This is y2k relevant because it illustrates the widespread impacts of the sudden fuel crisis that has erupted since CDC.

Railroads raising freight prices for some customers, citing higher costs for fuel, labor

Source: Associated Press Publication date: Feb 09, 2000

DALLAS (AP) -- Encouraged by the strong economy and facing higher fuel and labor costs, the nation's freight railroads are raising certain rates more aggressively than in recent years.

Fort Worth, Texas-based [Burlington Northern Santa Fe Corp.] is notifying shippers it will raise rates for some customers as much as 4 percent in the railroad's first broad price hike since 1995. [Norfolk Southern Corp.], based in Norfolk, Va., recently announced an identical increase for customers shipping scrap metal, paper, lumber and container freight.

Top officials of Omaha, Neb.-based [Union Pacific Corp.] and Richmond, Va.-based [CSX Corp.] have also signaled they intend to raise rates.

The railroads blame higher labor costs and the rising price of diesel, which has doubled from a year ago. Some analysts, who have been looking for signs of higher prices to boost profits, are underwhelmed by the announcements, however.

"It's selective and I'd say it affects less than a quarter of the business," said James Valentine, an analyst with Morgan Stanley Dean Witter.

Valentine's skepticism is due to the fact that the increase won't apply to the roughly 60 percent of rail customers who have long-term contracts with the railroads. Other customers, such as farmers and automakers, can't afford to pay more or will shift to truck shipments, he said.

Adam Hollingsworth, a CSX spokesman, said his company's increases -- he declined to say how much CSX will raise rates -- are also due to stronger market conditions, including a shortage of rail capacity, price increases averaging about 5 percent imposed by trucking companies, and the shortage of truck drivers, which limits trucking capacity.

Burlington Northern spokesman Jim Sabourin said the increases, scheduled to be completed during the first three months of the year, are the first since Burlington Northern merged with Santa Fe Pacific in 1995.

Jill Evans, an analyst with J.P. Morgan, said rather than improving service, railroads in recent years resorted almost entirely to cost-cutting to bolster their bottom lines.

"Rail service has improved, they have a very good on-time record in intermodal," she said, referring to containers that can be loaded from trains on to trucks. "They've also improved in shipping commodities, such as forestry products, because of more-direct routes as a result of mergers."

Railroads' on-time record, however, still lags far behind truckers. Analysts say Burlington Northern's on-time record is around 90 percent, but the industry as a whole rates about 75 percent, while the trucking industry is well above 90 percent. Valentine called timeliness "the Achilles heel" for raising railroads' profitability.

Analysts said they doubted the rail freight price increases would affect consumers.

"It's relatively small in the scheme of the economy," Evans said.

Publication date: Feb 09, 2000

) 2000, NewsReal, Inc.

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