CSX Transportation zeroes in on line-sales mileage figure: 4,500

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JamesFoote
Jim Foote, CSX Corp. CEO
CSX Corp.
JACKSONVILLE, Fla. — CSX Transportation now aims to spin off about 4,500 miles of routes under its line rationalization program, a figure that includes the 1,325 miles that have been sold or are currently out to bid.

The railroad began reviewing 8,000 miles of track as potential candidates for sale or lease in 2017. The goal was to determine which lines were core to the CSX network and which might be better off in the hands of short-line operators.

That review process has narrowed the sale candidates to 4,500 miles, a person familiar with the matter tells Trains News Wire. CSX declined to comment.

The railroad has identified an additional 500 to 1,500 miles of lines that are on the fence. CSX will retain them if their economics improve. If the numbers don’t improve, underperforming routes may be candidates for sale.

Former CEO E. Hunter Harrison, who died in December 2017, set an aggressive timetable to spin off non-core routes. But the railroad now intends to take a slower, more measured, approach to line sales.

If CSX ultimately sells 4,500 miles of low-density and redundant routes, it will shrink its 21,000-mile system by about 21 percent, to a core network of 16,500 miles.

CSX has said it aims to sell lines to local operators who can grow traffic.

The first line sale, to Watco’s Decatur & Eastern Illinois, has done just that. Traffic was nearly triple initial projections after its first months of operation, Watco executives have said.

The trackage in Illinois and Indiana was one of two lines put out to bid in January 2018. The other, 373 miles of track across the Florida Panhandle, was set to become the Florida Gulf & Atlantic Railroad before the deal fell through in January.

CSX put an additional 650 miles of track out for bid in June 2018. The lines, bundled in six packages, include:
  • The Massena Line from Syracuse, N.Y., to the Montreal area.
  • The Baldwinsville Subdivision branch line near Syracuse.
  • Branches in West Albany and Rensselaer, N.Y.
  • Cumberland Valley feeder lines extending east of Corbin, Ky.
  • Eastern North Carolina branches terminating in Grangers and Plymouth, N.C.
  • The Marietta Subdivision extending north out of Parkersburg, W.Va.

There has been intense interest in most of the routes, and railroad is nearing agreements on a couple of the line segments, according to people familiar with the matter.

In July, CSX sold 176 miles of railroad in Alabama and Georgia to OmniTrax, which had previously leased and operated the lines as Alabama & Tennessee Railway and the Fulton County Railway.

At a May investor conference, CEO Jim Foote confirmed that CSX was evaluating about 8,000 miles of its network.

“We’re doing a good job of analyzing about 8,000 miles of railroad and trying to determine what segments fit into … three baskets,” Foote said.

The three baskets are core and non-core routes, plus lines that are somewhere in the middle and needed further analysis.

At the RailTrends 2018 conference in November, Foote said that CSX is working with partners on creative ways to spin off routes.

“We are looking at some unique-type transactions with people that would actually bring reinvestment into and around the lines, and maybe those are packaged up differently,” Foote says.

The investors in these lines might attract industrial development, enabling the feeder lines to put more traffic on CSX’s core network, Foote says.

CSX expects the line sales program to generate up to $500 million in the next three to four years.

The railroad’s three-year financial targets, announced in March 2018, do not hinge on line sales.
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