Visionary Plans Unveiled for America’s First Transcontinental Freight Railroad After Major Megamerger | CNN Business

Union Pacific and Norfolk Southern, two major U.S. railroads, recently revealed plans to merge in a massive $72 billion deal, potentially creating the first transcontinental freight railroad in America.

This merger would be the largest ever in the railroad sector, which has seen significant consolidation over the past few decades. Regulatory approval is still required, and this merger will be a key test for current antitrust regulations. Historically, the Trump administration’s regulators have been more lenient in allowing some mergers compared to the Biden administration, which tends to scrutinize such deals more closely.

Freight railroads play a vital role in the U.S. economy, moving about 30% of the nation’s freight by weight, per the Bureau of Transportation Statistics. They transport everything from cars and groceries to raw materials needed for manufacturing.

“Railroads have built America since the Industrial Revolution, and this merger is a step forward for the industry,” said Union Pacific CEO Jim Vena. With Union Pacific focusing on the western U.S. and Norfolk Southern on the east, this merger could significantly impact how goods move coast-to-coast.

Recent studies show that rail customers have been expressing concerns about service reliability, especially after previous mergers. Many fear service quality might worsen, leading to supply chain issues. Ann Warner, a logistics consultant, warns that past mergers have often resulted in service declines and higher prices for shippers.

Peter Swan, a logistics expert from Penn State Harrisburg, agrees, noting that service has typically deteriorated after rail mergers. Yet, the railroads assert that the merger will enhance services for their customers. They envision streamlined transport of various goods, claiming it will boost efficiency.

However, it could take a long time for the deal to finalize. Not only must it clear antitrust regulators, but it also needs approval from the Surface Transportation Board. This panel recently endorsed the acquisition of Kansas City Southern by Canadian Pacific, marking the first major railroad merger in over 20 years. They granted approval because the two companies had minimal overlapping routes, a different situation compared to Union Pacific and Norfolk Southern.

Transcontinental rail service began in 1869 with the famous “Golden Spike.” However, using multiple railroads for cross-country shipments has been a consistent challenge. Most rail mergers focus on creating density in specific regions, but an end-to-end merger like this one is rare.

Rail experts suggest that while efficiency might improve, cargo will still need to be transferred to different trains for delivery, as few shipments travel entirely across the country. “There aren’t many containers that move from coast to coast in one go,” Swan explains.

In summary, while this merger could transform freight transportation in the U.S., uncertainty remains over its potential impact on service quality and efficiency.

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