Railroad Proud: To Merge, or Not to Merge?
A transcontinental rail merger may promise efficiency — but if it comes at the expense of competition, service quality, and investment in infrastructure, the public, and the economy will ultimately bear the cost.
The real question is not can we create a coast-to-coast railroad, it’s: should we?
Creation of a Transcontinental Single Line
There’s a lot of excitement—and concern—about the prospect of combining dominant western railroads with dominant eastern railroads to form true transcontinental lines.
Specifically, the market is studying the benefits and risks of two separate Class I railroad mergers: UP and Norfolk Southern, and potentially BNSF and CSTX. But let’s focus on the keyword here: dominant.
If four major U.S. railroads are already flexing pricing power to the point of widespread shipper complaints, what happens when two transcontinental giants merge?
The answer: less competition and increased pricing pressure on shippers.
Today, with two Class I railroads in the east and two in the west, shippers have four possible interline connections. A merger reduces those options by half for those supply chains with dual access shippers at origin and destination. In those cases where either the origin or destination point is single line access, there will be virtually no competition as the single line railroad will make rule (11) prices prohibitive in comparison to the single line price option.
Even with strong premerger conditions established by the Surface Transportation Board (STB), it is unlikely the existing competitive environment will survive.
Benefits of Seamless Coast-to-Coast Rail Service
Proponents say East/West railroad mergers would create a “seamless” coast-to-coast network, improving speed, reliability, and cost efficiency by removing handoffs. And yes, analysts estimate billions in annual savings through optimized routes and infrastructure rationalization.
But will these savings reach the customer?
Unlikely. With reduced competition, those savings are more likely to boost shareholder returns than lower freight rates. History supports this prediction.
Operational Efficiency vs. Real-world Bottlenecks
Some argue that rail mergers can ease freight chokepoints like Chicago. But that only happens if traffic is reduced through the bottleneck (routing around), or the merged carrier invests in expanding capacity—unlikely as railroads cut costs.
In practice, these mega-carriers will likely reroute traffic around bottlenecks, increasing mileage and reporting “growth” in gross ton-miles (GTMs). Ultimately, the longer routes mean higher costs for private fleet owners, higher fuel surcharges, and longer cycles—not better service.
Rail vs. Truck: The Missed Opportunity
Single-line service should make rail more competitive with long-haul trucks. Historically, rail mergers haven’t captured truck market share.
Why? Trucks move point-to-point with minimal circuity (~5%) and high predictability. Railroads, by contrast, often choose longer, circuitous routes to avoid congested hubs or investments in low-density lines—adding cost to shippers, fleet delays, and inefficiency.
Environmental and Infrastructure Concerns
Mergers are often sold as green, infrastructure-friendly solutions. But that’s only true if railroads take the most direct, fuel-efficient routes, which they often don’t.
Longer routes erode environmental benefits. Meanwhile, reduced investment in rail infrastructure pushes more freight onto taxpayer-funded highways. That is not sustainability; it is cost shifting.
Wall Street’s View: Short-term Wins, Long-term Costs
Investors love mergers. Fewer employees, fewer trains on “unprofitable” lines, and more volume on high-density corridors = lower costs and improved short-term ROI.
The longer-term impact of mergers is proven: reduced service coverage, declining network utility, and flat to zero growth. While various operating productivity ratios may look good in the short term, the feasibility for long-term expansion erodes.
Integration Risk: More Than Just Tracks and Trains
Those who’ve lived through past mergers know that merging IT systems is harder than merging tracks. Without unified data and freight visibility, even AI can’t fix the chaos.
Expect 18-24 months of operational disruption. But the ripple effects—longer fleet cycles, reduced infrastructure investment, inflationary rates—could last much longer.
Frequently Asked Questions (FAQs) About Railroad Mergers
Q: What happens to shipping competition when railroads merge?
A: Railroad mergers typically reduce competition by 50% or more. When four Class I railroads become two transcontinental systems, shippers lose competitive options and face increased pricing power from the remaining carriers.
Q: Do railroad mergers lower shipping costs for customers?
A: No. While mergers create billions in cost savings for railroads, these savings rarely translate into lower shipping rates. Instead, reduced competition allows railroads to maintain and increase prices while improving profit margins.
Q: How do railroad mergers affect delivery times?
A: Mergers often increase delivery times despite promises of efficiency. Railroads route around bottlenecks to avoid capital investment, creating longer, more circuitous routes that extend freight car turnaround times.
Q: What are the environmental impacts of railroad consolidation?
A: The environmental benefits depend on route efficiency. If merged railroads take longer routes to avoid infrastructure investment, greenhouse gas emissions may increase rather than decrease.
Q: How long does railroad merger integration take?
A: Technology-driven disruptions typically resolve within 18-24 months, but impacts on shipping rates, delivery times, and infrastructure investment persist much longer.
About the Author: Karen Burchfield
Karen Burchfield is a veteran railroad industry consultant at Praxichain, bringing decades of operational experience and strategic insight to transportation analysis. With deep expertise in railroad operations, merger integration, and supply chain optimization, Karen provides a critical perspective on how industry consolidation impacts shippers, investors, and the broader freight transportation ecosystem. Her analysis combines practical operational knowledge with strategic business acumen, helping clients navigate the complex landscape of railroad competition and pricing dynamics.
How PraxiChain Helps Shippers Navigate Railroad Merger Realities
With decades of operational experience and strategic insight into railroad merger dynamics, PraxiChain provides the practical expertise shippers need to proactively address the challenges of reduced competition, longer routes, and operational disruption that come with transcontinental consolidation.
- Competitive Analysis & Strategy Development – Evaluate remaining carrier options and develop negotiation strategies before reduced competition limits your leverage
- Route Optimization & Cost Modeling – Analyze potential service changes, longer routes, and pricing impacts to build realistic budgets and contingency plans
- Contract Risk Assessment – Review existing agreements and identify vulnerabilities to merger-related service disruptions or rate increases
- Integration Timeline Planning – Prepare for 18-24 months of operational disruption with backup logistics solutions and extended fleet cycle planning
- Multi-Modal Strategy Development – Assess truck-rail alternatives and intermodal options to maintain competitive transportation choices post-merger
For assistance, contact us.
Related Analysis
For additional insights on railroad consolidation trends, read our comprehensive analysis: The Union Pacific-Norfolk Southern Merger: A New Generation’s Take on Railroad Consolidation.
