I really hate this.
Garl: Your latest essay demonstrates my oft-stated view that rail passenger afficionadoes (foamers, if you will) are their own worst enemies.
Another brilliant piece! I'll have to keep my comments brief as the verbose responses tend to disappear! I recently attended a conference where an S&P analyst attempted to shed some light on the prospects of launching successful 3P projects. I found S&P's credit rating of potential private partners most interesting.
Here are the latest Debt/EBIT (Earnings before taxes) for the different companies:
They also rated several international carriers who are considered private operators:
E Japan 4.8x
It was also interesting to note that the East Japan Railway company, even with its relatively high debt load has a higher credit rating than any of the North American railroads. According to the S&P Presenter, this is related to the reliability of the revenue derived from the Japanese system; a portion of which is derived from real estate developments along the corridor.
Most interesting, Blaine. Thanks. The East Japan example demonstrates how important it is to peel back a layer or two when trying to evaluate. Any explanation or theory on why the foreign rail companies have so much higher debt/EBIT rations than U.S. railroads? And, is CN more an American railroad while CP is not?
Larry, I don't know why the debt ratios for those foreign roads may be higher but it may have something to do with the fact that our North American railroads had a banner year in 2011? I would venture a guess that, based on the S&P analysts comments, the foreign railroads profits while more consistent are likely lower than might otherwise be expected from such large companies.
With respect to CP and CN, I have my own suspicions about their differences. Suffice it to say that CN was once a gov't owned entity (up until 1994 or so if my memory serves correctly); I suspect that the private entity still benefits from years and years of higher capital investments.
Blaine: Don't forget that in most of the world, the state considers rail infrastructure to be a strategic asset of the state and returns ownership, leasing operating rights to what we might call railroad operating companies. They really are glorified real estate owners and that very well may account for the significantly different debt/EBIT ratios. As for CN and CP, until recent years CP always had to be just a little better than "the people's railroad" - CN. Its capex had to be justified to stockholders and creditors, while CN undoubtedly was the beneficiary of Canadian government largesse.
I too have used the TRE in Dallas to get from the airport to downtown. The bi-level Bombardier cars made for a most productive and enjoyable commute. Cafe style booths on the upper level complete with AC outlets made it possible for me to check my email on my notebook. I glanced every few minutes at the multiple lanes of autos crawling through traffic to further appreciate the convenience of the service. The only down-side related to the TRE service from DFW is related to the two rubber tired shuttles I had to take to reach the nearest TRE station; no idea of how long those shuttles could take as they mix with traffic. The TRE, on the otherhadn, ran on a very precise schedule on the 2-3 different times I used it.
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