DESPITE last minute lobbying efforts, Burlington Northern Santa Fe and Canadian National have lost the court battle to overturn a government suspension of railway mergers. On July 14 the Court of Appeals in Washington ruled 2:1 that the Surface Transportation Board was legally empowered to impose such a moratorium and ’neither violated the statute nor otherwise exceeded its authority.’
The Board acted on March 17 (RG 4.00 p201) after the two giants announced a US$6·2bn deal to create an 80000 km network serving 33 states in the west and midwest and eight Canadian provinces. Shippers and politicians reacted immediately, warning of possible service meltdowns similar to the débâcle that followed the 1996 Union Pacific-Southern Pacific combination. The board was also worried that the BNSF-CN tie-up would trigger a spate of similar schemes as the continent’s few remaining major railways jockeyed to create ever-larger carriers in order to remain competitive.
Following the court’s decision, the two companies issued a joint statement saying they were ’deeply disappointed’ and were undecided on what, if any, options they would pursue. In any case, the STB has said the moratorium will expire in June 2001, after it has had the opportunity to evaluate outdated merger standards.
CN had issued on July 3, as required by the STB, its first of five annual reports on its 1999 merger with Illinois Central. In a statement accompanying the report, CN President & CEO Paul Tellier said that ’the integration of CN and IC has been flawless’, claiming that it was the ’smoothest integration on record’. The report says that CN ’has become the most efficient Class I railroad in North America, with a 1999 operating ratio of 72%’, which was ’10 points better than the average of its peer group’.
