New-York tribune., 1920-12-05

Slllctcu, IN act, we i've N the past
20 far as the results of railway oper-
ations are concerned The country Is
so vast and the lumber of separate
railway corporations so large that not
until six weeks after the close OF &
months operations are there available
nimarized reports for the country as
- whole or for the primary reporting
districts, and these reports cover only
revenues and expenses and DO not give
rs the statistics Of the traffic from
which the revenue is derived.
1t is therefore apparent that no one
is in q position to make any definite
statements concerning the present
financial situation or tive imme diate
>uture of the railways. When the rail
vays went before the mission last
August they sought to have that body
accept the property investment ac
counts of the carriers as the fair
Ta'ue upon which they might earn, in
N'ew Of the fact that the valuation
now under way ia 50 incomplete as 60
furnish no guide to the aggregate
value OF railway property
What Law Provides
The TRANSFORMATION act requires the
investment account Of the carriers
only that consideration which
It is entitled to in establishing values
for rate-naking purposes" A COM
plete acceptance Of the figures shown
in this account would have given q
value Of a little over twenty billions
Of dollars TIE commission cut this
value down to $4,000 900 900. giving
no explanation Of It's action beyond
the statement that It had considered
AL the facts end matters Of record.
Hence il is not possible to discover
how they arrived at the, figures
The result was TO reduce the prop
erty investment Of the Eastern group
by almost ofs per cent, and of the
South and West by over 8 per cent
The percentage Of rate increase neces
sary 10 earn the stipulated 6 per cent
upon the fair value was apparently
largely Influenced by the figures
offered in evidence by the carriers, al
thoueh it must he noted in this con
aectoH that the estimates made by the
carriers were based Gpon the aggre-
gate of the property investment and
not unon tNe revised and reduced value
found by the commission
To the Eastern district the fun 40
per cent increase In freicht rates asked
for WAS granted THE South requested
80 per cent and received 25 per cent,
The West wanted 80 per cent. and was
given 80 per cent for the eastern por-
ton and o5 per cent for the newly
created Mountain-P Pacific district.
= Other Increases Granted
Other increases were granted in pas
senger and Pullman fares by adopting
without change the Recommendations
that the commission, transformed By
Congress into the guardian Of railway
revenues and the protector Of railway
service, was DISPOSED to be rs generous
as the law allowed and to give the
carriers full opportunity to make good
under the trying conditions they we're
facing as they emerged from the pro-
lection Of the government guaranty.
Much might be said as to the niggardN- n
ness Of Congress in limiting the earn
ings exclusively belonging to any in
dividual carrier to 6 per cent. but
little fault can be found with The pres
ent attitude Of the commission
What has been the eject of this rate
decision in practice2 The fair value"
having been officially proclaimed, the
amour: that the railways are entitled
TO earn can be determined approximate
y by applying TO this value the statu-
tory 6 per cent. This computation has
been made by the bureau Of Rai'way
Economics Eliminating from the ag
gregate valuation the values Of al car
riers OF Glasses II and III-that is,
those having annual gross revenue Of
less than 81 coo OC0-a net operating
income Of per cent on the remainder,
or on the valuation Of Class | roads,
would be s1.080000, 900.
What, Returns Should BE
Distributing the operating income
among the months or the year in the
same proportion as prevailed during
the so-cal ed "test period" the three
years of 1915 to 1917. September should
show net operating income for Glass
roads Of $l09 220,00 What they actu-
ally earned net in September last (207
roads Wit a mileage Of 2s0 000) vas
about $50. 100000, which was shor.
nearly 27 per cent. The biggest short
age was In the Eastern district, where
1t amounted to 423 per cent.
OF course. this was the first month
OF Independent operation, and many
causes have been suggested for the ds
appointing outcome. Much freight was
started in August 70 anticipate the rate
j. creases; large appropriations were
made for maintenancc for the purpose
of restoring track and facilities TO
standard cond tion ss soon as possible,
executives being Influenced to degree
perhaps by the thought that II they
we're snort OF net earnings there would
be less 70 divide with the government
Wage increases dating back to May 1
ana relating 20 every phase Of opera
l'on enhanced the expenses, and the
t"llrse o. many state commissions 70
grant IN " o g or in part increases on
ln,rastste traffic cofregponGi ny 10 the
increases on Interstate. deprived the
"a "sys ~ gross revenue upon which
D"tn commission and carriers had re-
lied.
Decline in Traffic Now
And now comes the falling OF In
traffic. clearly marked in the Fast. not
so evident In the West. bur likely to
take on considerable proportions before
tie winter is ended. This rneans a fail
in gross earnings, and the question
becomes orr of absorhing interest
whether the roads car face tnis decline
In gross and cDMe out with the net
revenue needed 10 -Drn the statutory
Q per cent. /, IL Fundamental In rail.
way operations that expenses are less
hezible than gross enrnlngg, that they
neither rfse nor fall az uuch or as
rapidly, and the result is seen In the
sharp advances and recersions In net
sarntnge. II therefore net IL to b..
saved a, tnjs 1uncture from sustaining
a ssriou, fan. expenses must be taken
vigorousl2 IN nand
10 whal degree src these expenses
eapabIs II radical REDUCTION at tho
prescnt time? w hays heard much os
sns recent dscIins in Wholesale pricsn.