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August 22, 2011 6:44 pm
Every few miles along the Iowa Interstate Railroad’s route from Council Bluffs, Iowa towards Chicago, two things mark the start of another town. On the track’s northern side, there will be a grain elevator. On its south is generally an unused red-brick passenger station with the words “Rock Island” on the gable end.
The stations are a reminder of the present Iowa Interstate’s roots in one of the darkest chapters of US railroad history – the collapse into bankruptcy and eventual closure of the Chicago, Rock Island and Pacific Railroad between 1975 and 1980, amid the railroad system’s then heavy-handed regulation.
The current rude health of the route – equipped with the latest General Electric diesel engines, often hauling trains 120 cars long – testifies to the often unheralded success of the US’s hundreds of regional and shortline railroads since the system’s 1980 deregulation. The small, local operations – often spun out of Class Is (a railroad with more than $380m in annual revenue) in the years after deregulation – tend to be far better than the large railroads at understanding small, local customers’ needs and meeting them cost-effectively.
According to John Giles, chief executive of Rail America, a listed company operating 43 shortlines across the US, these entities work well when they fit in with the unique needs of the local area’s economy and co-operate with the area’s Class Is to generate new traffic.
“We put our heads together and figure out how we can collectively compete,” Mr Giles says.
In the Iowa Interstate’s case, Henry Posner, a railway entrepreneur, bought the 592-mile route from the Rock Island’s liquidator in 1984, with backing from local business and government interests.
The railroad has benefited in recent years not only from strong demand for the region’s grain but also booming demand for ethanol produced in plants along the line. The company continues to pursue a policy of “industrial development”, persuading factories to set up next to the line, Mr Posner says.
Many customers prefer setting up next to a relatively minor railroad, Mr Posner adds, because they can retain a choice about which connecting Class I will handle their long-distance movements.
“If a customer on our railroad were shipping to some place in the west, it might well be a destination served by both the Union Pacific and BNSF,” Mr Posner says. “So we would have the effect of creating competition for that customer.”
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