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Re: UP announces Phoenix terminal. The under 500 miles question. No I think that UP will not suddenly become a charitable enterprise....
Author: BOB2
Date: 12-01-2023 - 10:57
John Wrote:
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> Is UP rethinking its business that includes
> hauling intermodal less the 500 miles at I assume
> a lower profit margin.If so maybe some shorter
> faster trains and even some return to carload
> traffic is on the table.You would think that less
> profitable hauls are far better than no revenue on
> its huge mostly under used network.
My answere would be NO... Pigs will more likely learn to fly before UP willingly does that....
I see no evidence that UP has or is thinking about to become a price equals marginal cost competitively priced "charitable" or "socialist" enterprise operating simply for the benefit of their shippers and the consuming public. I think that UP will likely continue to be a profit mazximizing oligopolistic/quasi monopolistic corporation which will not do any such thing out of the "goodness" or UP's "heart".
The mathematics of a profitable haul do not change with this wistful idealic scenario.
At one time there was more LA Phx direct through intermodal out of the Shops under regulation than there is today. At that time the direct westward connection to Phoenix was still available, reducing the transit times I outlined above, and making it more competitive than a secondary back haul to Phoenix. But, that improved direct rail travel time to PHX does nothing for the "break bulk and consolidation" "time" problem with assembling and loading sufficient containers and assembling even a "short" (but sitll cost effective and profitable) trainload volume.
But maybe, if Amtrak and AZ were to pay to restore the Welton line, then UP's idealic press release might actually generate some slight to marginal levels of additional potential lower time value traffic from the LA to PHX market. But, until that happens, or again, "when pigs fly", which, at the current pace for restoring Amtrak to PHX, is more likely to happen first, I doubt there will be any significant shift of container/truck movements from POLB/POLA to the Phoenix market with the likely transit times, even if PHX has an intermodal facility that could theoretically handle it. It's the time and time costs which will determine that market choice for shippers.
There are cases and business models that could offer more competitive outcomes, with a closer approximation of the "price equals marginal cost" true competitive free open market "ideal". These could be imposed by mandating competitive entry to monopoly rail markets like Phoenix, or into monopoly corridors, like UP's dominance of the central corrider from CA to the east, or UP's complete monopoly on all freight services offered on CA's Coast Line. There could also be requirement to regulate rates to more closely approximate a true competitive free market price.
All of which are extremely unlikely given the utterly gutless lickspittle regulatory history of the Surface Transportation Board since it's creation. As I noted above, this kind of regulatory backbone from the STB is also something I expect to see coming sometime very soon, right after pig's learn how to fly....
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> Is UP rethinking its business that includes
> hauling intermodal less the 500 miles at I assume
> a lower profit margin.If so maybe some shorter
> faster trains and even some return to carload
> traffic is on the table.You would think that less
> profitable hauls are far better than no revenue on
> its huge mostly under used network.
My answere would be NO... Pigs will more likely learn to fly before UP willingly does that....
I see no evidence that UP has or is thinking about to become a price equals marginal cost competitively priced "charitable" or "socialist" enterprise operating simply for the benefit of their shippers and the consuming public. I think that UP will likely continue to be a profit mazximizing oligopolistic/quasi monopolistic corporation which will not do any such thing out of the "goodness" or UP's "heart".
The mathematics of a profitable haul do not change with this wistful idealic scenario.
At one time there was more LA Phx direct through intermodal out of the Shops under regulation than there is today. At that time the direct westward connection to Phoenix was still available, reducing the transit times I outlined above, and making it more competitive than a secondary back haul to Phoenix. But, that improved direct rail travel time to PHX does nothing for the "break bulk and consolidation" "time" problem with assembling and loading sufficient containers and assembling even a "short" (but sitll cost effective and profitable) trainload volume.
But maybe, if Amtrak and AZ were to pay to restore the Welton line, then UP's idealic press release might actually generate some slight to marginal levels of additional potential lower time value traffic from the LA to PHX market. But, until that happens, or again, "when pigs fly", which, at the current pace for restoring Amtrak to PHX, is more likely to happen first, I doubt there will be any significant shift of container/truck movements from POLB/POLA to the Phoenix market with the likely transit times, even if PHX has an intermodal facility that could theoretically handle it. It's the time and time costs which will determine that market choice for shippers.
There are cases and business models that could offer more competitive outcomes, with a closer approximation of the "price equals marginal cost" true competitive free open market "ideal". These could be imposed by mandating competitive entry to monopoly rail markets like Phoenix, or into monopoly corridors, like UP's dominance of the central corrider from CA to the east, or UP's complete monopoly on all freight services offered on CA's Coast Line. There could also be requirement to regulate rates to more closely approximate a true competitive free market price.
All of which are extremely unlikely given the utterly gutless lickspittle regulatory history of the Surface Transportation Board since it's creation. As I noted above, this kind of regulatory backbone from the STB is also something I expect to see coming sometime very soon, right after pig's learn how to fly....
