Only eleven airlines fly the 285,000 miles of U.S. trunk routes, and seven American steamship lines dock in U.S. ports. By contrast, nearly 100 railroads —the greatest conglomeration anywhere in the world—compete unevenly over 214,000 miles of Class I track, both among themselves and with a growing number of trucks, buses, automobiles and barges. The result is massive inefficiency and chronic headaches for the U.S. railroad industry, which has failed to keep pace with the vast changes in public transportation.
One answer to the railroads' problems is the merger. Since 1959, the Interstate Commerce Commission has authorized 18 railroad mergers involving 34 lines, is now considering another nine requests. Last week, in the biggest and most significant such case to date, two ICC examiners recommended joining the Pennsylvania Railroad, the nation's largest, and the New York Central, its third largest. The recommendation, which came after 14 months of hearings in 18 cities and testimony from 450 witnesses, must be approved by the full eleven-member ICC board; the odds are in favor of approval.
Altered Circumstances. The new road, whose name would be the Pennsylvania New York Central Transportation Co., would be the greatest new corporation on the U.S. business scene since U.S. Steel was formed 64 years ago. Penn-Central would become the 16th largest U.S. corporation and the world's largest transportation company: It would include 19,475 miles of road stretching from Virginia to Canada and west to St. Louis; initially, at least, it would also have 109,000 employees and 182 subsidiaries that do everything from mining coal to making freight cars. Yet even the Justice Department, which alone has opposed the merger for the usual antitrust reasons, is prepared to accede to it now. One reason: after deciding to make his run for the U.S. Senate, former Attorney General Robert F. Kennedy took one look at the railroad problem in New York, left behind at Justice a memo urging approval of the merger because "conditions have changed dramatically."
The plain fact is that the 13 struggling Eastern railroads can no longer survive without consolidation. Recognizing this, the ICC has already allowed the merger of the Chesapeake & Ohio with the Baltimore & Ohio, the Norfolk & Western with the Wabash and Nickel Plate. Even the bankrupt New Haven has found a partner. Two days after last week's Penn-Central finding, in accordance with the examiners' recommendation, the two roads agreed to take over the New Haven's red-ink freight business for $140 million in stock, bonds and cash. They want no part of its commuter business, which lost $11.5 million last year on 25,000 daily passengers to New York and Boston. In approving the proposed sale, the ICC examiners hinted that New York, Connecticut, Rhode Island and Massachusetts should find some way to subsidize commuter service.