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Rail Industry Survives Recession Better Than Trucking

The trucking industry, on the other hand, faces a more precarious situation, with several major players facing the possibility of bankruptcy.

By John McCloud | Updated on January 28, 2009

NEW YORK CITY-A report from Fitch Ratings indicates US rail freight operators have suffered less than trucking companies from the recent downturn in the logistics and distribution industry. The international ratings agency found that base rates for rail transport have remained relatively firm, while rates for road transport have fallen. The results suggest the values of intermodal and other rail-served industrial properties may hold up better during the recession than those served only by trucks.

According to the report, overall US rail freight shipment volumes, including carloads and intermodal containers/trailers, decreased by 2.2% through November compared with the first 11 months of 2007. The report notes, however, that the decline accelerated in the fourth quarter, with volumes down by 5.6% from the previous year. Fitch attributes the overall decline to pronounced drops in volumes related to the automotive and residential construction industries combined with a falloff in imported consumer goods.

Yet despite weakening volumes, Fitch emphasizes that pricing has held up, with Class I railroads generally reporting double-digit percentage yield increases in Q3. According to the report, the top four US railroads – Union Pacific Corp., Burlington Northern Santa Fe Corp., CSX Corp. and Norfolk Southern Corp.) all produced EBITDA margins in the 28% to 35% range during the 12 months ended Sept. 30.

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