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In the first six months of 1937 net earnings reached $528,000,000 against $451,000,000 last year. But since March the increase in earnings has been slowing down. Spurting sharply in January, February and March, revenues then slumped under the impact of floods and strikes. In June net earnings actually dropped below those of June 1936. Freight loadings in the first quarter were up 15.5%, in the second quarter 12.9%, in July 7.2% and in the first two weeks of August only 5.3%.*
Meanwhile railroad operation costs have jumped on four fronts this year: 1) Cost of materials and supplies, particularly coal, are up about 12%, or $125,000,000. 2) Taxes, including those under the Social Security Act and pension laws, have risen $70,000,000. 3) New State laws, such as those limiting train length and increasing train crews will cost $12,000,000. 4) A 5¢-an-hour pay raise granted Aug. 1 to 750,000 non-train railroad workers (clerks, signalmen, etc.) will cost $100,000,000. The five big brotherhoods of railway trainmen for a month have threatened to strike unless given a 20% raise. This would add $116,000,000 a year and the roads have refused point-blank to grant the full amount on the grounds that these workers are already very well paid.† A raise similar to that given to all other employes would cost some $30,000,000 yearly.
If all these increases went into effect, they would cost the roads $639,000,000, or 95% of last year's net operating income. One-third of U. S. railroads are already bankrupt and others hard-pressed to meet their fixed charges alone. Said Railway Age: "Unless the series of developments now rapidly tending to bankrupt virtually the entire railway system of the U. S. is immediately arrested, the American people may suddenly awaken to a realization that government ownership and operation of railways have become almost or actually unavoidable."
Last week government ownership of railways finally went completely into effect in France when the Popular Front Government took over control of six private roads, merged them with two other lines the nation already operated. Since 1931 France has underwritten some $1,050,000,000 annually in losses for these six private systems. In the future the government will hold 51% of the new capitalization, including a $1,046,000,000 assessment for the private lines, and private shareholders will have virtually no say in their operation.
*Aggregate car loadings in the first six months of 1937 were 18,900,000, well above 1936's 16,400,000, but still far below the 25,500,000 of January—June 1929. † In England, railroad workers lately negotiated a raise making their minimum pay $10 a week.