U.S. class I railroad carload freight tonnage, revenues, out-of-pocket costs (ICC formula), and ratio of revenues to out-of-pocket costs: also excess or deficiency of revenues versus 140 percent of out-of-pocket costs, and rate of return, years 1939 and 1947 to 1960, inclusive Source: ICC "Distribution of the Rail Revenue Contribution by Commodity Groups." Rate of return, U.S. class I railroads, by regions, 1955-60, inclusive, with percentage changes since 1955 1 Deficiency. Percentage increases in rail freight rates authorized by the Interstate Commerce Commission, 1946-61, inclusive, compared with actual average carload rates Sources: Percentage increases authorized-ICC, "Transport Economics," December 1961; average carload rates-ICC, "Carload Waybill Studies." SUMMARY OF RECENT TRENDS OF RAILROAD CARLOAD FREIGHT COSTS, RATES, REVENUES, AND RATE OF RETURN From 1955 to 1960 costs of carload transportation by railroad went up 22 percent per ton and 15 percent per ton-mile. (Costs probably increased further in 1961, but 1961 figures have not yet been released by the Interstate Commerce Commission): In the same period (1955 to 1960) the Interstate Commerce Commission granted additional general increases in freight rates of about 20 percent, which were made to meet increased costs. But the railroads applied the full authorized increases only to traffic they considered noncompetitive, and made so many rate reductions on competitive traffic that the overall increase in carload rates, 1955 to 1960, was only 9 percent per ton, and 2 percent per ton-mile. (There was an actual reduction from 1959 to 1960 of 5 percent in average rate per ton, and 3 percent per ton-mile: From 1955 to 1960, carload ton-miles decreased 8 percent, and carload revenues decreased 6 percent, while out-of-pocket costs increased 6.5 percent, and the margin of profit over out-of-pocket cost decreased 33 percent: The railroads' margin of profit above out-of-pocket cost (ICC formula) on carload freight must be at least 40 percent to yield a 4-percent overall return on investment. In 1955 the margin was 46 percent; by 1960 it had fallen to 29 percent. The ratio carload revenue to out-of-pocket cost in 1955 was 146; in 1960 it was 129. The net result of increased costs, declining traffic, and competitive rate cutting, nullifying the rate increases authorized by the Interstate Commerce Commission, was a decline from 1955 to 1960 of the rate of return, for the U.S. railroads as a whole of 50 percent; in the eastern district, 81 percent; southern region, 46 percent; and western district, 38 percent. (In 1961 the results were still worse: According to the Association of American Railroads, the overall return in 1961 fell to 1.97 percent, and the eastern district railroads incurred a deficit; official Interstate Commerce Commission figures are not yet available.) |