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The Santa Fe and Southern Pacific Railroads, 1950 - 1965

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The Santa Fe and Southern Pacific Railroads, 1950 - 1965 AN ECONOMIC STUDY OF RAILROAD PASSENGER SERVICE: THE SANTA FE AND SOUTHERN PACIFIC RAILROADS, 1950 - 1965 By JOHN BYRON M1yCALL Bachelor of Science Texas Technological College Lubbock, Texas 1960 Master of Business Administration Texas Technological College Lubbock, Texas 1961 Submitted to the Faculty of the Graduate College of the Oklahoma State University in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY July, 1968 OKLAHOMA STATE UNIVERSITY LIBRARY JAN 301969 Copyright by: John Byron McCall 1968 AN ECONOMIC STUDY OF RAILROAD PASSENGER SERVICE: THE SANTA FE AND SOUTHERN PACIFIC RAILROADS, 1950 - 1965 Thesis Approved: 11 PREFACE Most United States railroads state that passenger service is not a profitable business. These carriers iclaim that continued operation of these losing services impairs the financial health of the industry. A minority group of railroads, however, views passenger service as a desirable business activity. These opposing philosophies within the railroad industry raise the question of whether passenger service is unprofitable or merely unpopular with railroad ' management. The pu!pose of this study is to gain some insight into reasons why passenger service has been considered a desirable activity by a few railroads when the majority of the industry believes otherwise. This study compares the activities of two similar rail­ roads--the Atchison, Topeka and Santa Fe Railway Company, Inc., and the Southern Pacific Company--between 1950 and 1965. The two carriers, although similar, differ on the question of rail passenger service. The Santa Fe is in favor of such service; the Southern Pacific is not. It is expected that the conclusions drawn from a study of these two carriers can be used to explain differences in passenger service policy that exist within the industry at large. 111 Indebtedness is acknowledged to Drs. Larkin B. Warner, Joseph J. Klos, Julian Bradsher, and Norbert Mahnken for their valuable guidance; and to the following for special assistance during the course of this investigation: E.L. DeGolyer, Jr., of the DeGolyer Foundation at Southern Meth­ odist University, Mr. A. Dean Hale, and Dr. George Hilton of The University of California at Los Angeles. Special thanks are due my wife, Kacy, for her patience and willingness to type in the middle of the night. iv TABLE OF CONTENTS Chapter Page I. INTRODUCTION • • • • • • • • • • • • • • • • • • Method • • • • • • • • • • • • • • • • • • • 1 Procedure • • • • • • • • • • • • • • • • • 2 Justification of Method • • • • • • • • • • 2 Sources of Data •••••••••••••• 12 II. THE MEASUREMENT OF PASSENGER SERVICE OUTPUT. • • 14 The Nature of Railroad Output ••••••• 15 Inadequacy of a Single Output Unit ••••• 20 Available Output Measures ••••••••• 21 Chapter Summary •••••••••••••• 23 III. THE EVOLUTION OF PASSENGER TRAIN OUTPUT: A COMPARISON OF THE SANTA FE RAILWAY AND THE SOUTHERN PACIFIC COMPANY FROM 1950 TO 1965 • • • 26 Passenger Train Output ••••••••••• 29 Composition of Passenger Train Output ••• 32 The Evolution of Passenger Hauling Equipment •••••••••••••••• 37 Passenger Service Load Factors ••••••• 37 The Significance of Commuter Service •••• 40 Passenger Service Relative to Total Output. 43 Chapter Summary •••••••••••••• 50 IV. THE EVOLUTION OF PASSENGER AND ALLIED SERVICE REVENUES: A COMPARISON OF THE SANTA FE RAILWAY AND THE SOUTHERN PACIFIC COMPANY FROM 1950 TO 1965 •••••••• o •••••••••••• 52 Definition of Terms •••••••••••• 52 Revenue Totals and Composition ••••••• 53 Sales Efforts ••••••••••••••• 58 Summary of Total Revenue Data ••••••• 63 Per Unit Passenger and Allied Service Revenue ••••••••••••••••• 64 Relative Importance of Freight Revenues •• 73 Chapter Summary •••••••••••••• 77 v Chapter Page v. THE NATURE OF RAILROAD PRODUCTION COSTS AND COST MEASURES ••••••••••• • • • • • 79 The Nature of Railroad Costs •••••••• 19 Available Cost Data •••••••••••• 84 Chapter Summary •••••••••••••• 88 VI. THE EVOLUTION OF EXPENSES DIRECTLY RELATED TO PASSENGER AND ALLIED SERVICE OPERATIONS: A COMPARISON OF THE SANTA FE RAILWAY AND THE SOUTHERN PACIFIC COMPANY FROM 1950 TO 1965 • • • 90 Adjustments Made to the Data •••••••• 91 Direct Expense Totals ••••••••••• 93 Composition of Direct Expenses ••••••• 96 Direct Expense Trends ••••••••••• 99 Direct Expense Per Unit Output ••••••• 104 Direct Expense Per Train Trip ••••••• 107 Freight Service Operating Expenses ••••• 109 Chapter Summary •••••••••••••• 114 VII. THE SUBJECTIVE ELEMENT OF RAIL PASSENGER MANAGEMENT • • • • • • • • • • • • • • • • • 116 Corporate Personality ••••••••••• 117 Corporate Philosophies About Passenger Service • • • • • • • • • • • • • • • • • 119 Chapter Summary •••••••••••••• 130 VIII. SUMMARY AND CONCLUSIONS •• • • • • • • • • • • • 132 Passenger Service Profitability •••••• 133 Overall Profitability • • • • • • • • • • • 136 Operating Efficiency •••••••••••• 138 Subjective Elements of Policy Determination •••••••••••••• 141 Conclusions •••••••••• o ••••• 145 rx. BIBLIOGRAPHY • • • • • • • • • • • • • • • • • • 148 vi LIST OF TABLES Table Page 1 • Passenger and Allied Service Revenues and Expenses Per Passenger Train Mile Class I Railroads, 1940, 1945, and 1950 - 1965 • • • 9 2. Intercity Passenger Travel by Mode of Transport in Passenger Miles and as Percent of Total, 1950 - 1965 ••• • • • • • • 1 1 3. Average Number of Cars Per Passenger Train Santa Fe and Southern Pacific Railroads, 1950 - 1965 •••••••••.•••••• • • 34 4. Distribution of Passenger and Allied Service Revenues Santa Fe.and Southern Pacific Railroads Selected Years, 1950 - 1965 ••• • • 36 Utilization of Passenger-Carrying Equipment Santa Fe and Southern Pacific Railroads, 1950 - 1965 •••••••••••••••• • • 38 6. Average Passenger Journey in Miles Santa Fe and Southern Pacific Railroads, 1950 - 1965 • • 39 7. Southern Pacific Company Commuter Service as a Percent of Total Passenger Service 1950 - 1965 •••••••••••••• • • 0 • 44 8. Passenger Service O~tput as a Percent of Total Railroad Output Santa Fe and Southern Pacific Railroads, 1950 - 1965 ••••• o • • 46 9. Selected Freight Service Output Data: Santa Fe and Southern Pacific Railroads, 1950 - 1965. 48 10. Composition of Passenger and Allied Service Revenue Santa Fe Railroad, 1950 - 1965 •••• 54 11. Composition of Passenger and Allied Service Revenue Southern Pacific Railroad, 1950 - 1965. 55 12. Total Advertising Expense and Amount Allocated to Passenger and Allied Service Operations Santa Fe and Southern Pacific Railroads, 1950 - 1965 •••••••••••••• • • • • 62 vii Table Page 13. Estimate of Average Per-Trip Car Earnings for Santa Fe and Southern Pacific Rail­ roads, 1950 - 1965 •••••••••• • • • • 68 14. Total Operating Revenue and Net Income From Freight Service Santa Fe and Southern Pacific Railroads, 1950 - 1965 ••••• • • • 74 15. Selected Per-Unit Freight Service Revenue Santa Fe and Southern Pacific Railroads, 1950 - 1965 ••••••••••••••• • • • 76 16. Total Directly Related Passenger and Allied Service Expense: Santa Fe and Southern Pacific Railroads, 1950 - 1965 ••••• • • • 95 17. Composition of Expense Directly Related to Passenger and Allied Service Operations by Category, as Percent of Total, Santa Fe Railroad, 1950 - 1965 ••••••• • • • 0 97 18. Composition of Expense Directly Related to Passenger and Allied Service Operations by Category, as Percent of Total, Southern Pacific Railroad, 1950 - 1965 •••••• • • 0 98 19. Estimate of Directly Related Passenger and Allied Service Expense per Passenger Car Trip Santa Fe and Southern Pacific Rail- roads, 1950 - 1965 •••• o ••••••••• 110 20. Freight Service Operating Expenses Santa Fe and Southern Pacific Railroads, 1950 - 1965 • 1 11 21. Selected Freight Service Expense Data Santa Fe and Southern Pacific Railroads, .1950 - 1965 • 113 22. Passenger Service Profitability: Santa Fe and Southern Pacific Railroads, 1950 - 1965 • • 134 23. Net Income After Taxes Santa Fe and Southern Pacific Railroads, 1950 - 1965 •••••• • • 137 24. Selected Measurements of Overall Efficiency Santa Fe and Southern Pacific Railroads, 1950 - 1965 •••••••••••• • • • • • • 139 viii LIST OF FIGURES Figure Page 1 • The Atchison Topeka & Santa Fe Railway System (Maj or Routes), 1950 - 1965 • • • • • • • 5 2. The Southern Pacific Company and Connecting Lines (Major Routes~ 1950 - 1965 ••••• • • 6 3. Passenger Train Miles: Santa Fe and Southern Pacific Railroads, 1950 - 1965 •••••• • • 4. Paasenger Train Gross Ton Miles: Santa Fe and Southern Pacific Railroads, 1950 - 1965 • • 31 Average Passenger Train Speed: Santa Fe and Southern Pacific Railroads, 1950 - 1965 •• • • 33 6. Revenue Passengers Carried: Santa Fe and Southern Pacific Railroads, 1950 - 1965 • • • • 41 1. Revenue Passenger Miles: Santa Fe and Southern Pacific Railroads, 1950 - 1965 • • • • 42 8 •. Passenger and Allied Service Revenue Total and "Head-End" Component: Santa Fe and Southern Pacific Railroads, 1950 - 1965 •••••••• 57 Passenger and Allied Service Revenue per Passenger Train Mile: Santa Fe and Southern Pacific Railroads, 1950 - 1965 •• o ••• • • 65 10. Passenger and Allied Service Revenue per Gross Ton Miles: Santa Fe and Southern Pacific Railroads, 1950 - 1965 •••• • • • • 66 1 1 • Average Passenger and Allied Service Revenues per Passenger Train Trip: Santa Fe and Southern Pacific Railroads., 1950 - 1965 • • • • 70 12. Passenger-Related Revenue per Passenger: Santa Fe and Southern Pacific Railroads, 1950 - 1965. 72 13. Composite Index of Material Prices and Wage Rates Paid ·by Railroads in the United States, 1950 - 1965 ••••••••••••••••••
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