2026 FREIGHT RAIL OUTLOOK, RAILWAY AGE DECEMBER 2025 ISSUE WITH WALL STREET CONTRIBUTING EDITOR JASON SEIDL: For most if not all of 2026, the industry will be preoccupied with the proposed Union Pacific-Norfolk Southern U.S. transcontinental merger. By now, we’ve all heard the often-repeated “standard,” practically boilerplate reasons why a merger of Union Pacific and Norfolk Southern into a coast-to-coast U.S. transcontinental megarailroad—a behemoth of unprecedented size and scope—would benefit human civilization:
Freight shipments abandoning the highways for rail! Fewer interchanges! “Seamless” service! Improved service! Faster transit times! Less traffic congestion! Reduced greenhouse gases! Rail volume growth! More rail volume growth! Eroding market share reversed! A stronger economy! Happy employees! Improved safety!
There’s probably a good deal of truth to these potential benefits—but realistically, not to the degree that advocates of this merger would like us to believe. For sure, the good people at UP and NS will bust their collective butts getting things right, but history tells us that hiccups are inevitable. We can only hope that those busting their butts won’t bust a gut if the hiccups morph into severe abdominal cramps. I’m not talking about a wholesale disaster, like the collapse of the Penn Central in 1970. That was a different time—and in the long run it led to major beneficial changes, like partial deregulation under the Staggers Rail Act of 1980. But let’s not forget the meltdown that occurred when UP acquired Southern Pacific.
At this writing in late November, the merger application is yet to be filed (it’s currently expected in the vicinity of Dec. 19), but the voices of the opposition have been turning up the volume. This is understandable. A transaction of this size is bound to have some negative effects, particularly to other railroads. Those who expect to be caught in the megarailroad maelstrom will demand concessions, which the STB, I believe, will order as a condition for approval.
“The Surface Transportation Board should condition any approval on enforceable service quality metrics, strong gateway protections, guaranteed short line interchange access, transparent pricing and clear penalties for service failures,” said U.S. Department of Transportation Infrastructure and Transportation Advisory Board member Brigham A. McCown, a former federal official, in a recent editorial. “These guardrails are essential, not optional, to ensure competition is preserved and shippers benefit from the efficiencies promised.”
If the merger goes through, then what? One industry veteran tells me BNSF and CN are already considering their options, and one of them will have to be first out of the departure yard with an offer to acquire CSX. It could turn into a competition, much like Canadian Pacific and CN engaged in over Kansas City Southern. CPKC, one of the most vocal critics of UP+NS (see Jason Seidl’s commentary, following), won’t need to seek a merger, I believe. The first and only North American single-line transnational, with its Canadian transcontinental system and north-south alignment into Mexico, can stand on its own.
“Primum non nocere” (“first, do no harm”) is the STB’s guiding principle. The UP/NS application will be the most difficult mission the agency has ever undertaken. .
Jason Seidl: ‘90% Chance Of Approval’
Looking back at the building of the original transcontinental railroad in the 1860s, the most impressive aspect was that it took just six years to complete, with immigrant labor laying nearly 1,800 miles of track and blasting 15 tunnels using mostly hand drills, black powder and nitroglycerine. Compare that to the maligned Big Dig in Boston, which took a decade longer to reach completion, was confined to a single city and was completed with modern machines and technology. Now, the railroad industry is facing the potential of combining two railroads into one coast-to-coast transcontinental operation in the U.S.
As backers and opponents line up to face off over the potential benefits and potential drawbacks, pundits abound to weigh in on what could happen. Being one of those pundits, I am happy to share my opinions on a potential deal and what it might mean to the rail supply chain. Please note, however, that as I am writing this, the UP/NS merger application has yet to be filed.
My thoughts around a 90% chance of the deal being approved by the STB have been in print for quite some time. We are confident that the Board will do a thorough job of evaluating the deal. This prognostication is also dependent on two things: 1) the White House’s desire to get a deal done will likely play a pivotal role, and 2) the UP does an excellent job of making sure it can create competition for those shippers losing options with a potential combination.
Lately, most of the news coming out about the deal has been on the negative side. This makes sense as we are at the stage of UP wrapping up its application, which easily includes hundreds of (but likely well over one thousand) letters of support from rail constituents. This lull has enabled most of the news to be on the negative side. Indeed, recently we saw a letter from a coalition of state attorneys general (Florida, Iowa, Kansas, Mississippi, Montana, North Dakota, Ohio, South Dakota and Tennessee) to the STB expressing concern about a potential merger. This group of AGs cautioned the STB that a potential UP/NS combination would create too much market concentration, thereby leading to reduced competition for rail supply chain constituents. They warned of issues with higher pricing, lower reliability and reduced innovation. While missteps from prior mergers have clearly provided enough backing for anyone to question how a proposed merger may impact reliability over the integration period, it may be harder to draw a straight line to the issues of higher prices and reduced innovation.
Since 2004, railroad pricing has risen every year, driven early on by renewals of long-term legacy contracts. Recently, rail pricing increases have been subdued by the longest downturn the trucking industry has seen in more than three decades. Eventually, the trucking industry should recover, but the rail industry must find a way to compete over the longer term. For this to happen, the rail industry must embrace innovation, not reduce it.
We wrote an extensive report on the very topic of growth for the rail industry in June. The report purposefully read as an open letter to the industry, in which we urged it to focus on growth. We continue to believe the pathway to growth remains very viable for the rail industry. It must focus on delivering a consistent service product, increasing the ease of doing business and improving supply chain visibility. Opening new services in watershed areas will likely add growth, but if the railroads fail to follow through on those three items, long-term industry growth will likely return to underperforming the major economic indices.
The next six months will be pivotal for the deal, with the obvious first step of an application. The acceptance of an application with limited STB pushback would be a good first step for UP/NS. However, we expect there to be a fight from many in the industry led by Class I’s (CPKC and BNSF have been by far the most vocal critics), shipper associations (National Industrial Transportation League, American Chemistry Council, and Freight Rail Customer Alliance, to name a few), politicians, and some unions—although we note that UP has reached agreements with Brotherhood of Railway Carmen, International Brotherhood of Boilermakers, National Conference of Firemen and Oilers, and SMART-TD.
We remain convinced that the STB will do a thorough job of evaluating the deal. While the Board will not be rushed, we do expect it to focus on the task in as much of an expedited manner as possible. Indeed, Chairman Patrick Fuchs has long said his No. 1 priority is to increase the accountability of the Board. The Chairman has acknowledged that the STB has a long-standing reputation of being too slow and somewhat inaccessible. Thus far, the current Board has shown productivity improvements over historical standards. Hence, if an application is presented to the Board in early December, we believe a review will be completed by the end of first-quarter 2027, with either four or five members voting on it (we fully expect Dick Kloster to be confirmed and believe there is a chance former Board member Robert Primus may return as well via court challenges). Until that time, we expect lots of news flow surrounding the deal and note that anything or everything could impact our current 90% prediction.
