Evening star., 1949-11-16
Railroads in East Seen
Still in Red Without
Rise in Express Rates
Long Delays in ice
Decisions Hove Cost
Carriers Millions
By Dapid Laurence

new TaC6S OTuClcu NY VIC A14cS1
state Commerce Commission just
about what they paid in 1928. This
was the so-called parity" period
for the farmers. It has become
parity" for the railroads, too.
But even with the 1928 prices
for passenger fares, the Eastern
railroads will be operating in the
red unless they can also get in
creased rates for carrying express
and mail.
The truth is that costs have
risen in the things the railroads
buy and their wage scales and
pensions have gotten so high that
thus far this year the largest rail-
roads in the East are running
deficits.
One Of the troubles is the lag
which the railroads experience In
changing their rates to meet a rise
In the cost of the things they buy
1t has been estimated, for in
stance, that If the railroads in
the East could have had prompt
decisions on their rate-increase
cases in the last few years they
could have transformed their op-
erations from red to black to the
amount Of nearly billion dollars.
Decisions Often Lag Year.
What happens is that often
about IL months elapse between
the time the railroads find it nee
essary to apply for increased rates
and the time the decisions are
handed down. Sometimes new in
creased costs occur before rate
increase case is decided and then
a supplemental request has to be
made. John Lewis and the miners
union have kept the railroads con-
stantly bewildered in trying to
estimate their future fuel costs.
Likewise, he has brought about
involuntarily the more extended
use of diesel locomotives which
burn oil.
The railroads not only find it
difficult to gauge their future in
come on an annual basis because
OF the length of time consumed in
arguing rate cases before the In
terstate Commerce Commission
and State Commissions, but also
they find it difficult to finance
permanent improvements. Thus.
unless a substantial rate for pas
senger fares is permitted, it would
be unwise to invest in better
coaches.
What is not generally realized is
that the passenger end Of the
railroad business costs more to op-
crate than is received from the
public to pay for 1t. In the case
Of one large eastern railroad. the
company pays out 20 cents more
than every dollar received from
passengers. This is a subsidy to
passenger travel that the railroads
cannot afford. '"'' aS
These figures incidentally do
not include communication service
which runs In the red far more
than 20 cents On every dollar Of
income received. The loss is be-
lieved to be almost IS to 80 cents
for every dollar received.
No Choice Offered.
In the case of the western and
southern railroads, which did not
apply for the increases In passen-
ger fares, the total volume Of pas
senger business is a much smaller
proportion of the total receipts
from all sources. Among the east
ern railroads, however. the pro-
portion Of passenger revenue to
total business done is between Is
and 80 per cent. Hence there is
no choice offered the eastern rail-
roads but to require larger fares.
The western and southern roads
also have longer hauls and get
more net revenue out of the pas
Senger business because their costs
are not as high as in the East
where tunnels and other expenses
are higher than elsewhere.
The suggestion by a minority of
the Interstate Commerce Commis-
sion that the eastern railroads
should experiment with even lower
fares as a means of meeting the
competition Of other forms of
transportation Is not practical.
This is because the total volume
of traffic that the railroads can
expect to get in competition is not
related to price as such. Certain
kinds Of travel the railroads can
not expect to get anyway. The
eastern railroads do expect a slight
falling off in volume due to higher
fares, but they also expect their
total net revenue to rise, and that's
what is important In paying bills
dollars in hand rather than
gains based on theoretical expert
ments.
Rate making in the cumber-
some manner Of today could con-
ceivably be injurious to the ma
tional economy. To put rates up
after long delays could mean a
rise in costs Of transportation at
q time when the Nation was in a
downward cycle Of deflation. To
avoid such a contingency some
new method to achieve prompt
settlement Of rate cases would
seem to be desirable.
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