Opinion ID: 421082
Heading Depth: 2
Heading Rank: 2

Heading: The Limited Relevance of Systemwide Revenues

Text: 108 We consider first the ICC's belief that essential services would not be affected because the diversions from the Canadian National to the Boston & Maine represent a fraction of 1% of Canadian National's gross revenues and thus, presumably, Canadian National could underwrite any losses on its Grand Trunk Eastern line. We fail to see the relevance of Canadian National's system-wide revenues. 109 First, if Guilford downgrades interchanges at Danville and Yarmouth Junctions, shippers will lose the benefits of the best transit time between Maine and the Midwest. Boston & Maine Merger, 366 I.C.C. at 352. Canadian National's ability to absorb [229 U.S.App.D.C. 39] the resulting revenue loss will not change that fact. 110 Second, the ICC's emphasis on Canadian National's financial strength and neglect of the profitability of the Grand Trunk Eastern line ignores Canadian National's incentive to maximize profits by shedding money-losing operations. Nothing in the record supports the implausible proposition that Canadian National will indefinitely subsidize losses on its Grand Trunk Eastern line. On the contrary, undisputed testimony from Canadian National's President establishes that Canadian National treats its branches and subsidiaries as independent profit centers and will not subsidize a losing branch line. 38 111 Third, the ICC itself, as a policy matter, opposes on efficiency grounds the subsidizing of money-losing lines. For example, the Commission will not under any circumstances require one carrier to indemnify another carrier for losses due to traffic diversion, because [t]his transfer of funds would, in effect, be a massive cross-subsidization ... of inefficient operations of another railroad. Burlington Northern--Control--St. Louis-S.F., supra note 37, 360 I.C.C. at 952-53. 39 Similarly, in abandonment proceedings, the Commission analyzes primarily the profitability of the line sought to be abandoned and gives little weight to the profitability of the parent railroad. See, e.g., Illinois Central Gulf Railroad Abandonment Between Herscher & Barnes, 363 I.C.C. 690, 703 (1980) (Unprofitable operations ... burden [the carrier] and interstate commerce ... [and the carrier] should not be required to continue [such] operations ..., regardless of whether it is financially capable of doing so ....), aff'd sub nom. Bloomer Shippers Association v. ICC, 679 F.2d 668 (7th Cir.1982). 40 The ICC, to be true to this policy, should not expect Canadian National to operate an inefficient, money-losing line. 112 In sum, the ICC's belief that Canadian National's overall profitability would permit Canadian National to preserve existing service on its Grand Trunk Eastern line ignores Guilford's unilateral ability to downgrade interchange service, is unsupported by evidence in the record, and is contrary to Commission policy. 113 This is not to say that Canadian National's Grand Trunk Eastern line will be unprofitable once the Maine Central merges with the Boston & Maine. Canadian National asserts that the Grand Trunk Eastern line will sustain heavy losses as a result of diversion of traffic to the Boston & Maine, 41 but Guilford disputes this. 42 On remand, the ICC will have an opportunity to decide this factual question. 43 114