Regarding "adverse RTC models":
Yesterday (04-07-2009) over on the "Sunset Route Two-Tracking Updates" thread there was a little analysis of the UP's ex-SP route from Colton, Calif. to El Paso, Texas (approx. 792 miles) in terms of the amount of 1 main track (292 miles, 38.3 %) vs. 2 main tracks (470 miles, 61.7 %), based on a list of 18 segments - ranging from 1 to 275 miles in length - which apparently change from 1 to 2 main tracks and back to the other again approx. 15 times over that distance. For the details, see Page 14 of 15 (currently) of that thread, at:
This morning (04-08-2009) I posed the following 2 comments there, as part of the discussion with john edwards:
" Now, onto a more interesting (to me, anyway) aspect of this, as follows:
Suppose I'm a BNSF executive looking at this publicly available data, and thinking about how it affects the competitive positions of BNSF with UP (ex-SP) on that route, roughly from Texas to LA, or that portion of a longer TransCon route. What I realize is that UP has to add about 292 miles of 2nd track to be entirely 2 main tracks, including at the Colorado River crossing. At $1 million per mile - which may be low since most of the easy parts are probably done already - that's a $300+ million capital expenditure for that alone. That's a significiant chunk of UP's annual CapEx budget - they could probably do it in a single year, but only by deferring other more routine items or adding that amount to the budget. More importantly, I think it's hard - for a variety of reasons - for most railroads to gear up to install more than around 100 miles of new track per year. So as a BNSF exec, I'd say that I have a "time window" of 3 to 5 years until this route has enough capacity to be a competitive threat. As a result, during that 3 to 5 year period BNSF would have a decided advantage on this route in capacity and hence in market dominance, and most importantly, in pricing power.
Any comments or further thoughts on this ?"
His - john edwards - response:
"I think there was a Fred Fairley article in Trains a few years ago that discussed this. IIRC the gist was that even if UP was double tracked all the way from LA to Chicago via El Paso there was a couple hundred mile disadvantage to BNSF's transcon. So they could get the slow stuff but not the real fast ($) traffic. But then again if the economy/rail traffic does what the experts say in a few years it may not matter as both systems will be going at full steam. (Hey, its a train forum)"
And my reply:
"It may not matter in terms of capacity - both will be full up, in that scenario - but it will matter in terms of revenues. BNSF could look at UP's route, and estimate UP's cost structure - see the discussion of "adverse RTC model runs" at the several posts dated 04-07-2009 over on the "RTC = "Rail Traffic Controller" Railroad Operations Modeling / Simulation Software" thread - (Page 1 of 1). Then, BNSF could set its rates just a little below UPs likely rates = inherently likely well above BNSF's costs due to that couple hundred mile disadvantage, knowing that UP can't really undercut BNSF too much without UP losing money on the traffic. Thus, BNSF can make a "super-profit" on that traffic (and my IRA account will thank BNSF, too !)."
Anyone here can to join in with any views on this ?
- Paul North.
"This Fascinating Railroad Business" (title of 1943 book by Robert Selph Henry of the AAR)
