FINANCIAL EDGE, RAILWAY AGE JANUARY 2026 ISSUE: All industries have “drops.” In the world of the sneaker-head it is the release of the latest Air Jordan basketball shoe. For movies it is the Friday night blockbuster release. For lovers of interesting watches, Swatch’s MoonSwatch drop during COVID caused lines, store closures and 9x purchase price eBay sales.
For North American rail, the “drop” is Union Pacific and Norfolk Southern filing their merger application to the Surface Transportation Board on Friday Dec. 19. Analysts and regulators crinkled at the length—the application weighed in at a hefty 6,700 pages. It was as if during a late-night drafting session someone caught wind of Rodney Dangerfield’s infamous clip in the movie “Back to School,” where after weighing a lab report written by his staff in his palm, he says “This feels like a C. Bulk it up and add some multicolored graphs.”
There are going to be lots of questions and lots of time to tear into the details of the application. UP held a press conference on the morning of the release and covered a lot of understandably positive information about the merger.
Here are a few key takeaways from the presser:
1. Where in the world is OR? After two decades of chasing OR in North American railroading, there was no mention of OR or on the merger’s OR impact. The guarantee made that “every employee with a union job at the time of the merger will continue to have one” could be a drag on OR. That is a collective moment of joy for the men and women who will not lose their jobs. In fact, Jim Vena also added that there will be an increase of 900 jobs within the first three years. The job picture is clouded by the operating highlights provided in the associated deck. With a reduction of 2,400 train handlings, 4,700 daily train-miles and 60,000 car-miles, the first question might be, what are all the employees going to do?
2. The answer to the previous question may come from the extraordinary growth being promised following the merger. The numbers are audacious: an increase of $2 billion (yes, billion) in EBITDA, with 75% of that coming from new business being brought onto the rail. That translates into more than 1.4 million intermodal loads and 425,000 new manifest and bulk traffic loads (105,000 annual carloads converted from trucks), much of the latter coming from east/west business originating within 250 miles from the north/south corridor that tracks the mighty Mississippi.
3. Maybe the biggest Easter Egg dropped was Committed Gateway Pricing (CGP). UP and NS discussed offering customers with originations or destinations on CSX and BNSF access to competitive rates as a hybrid “single-line” haul. This would allow other railroads with these origin and destination points the opportunity to quote “competitive rates” involving UP route-miles. A few important things: Adding CGP into the application allowed for the removal of $750 million in competitor concessions from the application. The scale and scope of CGP will certainly change over time. Rates are expected to be based on actual rates charged to operate in those corridors. That opens “dynamic” route costing and a competition-based pricing system.
What resonates is the similarity between CGP and the European “open access” model (where qualified operators run on railroad-controlled track). It’s a fascinating exchange of value, the scale of which is unexpected from an industry that has worked tirelessly to protect individual franchises. Expect a lot of devil in those details, but the premise centers around what should be an infamous quote from Vena: “[Customers] are going to go with the one [railroad] that gives them enhanced service, enhanced safety and enhanced competitive advantage.”
The proposed merger, if it follows through on all of these “promises” or “projections,” will change North American rail permanently. If the merging railroads deliver these results, one could imagine that by 2035 there could be one or two Class I railroads selling track space and no longer looking like a traditional rail operating company.
So, the presser was a mix of the unexpected (CGP) and the routine. North American railroads have spent decades (with deviations for coal, ethanol and fracking) making intermodal a growth strategy cornerstone and service the foundation of bringing back the customer. Industry watchers from “coast to coast” will wonder what’s different this time when there’s a claim that business will be pulled away from trucks and that service will be the priority—all while tomorrow’s new rates are the same as yesterday’s old rates.
Further Reading:
- CN on UP+NS: ‘Show Us Schedule 5.8′
- BNSF, CN, CPKC, CSX, NGFA: UP+NS Merger Application ‘Incomplete’
- Former Rail Executive: UP-NS Deal Likely to Get Done & Other Views
- Merging Lines – First Take on UP-NS Application
- How Railroads Can Deliver What Congress Promised: Better Infrastructure
- CPKC: UP+NS Merger ‘Not in the Public Interest’
- UP, NS Deliver 6,700-Page ‘Christmas Present’
- UP, NS Shareholders Greenlight Merger
- UP 3Q25: ‘Continued Improvements in Pursuit of What’s Possible’
- For NS 3Q25, ‘Strong Results’
- ASLRRA to Participate in STB Review of Proposed UP-NS Merger
- Is a UP-NS ‘Fix’ In? Don’t Bet on It!
- Why a Unified Rail Network Makes Sense
- A Rail Merger to Put America Back on Track
- UP’s Jalali: No Hiccups With NS IT Integration
- 64 Industry Organizations to the STB: ‘Proceed With Great Care’
- Ag-State Senators to STB: Be ‘Rigorous’ and ‘Comprehensive’
- BNSF vs. UP, Take Three
- Eliminating Paper Barriers is the Pro-Competitive Move
- Hoeven, Klobuchar to STB: ‘Closely Scrutinize’ UP+NS
