(The Association of American Railroads issued the following news release on March 16.)
WASHINGTON — U.S. Class I freight railroads will spend more than $8 billion in 2006 laying new track, buying new equipment and improving infrastructure, the Association of America Railroads (AAR) announced today.
The industry’s capital expenditures budget is a 21% increase from last year and shatters the previous record for infrastructure spending in one year.
“These massive investments by the Class I railroads will translate into jobs, increased productivity for the railroads, additional capacity and better service for our customers,” said Edward Hamberger, president and CEO of the AAR. Hamberger said that trains carry far more than most people realize, including everything from computers to cars to coal to Christmas trees.
Freight railroads are at or near the top of all U.S. industries in terms of required capital intensity. Between 1995 and 2004, railroads put an average of 17.8 percent of their revenues into capital expenditures. This compares with an average of 3.5 percent for manufacturing.
The numbers are estimates based on the announced plans from each Class I railroad and are released by the Washington-D.C. based association.
The U.S. Department of Transportation estimates that freight traffic will grow more than two-thirds by 2020. Hamberger said these investments are a necessary part of an ongoing effort to keep pace with anticipated traffic growth.
“A growing economy means more freight traffic on the highways, on the waterways and on the rails. These investments are critical to keep pace,” Hamberger said.
From 1980 to 2005, Class I freight railroad capital spending was more than $120 billion. In addition, railroads spend $10 billion to $12 billion each year to repair and maintain their infrastructure and equipment, for total spending of nearly $360 billion since 1980.
The $15 billion to $17 billion railroads typically spend each year on their infrastructure and equipment is equal, on average, to approximately 45 percent of their operating revenue.
The Class I railroads include: BNSF Railway; CSX Transportation; Canadian National Railway; Canadian Pacific Railway; Kansas City Southern Railway; Norfolk Southern Railway; and Union Pacific Railroad.
AAR is the world’s leading railroad policy, research and technology organization focusing on the safety and productivity of rail carriers.