US railways focus too much on pleasing shareholders at the expense of shippers and the general public, said US Surface Transportation Board (STB) chairman Marty Oberman, reports IHS Media.
'Railroad representatives regularly tell me the Staggers Act means the STB should stay out of it,' Mr Oberman said, referring to the 1980 law that deregulated freight railways.
'But the statute also mandates that the STB consider the best interests of the shippers, workforce, and most importantly the public, as well as railroad owners,' he said.
Speaking to the North American Rail Shippers conference, Mr Oberman warned that unacceptable behavior may prompt action from regulators if it does not change.
'The STB would prefer to regulate as little as necessary,' he said. 'The best way for that to be accomplished is for the railroads to deemphasise their focus on the pursuit of ever lower operating ratios and instead work with shippers, unions, and the STB to provide the service they are capable of at a reasonable price.'
Operating ratios (OR), expenses as a percentage of revenue, are a metric that investors use to evaluate the Class I railways, regularly highlighted in earnings reports, and shareholders reward lower ratios because it means more revenue flows through net profits.
'To reach low ORs, railroads have cut their workforce by 25 per cent,' Mr Oberman said. 'Operating the railroads with that many fewer employees makes it difficult to avoid cuts in service, provide more reliable service, and reduce poor on-time performance that does not compete well with truck.'
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'Railroad representatives regularly tell me the Staggers Act means the STB should stay out of it,' Mr Oberman said, referring to the 1980 law that deregulated freight railways.
'But the statute also mandates that the STB consider the best interests of the shippers, workforce, and most importantly the public, as well as railroad owners,' he said.
Speaking to the North American Rail Shippers conference, Mr Oberman warned that unacceptable behavior may prompt action from regulators if it does not change.
'The STB would prefer to regulate as little as necessary,' he said. 'The best way for that to be accomplished is for the railroads to deemphasise their focus on the pursuit of ever lower operating ratios and instead work with shippers, unions, and the STB to provide the service they are capable of at a reasonable price.'
Operating ratios (OR), expenses as a percentage of revenue, are a metric that investors use to evaluate the Class I railways, regularly highlighted in earnings reports, and shareholders reward lower ratios because it means more revenue flows through net profits.
'To reach low ORs, railroads have cut their workforce by 25 per cent,' Mr Oberman said. 'Operating the railroads with that many fewer employees makes it difficult to avoid cuts in service, provide more reliable service, and reduce poor on-time performance that does not compete well with truck.'
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