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U.S. Rail Merger Talks Heat Up as Investors Seek Paths to Class I Consolidation: What You Need To Know

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Friday, July 4, 2025

The ongoing debate about the future of U.S. railroads has reached a pivotal point, with new discussions signaling a potential shift in how investors perceive Class I freight rail consolidation. Despite the historically stringent merger rules set by the Surface Transportation Board (STB) in its 2001 framework, the conversation around rail mergers has regained momentum, driven by a renewed wave of interest from investors across various sectors.

For years, the possibility of merging major U.S. railroads seemed remote, mainly due to the regulatory hurdles imposed by the STB, which requires mergers to demonstrate clear public benefits, typically in the form of improved competition or enhanced services for shippers. But now, investors from long-only funds to event-driven specialists are revisiting the sector, hoping to find ways to merge Class I carriers while navigating the complicated landscape of political and regulatory requirements.

The focus of these discussions is on finding viable paths for large-scale mergers in the freight rail industry—an industry that has long been one of the most consolidated and profitable sectors in the transport industry. With only six Class I carriers currently controlling the long-haul network across the U.S., the question of whether these railroads can consolidate further is gaining attention.

A New Wave of Interest in Rail Consolidation

The six dominant players—Norfolk Southern, CSX, Canadian National, Canadian Pacific Kansas City, Union Pacific, and BNSF Railway—are highly profitable, consistently achieving impressive margins. However, this consolidation has led to flat volumes over the last decade and growing frustration among customers, particularly shippers, due to declining service quality. Complaints about poor on-time performance and limited tracking capabilities are increasingly common, and many are looking for more fundamental changes to the structure of the rail system.

MKP Advisors, a London-based investment analysis firm, highlighted this growing dissatisfaction, noting that investor pressure has shifted from minor margin improvements to calls for significant structural changes within the industry. According to MKP, large-scale mergers and acquisitions (M&A) are now seen as the ultimate expression of this demand for transformation.

The firm identified a few potential merger scenarios that may be viable within the current regulatory framework. Specifically, they pointed to two east-west mergers as having a more realistic chance of gaining approval: CSX-Unio Pacific (UP) and Norfolk Southern-BNSF. Additionally, a lower-probability merger between Norfolk Southern and UP could also be possible. However, for these mergers to succeed, they must meet a high threshold of regulatory scrutiny and pass the STB’s competitive tests.

The Regulatory Landscape and Challenges Ahead

While some observers feel the current environment may be more favorable to mergers, especially under the leadership of STB Chairman Patrick Fuchs, the regulatory hurdles are not easily surmountable. A significant challenge will be convincing regulators that consolidation would increase competition in the long term, rather than further limiting it. The STB’s focus on ensuring that mergers provide demonstrable benefits to the public and the shipping industry remains a high barrier for large-scale consolidation.

MKP’s analysis notes that while some consolidation logic exists, the regulatory scrutiny required will be intense. The potential to create more efficient networks and reduce inefficiencies in critical areas, such as freight handoffs at bottlenecks like Chicago and St. Louis, must be positioned as a clear public benefit. These inefficiencies have long been viewed as unavoidable friction points, but MKP suggests that they could be reframed as fixable bottlenecks rather than inherent problems in the system.

In addition to regulatory challenges, the political landscape will also play a critical role. Given the current administration’s focus on domestic manufacturing and supply chain resilience, proponents of rail mergers will need to align any potential deal with these broader economic priorities. In particular, the merger could be framed as a way to bolster national industrial competitiveness, which could attract support from the White House.

A Broader Evolution in Rail Industry Policy

Recent policy shifts and the ongoing conversation around supply chain resilience have created a more receptive environment for rail mergers. Post-pandemic efforts to modernize infrastructure, improve supply chain efficiency, and create new jobs have led to growing political will to support certain types of consolidation, especially when framed as key to national interests.

Labor concerns about mergers remain but are more likely to focus on potential redundancies in administrative roles, rather than frontline workers, who are often protected under merger rules. Additionally, proposed remedies like reciprocal switching or open-access obligations—though historically resisted—are gaining traction as potential solutions to maintain competitive balance in the wake of a merger.

For travelers, especially those relying on freight services, the broader implications of these mergers may seem abstract but could eventually affect shipping times, prices, and efficiency. Rail industry consolidation may lead to improved operational synergies, better infrastructure investment, and enhanced service reliability, ultimately benefiting businesses and consumers alike by improving the efficiency of freight transport.

What’s Next for the Rail Sector

While the window for large-scale rail mergers has remained mostly closed, the changing political and regulatory environment suggests that there may now be a pathway forward. For travelers, this shift could mean faster, more reliable services, especially if freight bottlenecks like those in Chicago and St. Louis are addressed through operational improvements.

Investors and industry participants are watching closely as the future of rail consolidation unfolds. The potential for mergers in the freight rail sector is more realistic than it has been in years, but the process will require careful navigation of political, regulatory, and operational challenges.

Quick Tips for Travelers:

  1. Track Rail Updates: Keep an eye on rail service updates, as mergers could lead to changes in routes, schedules, or pricing.
  2. Expect Delays in the Short-Term: With ongoing regulatory challenges, it might take time before any mergers result in tangible improvements to services.
  3. Stay Informed on Freight Movement: If you rely on rail for freight or logistics, watch for updates on efficiency improvements that may affect delivery times.
  4. Consider Alternatives for Urgent Shipments: As bottlenecks are addressed, consider diversifying your shipping methods if you’re seeking speed and reliability.

Looking Ahead: Opportunities and Challenges for Rail Travelers

As the rail industry contemplates potential mergers, the landscape for freight movement and service reliability could be set to improve significantly. For both the industry and travelers, consolidation offers both challenges and opportunities, with the promise of greater efficiency and stronger infrastructure. Only time will tell how these mergers will evolve, but the future of U.S. freight rail may look very different in the years to come.

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London-Berlin trains on the drawing board for UK-German rail taskforce | Rail industry

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Plans for possible direct trains from London to Berlin will be drawn up by a joint UK-German taskforce, reigniting hopes for better rail connections across Europe.

The partnership, announced as part of the bilateral treaty to be signed by the British prime minister, Keir Starmer, and his German counterpart, Friedrich Merz, could eventually lead to direct rail services between the two countries after previous plans for London-Frankfurt trains hit the buffers.

The Department for Transport described the agreement as a “significant step forward”, with direct trains the most eye-catching part of a commitment to collaborate in enhancing sustainable transport links and mobility.

Germany has also agreed to allow some arriving UK airline passengers to use passport e-gates at its airports by the end of August, the Cabinet Office said.

Since Brexit, UK travellers have needed to queue to have their passports manually stamped, rather than use automated gates, at EU airports.

A joint taskforce will bring together transport experts from Germany and the UK to tackle the issues that have blocked such services in the past, including commercial, safety and technical requirements, and, not least, border arrangements.

The transport secretary, Heidi Alexander, raised the possibility of visiting Checkpoint Charlie “direct from the comfort of a train”, adding that the government was “determined to put Britain at the heart of a better-connected continent”.

She said: “The Brandenburg Gate, the Berlin Wall and Checkpoint Charlie – in just a matter of years, rail passengers in the UK could be able to visit these iconic sights direct from the comfort of a train, thanks to a direct connection linking London and Berlin.

“This landmark agreement – part of a new treaty the prime minister will sign with Chancellor Merz today – has the potential to fundamentally change how millions of people travel between our two countries, offering a faster, more convenient and significantly greener alternative to flying.

“The economic potential is enormous. A direct rail link would support the creation of jobs and strengthen the vital trade links that underpin our economic relationship with Germany. British businesses will have better access to European markets, whilst German companies will find it easier to invest and operate in the UK.”

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The deal follows a similar memorandum of understanding signed with Switzerland in May to explore direct services.

While direct trains to new European countries may be at least a decade away, the international train operator Eurostar has spoken of its ambition to open new routes to Frankfurt and Geneva. Other potential rival operators, including Virgin, are hoping to start cross-Channel services.

Opening new routes has been difficult due to commercial viability, different track and train systems, and border requirements and station capacity. Eurostar’s longest direct route to date, London to Amsterdam, has had to overcome numerous difficulties, largely linked to border security and passport control, since its delayed inception in 2018.

The demand for direct London-Berlin trains is unclear. Passengers can travel between the UK and German capitals in about 10 hours, changing in Brussels and Cologne.



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Regulator’s report on rail assistance ‘shows it is still failing to acknowledge right to turn up and go’ – Disability News Service

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The rail regulator has been asked why it has failed to do more in an annual report to stress disabled people’s right to “turn up and go” when accessing the railway network.

The Office of Rail and Road (ORR) released new figures this week which showed that satisfaction with booked passenger assistance on the rail network had plateaued, with one in 10 disabled passengers still not even being met at the station after booking help.

The proportion of passengers who received all the assistance they booked also remained stable in 2024-25 at just 78 per cent.

This was even lower for passengers with a “learning, concentrating or remembering disability” (73 per cent); with mental health conditions (72 per cent); those who are neurodivergent (72 per cent); and passengers with a communication impairment (73 per cent).

There were also figures showing what proportion of passengers were satisfied with the assistance they received, with the booking process, and with the helpfulness and attitude of staff.

But there were no similar figures to show the levels of satisfaction for disabled passengers who turn up at a rail station and request assistance with their journey without booking it in advance, which is their legal right.

The report on disabled people’s experiences of Passenger Assist was released alongside ORR’s Annual Rail Consumer Report.

Accessible transport campaigners have been highlighting for years the failure of the rail industry and successive governments to ensure disabled people’s right to spontaneous travel by denying their right to turn up and go (TUAG) across the rail network.

The ORR annual report appears to underline that failure by focusing on pre-booked passenger assistance.

It says only that it is “working with industry to strengthen the quality of data on turn up and go assistance requests”, and that it expects the “quality and completeness to improve over time”.

The only TUAG figures released by ORR this week show the number of TUAG requests made in 2023-24 and 2023-24 (about 312,000 in 2023-24 and about 491,000 in 2024-25), although notes published alongside these figures show they are likely to be unreliable*.

It is the first time such TUAG figures have been published.

Doug Paulley, one of the disabled activists who has highlighted the right to TUAG in his campaigning, said he had a “significant concern” about ORR’s “concentration on assistance booking rather than TUAG” in its “uninspiring” report.

He said ORR did not have reliable or useful statistics on how well rail companies were doing on TUAG.

He said: “Everything they measure or do is about booked assistance: satisfaction with booked assistance, recompense for failed booked assistance…

“It feels like they try to avoid mentioning or acknowledging our right to turn up and go.”

He said this was a “disturbing and counter-productive trend”.

Responding to these concerns, ORR said it was exploring with rail operators “how we might get a better picture of the experience of passengers who request assistance on demand”, including the potential for TUAG passengers to be asked to take part in its existing passenger survey of experiences of assistance.

ORR released figures in the Passenger Assist report that ranked each rail operator on their performance on booked passenger assistance.

It showed that Northern Trains was the worst performer, with only 70 per cent of disabled passengers who were met at the station then receiving all the assistance they had booked, with Transport for Wales (74 per cent) and West Midlands Trains (74 per cent) also performing poorly.

The best performer was London North Eastern Railway (85 per cent).

The annual report notes how ORR has raised concerns through the year about passenger assistance; the reliability of help points at stations; communications between staff at boarding and destination stations when arranging passenger assistance; the reliability of passenger lifts at stations; the provision of accessible rail replacement vehicles; and the complaints process for disabled passengers.

The report points to annual data that shows a 42 per cent increase in the number of faults across the rail network that put lifts out of service for over a week, in 2024-25 compared with the previous year.

Commenting on the report, Stephanie Tobyn, ORR’s director of strategy, policy and reform, said: “Ensuring that disabled passengers consistently receive the support they need to travel by train requires clear focus, collaboration and a commitment to continuous improvement.

“Our latest survey shows that overall passenger satisfaction has plateaued, and we know that, in some instances, assistance failures can leave passengers feeling powerless and frustrated.”

She said that a new rating system on passenger assistance would “help us target our efforts and use resources effectively, focusing on working with those operators where improvement is most needed to deliver better outcomes for passengers”.

*ORR says in its notes that the only TUAG requests recorded are those noted by staff via the Passenger Assist system, while not all rail operators are yet using this system to record TUAG requests, and any requests booked less than two hours before departure are treated as TUAG

Picture by ORR

 

A note from the editor:

Please consider making a voluntary financial contribution to support the work of DNS and allow it to continue producing independent, carefully-researched news stories that focus on the lives and rights of disabled people and their user-led organisations.

Please do not contribute if you cannot afford to do so, and please note that DNS is not a charity. It is run and owned by disabled journalist John Pring and has been from its launch in April 2009.

Thank you for anything you can do to support the work of DNS…



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Over-dependence bulk freight hamstrings railway revenues: Study – Industry News

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The Indian Railways‘ over-dependence on bulk commodities like coal, iron ore and cement is hurting its growth potential and exposing it to the competitive pressure from other modes of freight transportation, a PwC-FICCI report said.

Strategic Opportunities

The unreliable services coupled with inflexible routes and poor timeliness are affecting the railways’ potential to grab a bigger market share in the “high-value” non-bulk commodities space, it said.

Even though the rail transport, particularly over long distances, offers inherent cost efficiencies compared with road transport, its infrastructure, terminal operations, and rolling stocks are not designed to handle the fast-growing segments like e-commerce, pharmaceuticals, FMCG, consumer durables and automobiles.

“These commodities demand more flexible, time-sensitive, door-to-door logistics, which road transport is better equipped to provide, rendering rail less competitive for such segments,” the report noted.

In the past five years, a large part of the railways’ freight volume growth – 5.6% CAGR – is contributing by a narrow set of traditional bulk commodities. Currently, coal dominates the railways’ freight basket accounting for arounf 50% of the freight volumes, followed by cement and iron ore, contributing around 10% each. But the growth in these bulk commodities are slowing down due to the structural limitations within rail logistics. On the other hand, the growth in emerging non-bulk commodities stood at 10% over the same period.

“A network that is optimised for bulk train operations may struggle to accommodate growing demand for parcel/lightweight goods or automobile transport, leading to capacity mismatches and service shortfalls,” it adds.

However, the report said that targeted interventions can boost the movement of lightweight commodities and enable greater diversification of the rail freight portfolio. “In India, more than 90% of the non-bulk freight market is transported by road. By contrast, in developed countries such as the US, 66% of non-bulk freight is moved by road, with rail or rail-intermodal systems accounting for a substantial 30%. This modal imbalance presents a strategic opportunity for IR to expand its footprint in the non-bulk segment,” the report noted.

Challenges

Though the railways has made efforts in the recent years to promote non-bulk segment. For instance, Joint Parcel Product–Railways Cargo Service (JPPRCS) scheme was introduced in 2023 to provide end-to-end logistics solutions for parcel. Similarly, Parcel Cargo Express Train (PCET) was launched this year to boost the transport of commodities like rubber and pineapples. But the modal share of rail for parcel-based cargo and lightweight commodities still remains low. The report further said that railways needs to adopt a commodity-specific approach to terminal planning, asset deployment and service design to diversify its commodity portfolio.

“Another opportunity lies in the automobile sector, specifically two-wheelers and passenger vehicles, which fall under the low rail share category but exhibit strong growth forecasts. The railways has focused on this segment by modifying the AFTO scheme, introducing modern rolling stock (NMG and BCACBM coaches) and assisting the development of new automobile loading terminals. These efforts have increased the modal share of rail in automobile transport from 1.2% in FY14 to approximately 20% in FY24,” the report said.



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