Red Signal

When U.S. railroads lost $560 million on their passenger business last year, it was obvious to railmen that something was wrong--and that something had to be done. The Eastern railroads, which had already had fare increases of 28% in about three years, thought that the answer lay in still higher fares. They asked the Interstate Commerce Commission for a 12 1/2% boost. Last week they got it. But the increase apparently did not solve everything; the news that it had been granted merely started everyone asking again: "What's wrong with the railroads?"

The new fares, effective at month's end, will make many rail fares double competing bus fares. For the first time, railroad coach fares in many cases will be more than airline fares, e.g., New York-Cleveland: $19.33 by rail, $17.80 by air.

Feather Beds. The ICC's 6-to-4 decision split the commission itself wide open. Though ex-Chairman J. Haden Alldredge voted for the raise, he warned that the railroads "certainly may be pricing themselves out of the market." He thought that the roads would be smarter to cut their fares and go after more business, and cited the example of the Central of Georgia, the Missouri-Kansas-Texas, and the Southern Pacific, which had boosted traffic by doing just that.

The Eastern roads had persuasive arguments to prove that their plight was not their fault. With investors shying away from railroads the carriers had trouble financing major improvements, except what could be done out of earnings. Furthermore, the ironclad rules of the railway brotherhoods kept railroad costs high by featherbedding. Worse still, the railroads had suffered from too much regulation, notably, out-of-date rules intended to keep them from becoming transportation monopolies--something which the buses and airlines now prevent, anyway.

The railroads, which are still making money on freight, know how to make money on passengers too, and have proved it on their main-line trains. They know that it is the uneconomical branch lines which eat up the profits. Yet state regulatory bodies, often for sentimental reasons, balk at letting them be closed down. (When the Chesapeake & Ohio sought to eliminate one, oldtimers who had not ridden it since World War I protested that they would miss the whistle.)

Deadheads. On the other hand, the railroads were not doing so badly on passengers as the figures seemed to show. Of 1948's loss on passenger business, fully two-thirds--$373 million--was incurred by hauling mail, express and baggage cars, rather than passengers. Many railroaders think that baggage cars--holdovers from the days when most travelers carried trunks--should be abolished, and mail pay increased. The railroads got only $26 million last year for carrying 95% of U.S. non-local first-class mail, while the airlines got $46 million for the remaining 5%.

One of the biggest gripes of U.S. railroaders is that their barge-line competitors use the federal-maintained inland waterways, and that trucks and buses use highways also built with tax dollars. "We don't want subsidies," said William T. Faricy, president of the Association of American Railroads last week, "but if the Government persists in subsidizing our competitors, we may have to accept them." If that threatened socialization, he added: "You could also have socialization by simply running out of money."

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