You have to fly from the West to the East Coast. You can either choose to have a layover at Chicago's O'Hare for five hours, or fly non-stop. What's your choice? Except for a couple of die-hard Cubs fans, I can't imagine the former being more popular.
Now, substitute trains for planes, and goods for passengers -- and go through the same thought experiment. Though many airlines might offer direct travel between the coasts, only one railroad sports that designation: Canadian National Railway
We know that efficiency = high demand + low operating costs.
First, let's examine the chart below.
|
Railroad |
Miles of Track |
Access to: |
|---|---|---|
|
Union Pacific |
32,100 |
Pacific and Gulf of Mexico |
|
Burlington Northern Santa Fe |
32,000 |
Pacific and Gulf of Mexico |
|
CSX |
21,000 |
Atlantic and Gulf of Mexico |
|
Norfolk Southern |
21,000 |
Atlantic and Gulf of Mexico |
|
Canadian National |
20,400 |
Atlantic, Pacific, and Gulf of Mexico |
If I were to include only the first two columns, Canadian National looks to have a major disadvantage. The company owns more than one-third fewer miles of tracks than its largest competitors.
However, the final column changes the whole story; it shows Canadian National's unique strength: direct access to both coasts, as well as the Gulf of Mexico.
All of a sudden, having fewer miles of tracks becomes an advantage: fewer tracks lead to lower costs for track maintenance and fewer workers to pay. While the average employee at a mammoth like Union Pacific earns the company $54,310 in profit per year, their counterparts at sleeker Canadian National bring in nearly $92,650 over the same time frame.
This advantage also helps to explain the company's industry-leading profit margin. While the average railroad keeps 19 cents for every dollar of revenue, Canadian National keeps a whopping 35 cents.
A gateway for trade
No one wants their products sitting in a rail yard waiting to be unloaded and reloaded by different rail companies. In our global and ever-shrinking world, the ability to efficiently move goods from producer to consumer has the utmost utility. Whether it's transporting Chinese goods to the East Coast, or connecting European automakers with the West Coast, Canadian National Railway is the only ride that goes from sea to shining sea.
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