Rail transport in the US can be subdivided into passenger-rail and freight shipment segments.  At present, the majority of rail transport in the United States is based in freight train shipments.  Freight railroads are crucial to the nation’s economy – they move 40 percent of manufactured goods and raw supplies. 
Freight Shipment

At the end of 2005 (latest data) 562 common carrier freight railroads were operating in the US.  They are divided into the following categories:

• Class I Railroads – typically operate in many different states and concentrate largely on long-haul, high-density intercity traffic lanes
• Regional Railroads – line haul railroads with at least 350 route-miles and/or revenue of between USD 40 million and Class I threshold.
• Local line haul carriers – operate less than 350 miles and earn less than $40 million USD.
• Switching and Terminal Carriers (S&T) – railroads, regardless of revenue, that primarily provide switching and/or terminal services. 
• In addition, there are two major Canadian freight railroads – Canadian National Railway and Canadian Pacific Railway, both of which have extensive US operations.

 
The US Railroad System
US freight railroads are overwhelmingly privately owned – over 90 percent.  Compared to passenger rail and freight railroads in other countries, they receive very little government funding.  Most of the tracks where US freight railroads operate are owned by the railroads themselves. 

Passenger Rail
Prior to Amtrak’s creation by the Rail Passenger Service Act of 1970, intercity passenger rail service in the United States was provided by the same companies that provided freight service.  When Amtrak was formed, in return for government permission to exit the passenger rail business, freight railroads donated passenger equipment to Amtrak and helped it get started with capital infusion of some $200 million USD.  Today, Amtrak is the only intercity passenger railroad in the continental United States. 
 
 
Key Issues Facing the Industry
A.  Legal issues
 
Freight Rail   
One of the critical policies on transportation in the US concerns shortage of rail capacity that hinders the timely and reliable delivery of coal and ethanol to consumers.  Without adequate rail capacity, the county could be awash in ethanol and coal but unable to use it.   US rail operators concede that they have capacity problems and say they are pouring money and other resources into efforts to resolve them.  The Association of American Railroads notes that from 1996-2005, railroad capital investments were 17% of revenue.  However, rail operators are still asking for federal legislation for tax incentives to enable still more capital investment that would increase their efficiency and capacity. 
 
The "Freight Rail Infrastructure Capacity Expansion Act of 2007” has been introduced to the Senate.  It is intended to address the need for expanding the nation's freight rail capacity by allowing up to a 25 percent tax credit for the expansions. 
 
Passenger Rail
The Passenger Rail Investment Reform Act makes key reforms to transition Amtrak purely into an operating company, creating a federal-state partnership to support passenger rail, introducing market-based competition to the system, and setting up an inter-state compact to maintain the heavily used Northeast Corridor service.

Under the legislation Amtrak will no longer carry the burden of maintaining tracks, stations, and other infrastructure.  Amtrak will have the ability to be an operating company, focused solely on running trains safely and on time.  Regional, state, or local authorities will be empowered to make decisions about service, planning where it is and what best meets local transportation needs.  In addition they will ensure rail operators are providing a reliable, efficient, and cost effective service.
 
B.  Social/Demographic issues

Mode of Transport   
New York City has an extensive subway system, and the passenger rail is a highly used mode of transport.  About two-thirds of all US passenger rail riders, and one in every three US mass transit users, lives in New York City; Chicago has a similar but smaller metro system
 
Security
One of the major concerns in passenger rails is terrorism.  More than 12 million Americans travel on passenger rail lines each weekday, and because of its open nature, rail transit is considered an attractive terrorist target.  While there have been no successful attacks on US rail systems recently, attacks on passenger rail systems around the world—such as the London Underground in 2005—highlight the vulnerability of rail travel and the importance of rail security for passengers.
 
A study by RAND, a nonprofit research organization, found that 80 percent of the worldwide attacks on rail systems were bombings, followed by sabotage (6 percent) and armed attack (6 percent).  Explosives accounted for 77 percent of the weapons used in rail system terrorist incidents, with 8 percent of the incidents involving hoaxes or threats.
 
C.  Technological issues
Emerging technologies in transport are involved in improving communications and safety.  The following are some of these technologies.
 
•    Wireless LAN Hotspots in Trains
A group called Railway Wireless LAN Services projects that over the next five years, 625 million people will be traveling on WiFi-enabled trains worldwide. 

Mobile hotspots represent an opportunity for train operators to generate significant new revenues and to bring their onboard entertainment and business services into the 21st Century.  On-train wireless solutions and service providers are to gain exclusive access to a captive audience of premium wireless internet users. 

•        Mobile Notification of Delays
Transportation strategists at IBM predict that soon, travelers will get notifications of train and bus delays via cell phone.  Using sensors, GPS technology, and in-vehicle communications, an innovative transport system will send notifications of train and bus delays, or if an alternative route will be faster or more convenient.  The same systems will allow schedulers to make real-time route corrections.

•        Ultrasonic Technology for Rail Inspections
In 2006, a new technology using laser beam pulses was developed by researchers at the University of California in San Diego (UCSD) to find defects in steel railroad tracks, including hard-to-find internal cracks that can break under the weight of passing trains.  This is an important breakthrough in railroad transport technology, because some of the worst derailments in the US have occurred on tracks inspected by the old technology, which often missed interior cracks in rails, causing train derailments. 
 
Major Players in the US Rail Industry
According to the Association of American Railroads, railroad companies in the United States are generally separated into three categories based on their annual revenues:

•    Class I for freight railroads with annual operating revenues above $277.7 million (2004 USD)
•    Class II for freight railroads with revenues between $10 million and $50 million in 1978 USD
•    Class III for all other freight railroads

The following are major US Railroads:
 
1.    Amtrak
2.    Burlington Northern Santa Fe (BNSF) Railway
3.    CSX Transportation
4.    Kansas City Southern  Railway
5.    Norfolk Southern
6.    Union Pacific Railroad
 
Trends, Opportunities, and Threats
 
Challenges and Opportunities
 
Recently, some key changes have occurred within the supply chain segments that have impacted the rail road industry, resulting in corporate changes to their service offerings.
 
First, the rail road industry is keeping pace with the strong demand for international intermodal traffic.  However, the anticipated growth in volumes of imports suggest that there will be continuing pressure placed on current rail assets, requiring more efficient processing centers in the near future. 
 
Second, in the past, ocean carriers have offered door-to-door service for international intermodal containers providing importers with a service called Inland Port Intact (IPI rates).  This means that the container moves from the foreign port to the US port, to rail and to an inland destination from the inland intermodal rail terminal to the importers distribution center, all on the same Bill of Lading/Pricing process.  However, the carriers have recently indicated a lack of will to support destinations inland beyond large distribution hubs, or beyond cities where they have significant volumes and can control empty container flow.  This trend is essentially reducing the number of inland ports or gateways where service will be provided by the carrier.  This shift reduces the number of destinations for the rail provider, increases the volume of destination-centric volume, and improves reverse logistics volumes from key gateways.
 
Third, the rail operators are no longer willing to support the traditional “rail-served” buildings that stand alone or are concentrated in specific areas of a community or city.
 
Lastly, the increased volume of imported vehicles will require that the rail carriers reengineer their approach to vehicle management and related assets.  The US is preparing for an onslaught of vehicles from Chinese producers, with some entering the US by way of vehicles assembled in Mexico—thus providing access to that market in parallel.
 
The Logistics Industry Growth
The slowing US economy is derailing the growth of the logistics industry, specifically rail.  But despite falling volumes, most rail providers and market analysts say rail rates are not dropping.

Demand for rail carloads has fallen 2% so far in the 3rd quarter of 2007, following a 3.3% overall decline in the second quarter.  The Association of American Railroads (AAR) reports that combined cumulative rail carload volume for the first 35 weeks of 2007 on 13 reporting US and Canadian railroads was down 3% from last year, while container and trailer traffic was down 1.1%.

Despite the volume decline, analyst group Bear Stearns reports in its Supply Chain Indicator Study that rail rates increased by about 3.9% in the second quarter of 2007.  The group notes that there is sustained momentum in rail rate increases in 2007, driven by expectations for long-term strong rail freight demand and ongoing tight rail capacity. 

Burlington Northern Santa Fe (BNSF) CEO Matt Rose said the railroad's pricing should remain strong into 2008, but price hikes could "decelerate" if freight volumes remained soft.  These bullish predictions are keeping companies like BNSF buoyant – the company announced in September 2007 that Berkshire notified the railroad that it plans to invest nearly $598 million USD in Burlington Northern stock on top of the 52.13 million shares it already owned



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