FORM 10-K


                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
    EXCHANGE ACT OF 1934

    For the fiscal year ended December 26, 1997

                                       OR

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

    For the transition period from                  to 
                                   ----------------     --------------------


                          Commission file number: 1-896
                                                  -----

                      ALLEGHENY AND WESTERN RAILWAY COMPANY
                      -------------------------------------
             (Exact name of registrant as specified in its charter)

              Pennsylvania                                       52-0790328
              ------------                                       ----------
     (State or other jurisdiction of                          (I.R.S. Employer
     incorporation or organization)                          Identification No.)

    500 Water Street, Jacksonville, FL                               32202
    ----------------------------------                               -----
 (Address of principal executive offices)                         (Zip Code)

              Registrant's telephone number, including area code: (904) 359-3100
                                                                  --------------

Securities registered pursuant to Section 12(b) of the Act:

                                                       Name of each exchange on
            Title of each class                            which registered
            -------------------                      ---------------------------
First Mortgage 4% Bonds due October 1, 1998          The New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:  None

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes (X) No ( )

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. (X)


<PAGE>


State the aggregate  market value of the voting stock held by  nonaffiliates  of
the registrant. The aggregate market value of the voting stock at March 6, 1998,
was $1,139,093, excluding the voting stock held by affiliates of the registrant.

Indicate the number of shares outstanding of each of the registrant's classes of
common stock,  as of the latest  practicable  date.  The  registrant  has 32,000
shares of common stock, par value $100, outstanding at March 6, 1998.

The following listed document has been incorporated herein by reference:

Form 10-K filed by CSX  Transportation,  Inc., on March 3, 1998 - Item 8 of Part
II.

                                     PART I
Item 1.    Business.
             and
Item 2.    Properties.

           Allegheny and Western  Railway  Company (the "company") is a railroad
incorporated in the  Commonwealth of Pennsylvania on January 22, 1898. It owns a
line of  railroad  62 miles  long  which lies  between  Punxsutawney  and Butler
Junction,  Pennsylvania.  Pursuant to leases dated October 1, 1898,  and January
15, 1900,  between the company and Buffalo,  Rochester  and  Pittsburgh  Railway
Company ("BR&P") the company leased its railroad to BR&P for the duration of the
company's  corporate  existence,  at an annual  rental equal to 4% on its bonded
debt and 6% on its common stock ($100 par value).  The principal and interest on
the company's bonds are guaranteed by BR&P.

           Under  an  agreement  dated  December  15,  1931,  as  amended,   CSX
Transportation,  Inc. ("CSXT"), as successor by merger to The Baltimore and Ohio
Railroad  Company,  operated the properties of BR&P,  and incident  thereto also
operated the  properties  of the company in the name and for the account of CSXT
without separation or segregation of the results of such operations.  Under such
agreement  CSXT  agreed to pay all  leased  line  rentals  but did not assume or
guarantee  payment of the principal on the bonds. In addition to the rental paid
by CSXT for the payment of the company's dividends and bond interest,  CSXT paid
all the expenses of the company, including all taxes assessed against it.

           On July 18, 1988, CSXT, BR&P and Buffalo & Pittsburgh Railroad,  Inc.
("B&P")  entered  into  certain  agreements  collectively  referred  to  as  the
"Purchase and Sale Agreement" and closed in escrow.  The B&P took possession and
control of  operations  of the line of  railroad of BR&P on July 19,  1988.  The
purchase and sale agreement provided that BR&P and CSXT shall assign,  transfer,
and  convey to B&P all their  obligations  and  duties  arising  under the lease
agreements.  On October 7, 1991,  CSXT,  BR&P and B&P executed an Assignment and
Assumption Agreement which concluded the escrow and B&P assumed all of the terms
and  conditions of the Purchase and Sale  Agreement with the exception that CSXT
would retain its right,  title and interest in the 16,159 shares of common stock
of the company,  being all the stock of the company  owned by CSXT at that time.
As of March 6, 1998, CSXT owned 16,234 shares of common stock of the company, or
50.7%.

           Since the interest and  dividends on the  company's  bonds and common
stock are paid from moneys obtained from the lessee, reference is made to CSXT's
Form 10-K for the year ended  December  26,  1997,  a copy of which is available
from Patricia J. Aftoora,  Vice  President and Corporate  Secretary of CSXT, S/C
J-160, 500 Water Street, Jacksonville, FL 32202


<PAGE>


Item 3.    Legal Proceedings.

           None.

Item 4.    Submission of Matters to a Vote of Security Holders.

           None.

                                     PART II

Item 5.    Market for Registrant's Common Stock and Related Security Holder
           Matters.

           There is no  market  in which  the  common  stock of the  company  is
traded.  As of March 6, 1998, there were  approximately 149 stockholders of $100
par value capital stock. The terms of the lease agreement referred to in Items 1
and 2, Business and Properties,  provide a full and  unconditional  guarantee of
dividends on the company's capital stock at an annual dividend rate of $6.00 per
common share.


<PAGE>


Item 6.    Selected Financial Data.
             and
Item 7.    Management's Discussion and Analysis of Financial Condition and 
           Results of Operations.

           Five year selected data:
<TABLE>
<CAPTION>

                                  1997         1996         1995         1994          1993
                                  ----         ----         ----         ----          ----
<S>                          <C>           <C>         <C>           <C>          <C>    

Rental income                $   328,730   $  328,730  $  328,730    $  328,730   $  326,290
Interest on funded debt           78,600       78,600      78,600        78,600       75,920
Federal income taxes              58,130       58,130      58,130        58,130       58,130
                             -----------   ----------  ----------    ----------   ----------

Earnings for the year        $   192,000   $  192,000  $  192,000    $  192,000   $  192,240
                             ===========   ==========  ==========    ==========   ----------


Weighted average number
  of common shares (a)            32,000       32,000      32,000        32,000       32,040
                             ===========   ==========  ==========    ==========   ==========

Earnings per common share (a)$      6.00   $     6.00  $      6.00   $     6.00   $      6.00
                             ===========   ==========  ===========   ==========   ===========

Dividends per common
  share (a)                  $      6.00   $     6.00  $      6.00   $     6.00   $      6.00
                             ===========   ==========  ===========   ==========   ===========

Total assets                 $ 6,834,324   $6,834,324  $6,834,324    $6,834,324   $6,834,324
                             ===========   ==========  ==========    ==========   ==========

Long term debt               $ 1,965,000   $1,965,000  $1,965,000    $1,965,000   $1,965,000
                             ===========   ==========  ==========    ==========   ==========
</TABLE>

(a) Calculations include shares held directly by CSXT.

Item 8.    Financial Statements and Supplementary Data.

           Due to the  nature of CSXT's  obligations  under the lease  agreement
referred to in Items 1 and 2, Business and Properties,  financial statements and
notes thereto in response to this item are not included herein. In lieu thereof,
the financial  statements and notes included in the Form 10-K filed on behalf of
CSXT on March 2, 1998, are incorporated herein by reference.


Item       9. Changes in and  Disagreements  with  Accountants on the Accounting
           and Financial Disclosures.

           None.


<PAGE>


                                    PART III

Item 10.   Directors and Executive Officers of the Registrant:

           The  following  sets  forth  certain  information   relating  to  the
company's  directors and executive  officers as of March 6, 1998.  Directors are
elected  annually  and serve until the next annual  meeting of  stockholders  or
until their successors are elected.  Officers are elected annually at the annual
meeting of the Board and hold office until the next annual  meeting of the Board
or  until  their   successors  are  elected.   There  are  no   arrangements  or
understandings  between any director or  executive  officer and any other person
pursuant  to which the  director or officer  was  selected.  There are no family
relationships among these officers and directors.


    Name, Age, Present
    Position with the                 Business Experience during last 5 Years,
        Company                     Company Directorships in Public Corporations
-------------------------           --------------------------------------------

GERALD L. NICHOLS, 62               President  of the  company  since 1995 and 
President and Director              Senior Vice President of the company prior 
                                    thereto. Mr. Nichols has served in various 
                                    executive capacities for certain CSXT 
                                    affiliates during the past five years and is
                                    currently Vice Chairman of the Board of 
                                    CSXT.

P. MICHAEL GIFTOS, 51               Senior Vice President of the company since
Senior Vice President               1990. During the past five years, Mr.Giftos
                                    has served as an executive officer of 
                                    certain CSXT affiliates and is currently
                                    Senior Vice President-Law and General
                                    Counsel of CSXT.

CARL N. TAYLOR, 58                  Senior Vice President of the company since
Senior Vice President               1995.  Mr. Taylor has been an officer of 
and Director                        certain CSXT affiliates during the past five
                                    years and is currently Executive Vice 
                                    President-Operations and a Director of CSXT.

MICHAEL J. WARD, 47                 Executive Vice President of the company 
Executive Vice President            since June 6, 1996.  During the past five
and Director                        years, Mr. Ward has served as an officer of 
                                    certain CSXT affiliates and is currently
                                    Executive  Vice  President-Finance, Chief 
                                    Financial Officer, and a Director of CSXT.

PATRICIA J. AFTOORA, 58             Vice President of the company since 1990 and
Vice President,                     Corporate Secretary of the company prior 
Corporate Secretary                 prior thereto.  Mrs. Aftoora has served as 
and Director                        an officer of certain CSXT affiliates during
                                    the past five years and is currently Vice
                                    President and Corporate Secretary of CSXT.


<PAGE>


 Name, Age, Present
 Position with the                     Business Experience during last 5 Years,
     Company                        Company Directorships in Public Corporations
-------------------------           --------------------------------------------

C.J.O. WODEHOUSE, JR., 50           Vice President and Controller of the company
Vice President and Controller       since 1995.  Mr. Wodehouse has served as an 
                                    officer of CSX  Corporation ("CSX") and 
                                    certain of its affiliates during the past
                                    five years and is currently Vice President
                                    and Controller of CSXT.

M. MAURICE LAZENBY, III, 54         Assistant Vice President and Treasurer of 
Assistant Vice President            the company since 1995.  Mr. Lazenby has
and Treasurer                       served as an officer of certain CSXT 
                                    affiliates during the past five years and
                                    is currently Assistant Vice President and 
                                    Treasurer of CSXT.

           There  have been no events  under any  bankruptcy  act,  no  criminal
proceedings,   orders,  judgments,   decrees  or  injunctions  material  to  the
evaluation  of the ability and  integrity of any  director or executive  officer
during the past five years.

Item 11.   Executive Compensation

           All  directors  and  officers of the company  are also  officers  and
employees of CSXT, and serve without compensation from the company.


<PAGE>


Item 12.   Security Ownership of Certain Beneficial Owners and Management

           As of March 6, 1998,  50.7% of the voting  securities  of the company
(16,234 shares of $100 par value capital stock) were  beneficially held by CSXT,
which, in turn, is beneficially  owned by CSX Corporation (CSX),  Richmond,  VA,
through ownership of 100% of CSXT's outstanding voting securities.

           As of March 6, 1998,  all  directors and officers of the company as a
group (7 persons)  beneficially  owned  1,518,317  shares of $1 par value common
stock of CSX,  (including  635,067  shares  exercisable  under option  within 60
days),  representing less than 1% of the outstanding  shares.  The number of CSX
shares owned by each director as of March 6, 1998, is set forth below:

 
                                                                   Number of
                                       Number of                 shares of CSX
                                     shares of CSX            exercisable within
                                 beneficially owned          60 days under stock
             Name              as of March 6, 1998 (1)(2)         option plans
         --------------        --------------------------      ---------------

         P. J. Aftoora                   31,126                       41,182
         G. L. Nichols                  230,755                      170,000
         M. J. Ward                     154,336                      120,400

           (1) Includes  shares  pledged  to  secure  loans  under the CSX Stock
               Purchase  and Loan Plan,  which shares were  acquired  under that
               plan.

           (2) Includes shares held in trust under certain deferred compensation
               plans.

Item 13.   Certain Relationships and Related Transactions.

           None.


<PAGE>


                                     PART IV

Item 14.   Exhibits, Financial Statement Schedules and Reports on Form 8-K.

           (a)  1.    Financial Statements.

                      Refer to response to Item 8 on page 4.

                2.    Financial Statement Schedules

                      Refer to response to Item 8 on page 4.

                3.    Exhibits

                      (3.1)  Articles   of   Incorporation    (incorporated   by
                             reference to Form 12 Application  for  Registration
                             dated May 13, 1935)

                      (3.2)  By-laws of the company  restated as of May 10, 1996
                             (incorporated  by  reference to Exhibit 3.2 to Form
                             10-K dated March 27, 1997)

                     (10.1)  Indenture  dated  October  1,  1898,   between  the
                             Registrant  and Buffalo,  Rochester and  Pittsburgh
                             Railway  Company   (incorporated  by  reference  to
                             Exhibit 10.1 to Form 10-K dated March 27, 1997)

                     (10.2)  Contract dated January 15, 1900,  supplementing the
                             original Indenture of October 1, 1898 (incorporated
                             by  reference  to  Exhibit  10.2 to Form 10-K dated
                             March 27, 1997)

                     (10.3)  Agreement  dated  December  15,  1931,  between CSX
                             Transportation,  Inc.  (successor  by merger to The
                             Baltimore and Ohio  Railroad  Company) and Buffalo,
                             Rochester   and    Pittsburgh    Railway    Company
                             (incorporated  by reference to Exhibit 10.3 to Form
                             10-K dated March 27, 1997)

                     (10.4)  Agreement  dated  January  1, 1940,  modifying  the
                             Agreement dated December 15, 1931  (incorporated by
                             reference  to Exhibit 10.4 to Form 10-K dated March
                             27, 1997)

                     (10.5)  Agreement  dated  December 29,  1943,  amending and
                             modifying the  Agreements of December 15, 1931, and
                             January  1,  1940  (incorporated  by  reference  to
                             Exhibit 10.5 to Form 10-K dated March 27, 1997)

                     (23) Consent of Independent Auditors (See page I-1).


           (b)        Reports on Form 8-K

                      No  reports  on Form 8-K  were  filed  for the year  ended
                      December 26, 1997.


<PAGE>


           Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the  undersigned,  thereunto duly  authorized,  on the 20th day of
March, 1998.

                                      ALLEGHENY AND WESTERN RAILWAY COMPANY

                                      /s/ JAMES L. ROSS
                                      -----------------
                                      James L. Ross
                                      (Principal Accounting Officer)



           Pursuant to the requirements of the Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
Registrant and in the capacities and on the dates indicated.


/s/Gerald L. Nichols                       President and Director
---------------------                      (Principal Executive Officer)
   Gerald L. Nichols*                              


/s/Michael J. Ward                         Executive Vice President and Director
-------------------                        (Principal Finance Officer)
   Michael J. Ward*                               


/s/Patricia J. Aftoora                     Vice President, Corporate Secretary
-----------------------                    and Director
   Patricia J. Aftoora*                    




/s/ Patricia J. Aftoora
-----------------------
   Patricia J. Aftoora                                            March 20, 1998
   *(Attorney-in-Fact)