(The following story appeared on The Journal of Commerce website on April 3, 2009.)
WASHINGTON, D.C. Union Pacific Railroad plans to hold firm on pricing despite declining demand for rail freight transport, an investment analyst said in a report April 3 after meetings with UP management.
Morgan Stanley transportation analyst William Greene also said in a research report that UP, the countrys largest railroad, will seek to raise rates as its large share of shipper contracts come up for renewal this year.
Greene, who issued the report after meetings recently with management of Omaha, Neb.-based Union Pacific, said the railroad believes it can maintain annual rate increases of 5 to 6 percent over the long term.
North Americas large railroads generally have maintained rates, and their profits, in the face of an economic downturn that has pressured carriers in other transportation modes and cut sharply into shipping demand.
UP expanded its profit 31.4 percent last year and improved its yield, based on revenue per rail unit, 16.2 percent. About 18 percent of UPs contracts are "legacy contracts" that have not taken on new prices in line with the changed economic environment, and Greene estimated average contracts now may be priced almost 50 percent below general rail rates.
Greene said UP executives are focused on service improvements that would help bring rates in the new contracts sharply higher, even amid declining volume.
