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ERIE - LACKAWANNA MERGER STUDY

Competitive Passenger Train Service

Study XXI

The purpose of this study was to review all competitive through passenger train service and to determine what changes would be made as a result of merger.

The competitive through passenger trains were considered to be Erie trains between Hoboken and Chicago and Lackawanna trains between Hoboken and Buffalo and Hoboken and Binghamton. Present schedules, consists and revenues of these trains, including passenger, mail, express. and dining cars, were analyzed in the light of competitive and other reasons for operating trains at the times scheduled. In the case of the Lackawanna, train connections with the Nickel Plate at Buffalo were also considered. A special "on-and-off" report for the two weeks of June 1-14, 1957, was made of all passengers on the trains being studied. This report included information regarding the origin stations of passengers their destinations and revenue received.

Proposed schedules, consists and estimated revenues and. expenses were developed and a comparison was made between present and estimated revenues and expenses.

The table below summarizes the number of present competitive through trains and the proposed through trains.

                           P R E S E N T              P R O P O S E D
Between               Eastbound Westbound Total  Eastbound Westbound Total

Hoboken-Chicago          3          3       6        3         3       6
Hoboken-Buffalo          4          4       8        2         2       4
Hornell-Buffalo          -          -       -        1         1       2
Hoboken-Binghamton       1          1       2        1         1       2
                   ------------------------------------------------------
         Total           8          8       16       7         7       14

The proposed passenger train schedules provide for the operation of through trains via the Lackawanna between Hoboken and Binghamton and one train per day in each direction between Hoboken and Binghamton via Port Jervis making connections with through service at Binghamton. The Lackawanna route was chosen for the proposed service as it is shorter and serves a more populous territory including Scranton, Pa., and the Pocono resort area. Between Coming and Buffalo the Erie would be used.

The estimated, loss in passenger revenues was $312,590 which reflects both "direct" and "dependent" losses. Direct losses were those considered to be attributable to revised passenger train operations of the through trains being studied. Dependent losses were:those which would result from the loss of passengers who would have moved to or from points on the line of the merged company beyond the route of the competitive trains being studied.

The loss of mail revenue was estimated to be $158,883, reflecting complete loss of local mail on the Lackawanna line between Corning and Buffalo offset by increased RPO miles for through mail carried over the longer Erie route.

An increase of $89,986 was estimated in express revenue which would result from anticipated longer hauls after merger. Traffic now handled via Lackawanna between Hoboken and Buffalo, for example, would move via the merged company to and from points beyond Buffalo, such as Chicago.

Dining car revenue was assumed to be unaffected by merger as it was thought that increased long haul business would offset the decrease in the total number of passengers.

The following items of expense were included in the out-of-pocket costs of operating existing service as compared with the proposed service of the merged company

Crew Wages

Wages were developed on an actual basis.

Locomotive Expenses

Repairs were based on normalized maintenance costs for diesel locomotives an outlined in Appendix B. Fuel costs are based on Erie' 1956 costs per gallon at the consumption rate developed for road passenger units.

Passenger Train Car

Passenger car miles were developed for the following types of care divided to show the miles made by each type of car separately:

Estimated costs of repairs per mile were developed for each class of car listed above reflecting the different requirements of the various classes and designed to show the average normal cost of repairs.

The cost of repairs permits by class of car was applied the miles made by the different classes and included the merger study in order to develop estimated savings in repair costs.

Train Supplies and Expenses

Costs were based. on system average costs per passenger train car mile.

Dining and Buffet Expense

Cost of operating this service were available on an actual basis and the estimated savings were based on existing costs.

Equipment Rents

A loss was estimated which represents the 1956 net mileage of head end cars interchanged between the Nickel Plate and the Lackawanna.

Payroll Taxes

Standard allowances were made for payroll taxes and vacations, using 60% of repairs to locomotives and cars as representing the labor portion of those costs.

Pullman Deficit

Under existing contracts with the Pullman Company, the operating carriers make up any deficits incurred on Pullman cars furnished by that company and these deficits can be allocated on a per car basis. Savings were estimated on the basis of proposed changes in the operation of Pullman equipment as a result of merger.

Joint Facility Rents

A loss, reflecting 1956 revenue received by the Lackawanna from the Nickel Plate for the use of facilities at Buffalo, was estimated. It was also estimated that on the basis of proposed passenger train consists that an additional 1,478 head end cars would be handled at Chicago annually on which joint facility charges payable to the C&WI of about $63-00 per car would be applicable.

A recapitulation of the revenues and expenses of the present and proposed operations as well as estimated annual savings is shown on Schedule A.

Schedule A

                       Competitive Passenger Train Service
               Recapitulation of Present and Proposed Operations

                     P r e s e n t    O p e r a t i o n s     Proposed     Estimated
                   Erie           DL&W          Total        Operations     Savings
 Train Miles     2,181,816     1,290,016      3,471,832       2,933,754      538,078
 Unit Miles      4,363,632     2,580,032      6,943,664       5,799,910    1,143,754
 Car Miles      17,362,020    10,527,088     27,889,108      25,224,918    2,664,lgo

Revenues
  Passenger    $3,001,766    $2,304,750    $ 5,306,516    $  4,993,926     $312,590 L
  Mail          2,721,123     2,071,806      4,792,929       4,634,046      158,883 L
  Express       1,727,047       830,226      2,547,273       2,637,259       89,986
Dining & Buffet   374,530       353,648        728,178         728,178        ---
              -----------------------------------------------------------------------
Total          $7,824,466    $5,550,430    $13,374,896     $12,993,409      $381,487L

Expenses
 Crew Wages    $1,773,028     $ 994,147    $ 2,767,175     $ 2,473,948      $293,227
 Loco Exp       1,454,835       842,535      2,297,370       1,933,690      363,680
 Pass Train Car
  Repairs         823,521       497,316      1,320,837       1,181,788      139,049
Train Supplies and
  Expenses        546,904       409,504        956,408         880,350       76,058
  Dining and Buffet
   Expense        458,004       470,315        928,319         898,014       30,305
  Equipment Rents
     (Credit)      ---           19,957         19,957         ---           19,957 L
  Payroll Taxes   350,041       215,591      1,565,632         502,613       63,019
               ---------------------------------------------------------------------
  Total        $5,406,333    $3,4O9,451    $ 8,815,784     $ 7,870,403   $  945,381

Net Revenue from
Train Operations $2,418,133  $2,140,979    $ 4,559,112    $ 5,123,006      $563,894

Other Expenses
 Pullman Deficit$  354,811    $ 210,002    $   564,813   $    414,689      $150,124
Joint Facility Rents
(Credit)            ---          68,394         68,394         93,114-Dr.  161,508 L
               ---------------------------------------------------------------------
Total           $  354,811    $ 141,608   $    496,419   $    507,803     $ 11,384 L

Net Revenues    $2,063,322   $1,999,371    $ 4,O62,693    $ 4,615,203      $552,510
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