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Rail Report - Spring 2008

Freight Railroads Reach Accord With UTU
The nations major freight railroads and the United Transportation Union (UTU) reached tentative agreement Wednesday on a new contract covering wages, benefits and other issues. With the ratification of this agreement by the nations largest rail union, the industry will have successfully concluded negotiations with unions representing 95 percent of unionized freight rail workers.

The agreement, which now goes before UTU members for ratification, includes a 17 percent wage increase retroactive to Jan. 1, 2005 through Dec. 31, 2009. UTU, which represents more than 44,000 members or about a third of the railroads unionized workforce, began negotiating with the railroads shortly after the current round of bargaining began in November 2004.

Were pleased to have reached a mutually beneficial conclusion to our negotiations with the UTU. While the bargaining presented many challenges, our ability to successfully reach an agreement once again demonstrates that voluntary bargaining continues to work well in the rail industry, said Robert F. Allen, chairman of the National Carriers Conference Committee, which represents the railroads in national (multi-employer) bargaining with the 13 major rail unions.

More than 30 railroads, including BNSF, CSX, Kansas City Southern, Norfolk Southern and Union Pacific, participated in the bargaining.

Norfolk Southern's Tobias named 2008 Railroader of the Year
Railway Age has named Stephen C. Tobias, Vice Chairman and Chief Operating Officer of Norfolk Southern Corp., the magazine’s 2008 Railroader of the Year.

“Norfolk Southern is arguably the best-run Class I railroad in North America, largely due to the leadership of Steve Tobias,” said Railway Age Editor William C. Vantuono. “Operationally, these are challenging times for the railroad industry, with record traffic volumes and tight capacity. Norfolk Southern has consistently set benchmarks in operational excellence and safety. Tobias and his operating department have, year after year, proven that NS deserves to call itself ‘The Thoroughbred of Transportation.’”

“Our employees, customers, suppliers and communities all can be proud of this recognition,” Tobias said. “Their effort and support are what make the Thoroughbred go.”

Tobias is the 45th recipient of Railway Age’s Railroader of the Year Award, which was started by Modern Railroads magazine in 1964 as the “Man of the Year” award. Railway Age acquired Modern Railroads in 1991 and has presented the award annually since then. Tobias will receive the award, one of the most prestigious in the railroad industry, on March 18, 2008, at Chicago’s Union League Club.

Major railways post record financials
BNSF achieved an operating ratio of 76.9% in the fourth quarter of 2007 and earned record freight revenues of $15.3 billion in 2007.

CSX's annual revenues broke the $10 billion mark in 2007 with $2.2 billion from surface transportation, also a new record. The company posted an operating ratio in the mid-70s, the best in a decade.

Kansas City Southern report record annual revenues of $1.74 billion (a 5.0% increase), record operating income of $362.4 million (a 19.1% increase), operating ratio of 79.2% (a 2.5% decrease) and a dilute earnings per share of $1.57, a 45% improvement.

Norfolk Southern issued a statement describing the following 2007 achievements:
Railway operating revenues increased $25 million to $9.4 billion.
Income from railway operations rose $28 million to $2.6 billion.
Diluted earnings per share increased 3 percent to $3.68.

Union Pacific also posted increases in all important financial measures. Operating revenue totaled $16.3 billion (up 5%), operating income grew 17 percent to $3.4 billion, net income increased 16 percent to $1.86 billion and return on invested capital (ROIC) grew to 8.7 percent.

Canadian railways also did well. CN reported C$833 million of net income and an operating ration of 62.1%, while Canadian Pacific increased their net income by 19% to C$946 million with a 74.3 operating ratio.

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