CP Rail looks to the U.S. East for expansion

MONTREAL — Canadian Pacific Railway plans to expand service to New York City, Philadelphia, Detroit, Buffalo and much of New Jersey next year as it tries to build business in the U.S. Northeast.

“The East is where trains can do the most good, given the enormous volumes of freight being moved around the region,” CP Rail president and chief executive officer Rob Ritchie told the Canadian Railway Club yesterday.

CP Rail wants to serve New York City on the eastern side of the Hudson River rather than use the conventional route through New Jersey, but was unable to reach an agreement this year with CSX Corp. to use CSX track. The link would provide customers with a continuous route from Quebec through to New York City.

The U.S. Surface Transportation Board, which regulates rail traffic, has indicated its support for CP Rail to use the track with no limits on the range of commodities it carries. The STB was scheduled to receive final responses from stakeholders in regard to the rules and conditions for CPR service to New York City this week.

Ritchie said he expects the railway’s Montreal-based Eastern operation, the St. Lawrence & Hudson Railway, to be “a major component in our growth.” The StL&H links Chicago, Detroit, Toronto, and Montreal with the U.S. Northeast.

Ritchie added that CP Rail will boost operating income and profits in 1998, despite tumultuous commodities markets.

“Similar to prior years, Canadian Pacific Railway expects the fourth quarter of 1998 to be our strongest quarter of the year, and we expect operating income for the full year to be strongly above that for 1997,” he said.

In 1997, the Calgary, Alberta-based railway posted record operating income of $668 million, excluding special gains.

“We’re suffering from the Asian flu, there is no doubt about that, mainly coal and grains, which are 35% of our commodities,” Ritchie said.

“We’re feeling it in both volume and prices.”

CP Rail plans capital expenditures of $800 million in 1999, mainly to renew its locomotive fleet. The company spent more than $1 billion in 1998.

Echoing statements from Canadian National chief executive Paul Tellier earlier this week, Ritchie asked the federal government for tax breaks.

“Railways should be relieved from paying property taxes on their rights-of-way,” he said. “Unlike trucks, railways foot the bill to maintain their own roadways, while also being taxed on them.”

He also said Canada should bring its truck size and weight rules into alignment with those in the United States.