To trim its losses, the New York Central Railroad announced that it will pull out of the Railway Express Agency, Inc. Hauling express parcels on its passenger trains, the Central said, accounts for $11 million of the $52 million deficit billed for passenger trains. Said the Central's president, Alfred E. Permian: "The old method of collecting parcels at gathering points and then loading them onto passenger cars is obsolete."
Over the past ten years, air freight, parcel post, bus and truck lines have cut into the Railway Express business. (To pick up 100 Ibs. of furniture in New York City and deliver it in Chicago via Railway Express costs $12.26 v. $4.60 on a private trucking line.) The agency's traffic declined from 193.1 million shipments in 1947 to 73.5 million in 1957, and the downtrend continued in 1958. Revenues dwindled from $428 million in 1947 to $358 million in 1957 despite eleven rate increases.
Fresh Approach. For Railway Express, a nonprofit corporation which deducts its operating costs from its revenues, passes the remainder on to 68 owner railroads, the Central's decision, effective in a year, was a critical blow, since it owns 14% of the agency's stock. Second largest stockholder (12.6%) is the Pennsylvania Railroad, which is also considering pulling out. If the Pennsy decides to do so, Western railroad officials concede that they will not be able to support the agency alone, will have to abandon it.
The Central's Perlman has his mind set on "a fresh approach." Possible solutions: turn the express business over to private freight forwarders, who could use piggyback service coordinating rail and road traffic, or let the Government take over express as parcel post.
Mild Pessimism. Final solution of the Railway Express problem may well depend on the outcome of the year-old proposed merger between the Central and the Pennsy, the nation's two largest railroads. (Together they account for nearly 15% of the railroad business; consolidation would bring them estimated savings of $200 million a year.) The Pennsy's operations and equipment studies are completed. Last week the financial vice president, David C. Bevan, said that financial studies for the merger are in their final stages and are expected to be presented to the Pennsy's board at its Jan. 28 meeting.
Moneyman Bevan also reported that Pennsy's earnings were looking up. The road was in the black for November, with earnings wiping out the ten-month deficit of $2,872,716. He expects that the Pennsy will be in the black for the year. For 1959, Bevan was only mildly pessimistic: he warned that unless volume exceeds present expectations, "the earnings outlook is not particularly good."
Other railroads were also busy trying to trim losses:
¶ The Chicago, Rock Island & Pacific Railroad will cut sleeping-and parlor-car round-trip fares 28% for nine months to see whether lower fares will attract new riders. Sample: Chicago-to-Denver round-trip fare, including Pullman Roomette, will be $84 v. $123 for first-class air travel.
¶ The Delaware, Lackawanna & Western Railroad asked the New Jersey Public Utilities Commission for permission to drop 40 suburban passenger trains, citing lower freight revenues which fail to support suburban passenger losses.