railroad: Decline and Revival

Decline and Revival

After 1920 the railroads failed to recapture their former prosperity largely because of added competition from the automobile, the bus, long-distance trucking, and the airplane. The widespread introduction of diesel power on long-distance passenger train routes and the electrification of heavily traveled urban lines in the 1930s still failed to revive the industry. During World War II, however, when gasoline rationing forced many travelers to abandon their cars, railroads increased their passenger traffic. After the war, railroads tried to maintain their gains through the introduction of air-conditioning and lighter, faster, more streamlined cars, built of steel and aluminum.

In spite of the changes, however, business, especially passenger travel, continued to decline. The industry's financial difficulties peaked with the bankruptcy of the Penn Central RR in 1970, but since then railroads have staged a modest revival. The Railroads Revitalization and Regulatory Reform Act (1976) and the Staggers Act (1980) deregulated the industry by making it easier for railroads to set their own rates, abandon unprofitable lines, and buy other railroads, thus creating economies of scale. Under deregulation, railroads could offer rate discounts to get more customers. Moreover, variable gasoline prices and technological change made the industry more competitive with trucking. Containers that adapt to truck, ship, or train travel, multilevel automobile-rack train cars, computerized tracking systems, and piggyback carriers that allow trains to carry fully loaded trucks also aided the modernization of freight service.

The amount of freight moved by railroads increased by 34% between 1970 and 1992, and rail's share of the freight industry, relative to trucking and other forms of transport, remained stable through the 1990s, reversing decades of decline. In 1996 the 10 major railroad companies had operating revenue of nearly $33 billion. The 1980s and 90s saw the consolidation of the U.S. freight industry, which resulted in four major railroad companies: Burlington Northern Santa Fe, CSX, Union Pacific, and Norfolk Southern, as well as the expansion of the Canadian National into the United States with its purchase of the Illinois Central. As a result, the Surface Transportation Board blocked the proposed merger of the Burlington Northern Santa Fe and Canadian National systems in 2000 and issued (2001) new regulations designed to assure that future mergers would increase competition.

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