, and the shortlines got turned loose to stimulate better business up and down the CT River. But it really would be problematic for Maine if the company destabilized; that's the one place they aren't indifferent to business and do still hold sway a portion of the local economy. MEDOT also lags all other New England states in public ownership of the in-state ROW's, and there's an awful lot of PAR trackage up there outside of the northern extent of viable passenger rail that would be thrown into doubt. Although MEDOT's insistence on reactivating low-margin branchlines seems to indicate they'd try even to the point of overreaching to assist the MEC system in staying active and intact. As long as the paper mill business is stable and there's a Class I to interchange with south, I think a regional operator could step into the vacuum and serve the system. Whether it would be profitable long-term without the state overleveraging itself is anyone's guess. Either that or some spun-off residue of PAR could become a 'new MEC' Class III operator, just own that trackage, not work any locals outside of a ME/NH base, and only retain overhead rights in MA for interchanges. If all track outside of Maine's borders and on any passenger routes went under full state control, with NS taking over the Patriot Corridor, then the remaining MEC trackage is manageable-enough mileage for a modest-size private operator to maintain at 10 MPH PAR standards. PAR's track dept. capacity fails them when they have to break a sweat maintaining better-than-Class-1 speeds on PAS, Conn River, Worcester Branch, and the Western Route in service to its recent passenger and interchange deals. Put all that under the exclusive jurisdiction of the states and dump all those far-flung Southern NE tiny branches and it's really not gonna be a big deal to maintain the MEC.

These are all unlikely, if not impossible scenarios. First of all, who are going to run the trains for these beloved "regional operators"? Pan Am can't get enough qualified crews now, what makes you think these "regional operators" who pay much less and offer little or no benefits, are going to fare better? If they take disaffected PAR workers, they will have to pay them what they make now, not many "regional operators" are willing to do that.
As for any "regional operators" in the Commuter zone area, forget it, the unions will fight it tooth and nail, it will have to be NS or CSX or nobody. Anyway, as soon as anybody who worked for one of these fantasy "regional operators" found out what the MBCR pays, they would be leaving in droves. Besides, the younger generation today don't want to work nights, they don't want to work weekends, many of them can't pass a drug screen and they would much rather be out drinking Jaeger Bombs at 3AM than hanging off the side of a boxcar, no matter how much you pay them.

mick wrote:These are all unlikely, if not impossible scenarios. First of all, who are going to run the trains for these beloved "regional operators"? Pan Am can't get enough qualified crews now, what makes you think these "regional operators" who pay much less and offer little or no benefits, are going to fare better? If they take disaffected PAR workers, they will have to pay them what they make now, not many "regional operators" are willing to do that.

If PAR didn't pay the going rate, nobody would work for them either. There's more than 2 railroads in the northeast within commuting distance for railroad employees. Never mind CSX...Class II & III P&W and NECR/RailAmerica are not chopped liver, and support substantial workforces with union contracts of their own. If PAR were brokered off to other companies, the acquiring RR would have its dibs on whatever staff it wanted to keep in the divisions it inherits. Just like every RR merger, split-up, and reorganization of the last 150 years. It's kind of expected when you go into the industry long-term. Every RR has to do business with the unions, and yet they seem to stay in business regardless. Hell, B&M and MEC are technically mothballed divisions of PAR because the ST union contract was the most favorable one for corporate; it waged its union battle 25 years ago to get what it thought was a right-sized deal. Union costs are not going to be a factor in any breakup of PAR. And jobs are generationally going to be at a premium, so if a RR is hiring the qualified applicants are gonna find them. Finding staff is a non-issue.

Besides, who is saying that if PAR gets displaced that there's going to be a need for as many or more staffers? It would most certainly result in further reductions. One operator is not going to run their whole network. Some shortline will get CT, and probably won't need to make more than a few hires to cover that short a distance from CSO/CNZR/Naugy home base. NS is just like CSX...all about long-haul intermodal and profit-profit-profit. They are not going to be picking up any locals off the mainline or a major interchange branch like the Worcester Branch or Conn River. That's not profitable or labor-efficient. They can move vastly higher volumes with fewer staff by being ruthlessly efficient about long-haul transloading and not getting involved in locals excursions that need a whole crew to serve some dinky branchline customer. That's not how they do things. They're big and corporate and all about demonstrating peak productivity to their shareholders. Also, if PAR's network does get chopped up so the MEC is back to being a more-or-less contained entity that only runs interchanges with the mega Class I's, then you pretty much have no locally based staffs outside of Maine or whichever yard they're exchanging with NS. That's a lot less labor-intensive than having folks on the payroll in 5 different states. You just hope when that happens that the early retirements and willing buyouts cover most of the needed reductions so not too many folks get laid off.

As for any "regional operators" in the Commuter zone area, forget it, the unions will fight it tooth and nail, it will have to be NS or CSX or nobody. Anyway, as soon as anybody who worked for one of these fantasy "regional operators" found out what the MBCR pays, they would be leaving in droves.

Completely irrelevant. There's freight in passenger territory today...there's been freight in passenger territory from the day state and federal governments took over passenger rail. The current operators inherited their rights from chopped-up, merged, recombined predecessor railroads, and when it's a state-maintained passenger line they don't ever give up those rights even when they have no active business. Hell, PAR even operates over former NYNH&H trackage in CT that B&M bought off Conrail; its Springfield Line rights have only existed for 30 years. And as mentioned prior, they operate using the ST union contract. ST never operated in MBTA territory, so the labor they staff their trackage rights with is irrelevant. PAS, when the East Boston tank farm goes online, is going to make its first-ever regular runs on MBTA trackage using NS staff. No issue there.

And, sorry, the T has had its own commuter rail workforce and union contract for 3 decades. MBCR is only the management side; front-line RR ops (including low-level managers) are public service workers on a transferrable contract whenever the CR operator changes. Employees passed over transparently when B&M/Guilford begat Amtrak begat MBCR, and they will again if the T decides to take the commuter rail fully in-house in 2013. Nobody re-applies for their jobs when the CR operator changes. The commuter rail and Amtrak workforce are constantly growing with system and ridership expansion. But PAR hasn't been subject to mass staff defections to the public sector. Neither has CSX or P&W or RailAmerica or anybody else. Would anything be different if a busted-up PAR has its in-house staff inherited by the buyer RR's. The T also has no need for specialists in freight ops. The freight RR's no longer employ anyone with specialties in passenger ops. None of them can seem to find enough track crews to keep up with the stimulus awards, and the T liberally subcontracts those jobs out to the freight RR's so it's a circular shortage. Why would anything change here? Other than maybe if there's going to be more public works projects to contract with temporary support reinforcements from further out-of-district.

Besides, the younger generation today don't want to work nights, they don't want to work weekends, many of them can't pass a drug screen and they would much rather be out drinking Jaeger Bombs at 3AM than hanging off the side of a boxcar, no matter how much you pay them.

I'm not sure if that's intended to be a joke, but that comment is so ignorant it can't be taken seriously at all.

I'm not sure if that's intended to be a joke, but that comment is so ignorant it can't be taken seriously at all.

Actually, that's a pretty spot on assessment.

Mick, with all due respect, I really can't picture these "regional operators" having a problem hiring or retaining employees in an area where you have people lining up to work at paper mills for $12-$15 an hour these days. Lets face it, $60-$70,000 a year with bennies and RR retirement isn't exactly chump change in central Maine. Considering how many companies have bid on running some really borderline operations over the years, I think you'd have potential suitors lined up from one end of Maine to the other if a relatively traffic dense property like the MEC went up for sale. Just, look how easily the Irvings took over the former MMA lines last week, not even a hiccup!

hiring out and staying hired are two different things - especially on a railroad. There is a very high "drop out" rate, even in this economy.

I can't think of many occupations that test your mind, body, and life like the railroad. It's not for everybody... a typical Mill worker from Maine might jump at the opportunity to make good money but then end up quitting once they realize it ain't no 8 hour milk run.

just saying.

Personally, I don't think any of the MEC lines would have any problem adapting to a new operator instead of PAR. Just at Bucksport/Verso alone, they converted several one-time rail served docks and buildings to truck due to the crap-ass service provided by GRS and now PAR. Slurry docks, log yards, finish lines.....Half the employee lot is now a POTTLES staging yard for trailers. I'd love to see the count for trucks into the complex in a 24-hr period compared to ten years ago. PAR normally takes over 2 hours to cover the 18 mile branch from Bangor. For an example of their blistering speed....I had passed a BA-1 that was heading south through Brewer on my way to Bangor. I then shot from Bangor to Ellsworth(about 25 miles) and met somebody after about ten minutes sitting. Then, we went from Ellsworth to Bucksport, stalled about twenty minutes and STILL beat the train by ten minutes to the mill. Enough said.....

In the area where MMA comes down through Northern Maine Junction, there are a total of three propane/LPG companies along the rails. One is served(Pine Tree) by MMA in sight of PAR's office building where either one could technically serve it. Maine Energy is on the outskirts of MMA's Lower Yard and is switched several times a week by them. Last comes Suburban Propane, which is on PAR's track near Cold Brook Road and MP 65. You think they are served by PAR or even approached about being serviced? Nope.

Between Waterville and Northern Maine Junction, trains can a lot of the time. That's 45 freakin' miles, and most of it is a whopping 10mph. The rail from NMJ to Mattawamkeag isn't much better(Anybody for some dead wallboard should go in back of EMMC because its still there from that recent derailment). So, like in southern NE, I'm thinking MEC territory could do just fine with someone fresh in the picture and in control of things. Being privately owned, though, PAR can just give the finger for now and say " Half-ass service with a smile and a kick in the sack."

I don't hold crews responsible for this either. They do what they can with the time and allowances they have.

Newpy....
Pretty sure a lot of those mill workers would jump at an 8hr day. There's only a certain group that do the 7-3 or 9-5 bit. The ones I know are normally on 12-hr windows and often do doubles. While it might not be as laborious necessarily, you wouldn't catch me dead working in the same place indoors on a concrete floor all the time like that!