The Middletown Press (Middletown, CT)
Conn. rail freight carrier to be sold
A company with New Haven roots that has long owned the Pan Am brand — for locomotives chugging along New England railroad tracks, rather than jets taxiing for takeoff — is a step closer to hooking up to one of the largest rail freight carriers in the nation.
Federal regulators have approved CSX’s deal to acquire Pan Am Railways and its parent company, one of nine freight railroads operating in Connecticut.
CSX is the third largest long-haul freight railroad in the United States, with headquarters in Jacksonville, Fla. Its locomotives haul more than 135,000 cars on routes east of the Mississippi River.
The deal includes a provision for the Darien-based short-line railroad operator Genesee & Wyoming to operate the Pan Am Southern line that links Waterbury and Berlin.
Genesee & Wyoming is the largest U.S. operator of short-line railroads with its headquarters in a modest building opposite the Noroton Heights station of Metro North in Darien. Private equity investors took Genesee & Wyoming private in December 2019 in an $8.4 billion transaction.
Pan Am Airways was incorporated by Tim Mellon in 1981 in New Haven, as Guilford Transportation Industries, named for the Long Island Sound town where he grew up before studying at Yale University.
Mellon is a grandson of investment banker Andrew Mellon, who led the U.S. Department of the Treasury during the Great Depression, and whose name continues today on the nameplate of BNY Mellon, with a Greenwich office and affiliates in Norwalk and West Hartford.
The Pan Am name stems from the legendary airline. The younger Mellon pounced on the brand rights in 1998 with a $30 million bankruptcy auction bid for the airline. Mellon would go on to launch a regional air service with a New Hampshire hub that folded in 2008.
Mellon was in the headlines last autumn, after news emerged that he fronted significant funds to support continued construction of a wall at the Texas border with Mexico.
David Fink runs Pan Am Railways today, having been a partner alongside Mellon since the company’s inception. The company’s initial office was at 71 Orange St., a small building that is now home to Elm City Games.
From its main office today in North Billerica, Mass., Pan Am Railways operates a 1,200-mile New England rail network. Alongside Norfolk Southern, Pan Am Railways shares ownership of the Pan Am Southern system which operates on another 600 miles of track. Across both, the company’s system includes track rights south of Springfield to New Hafreight ven; co-ownership of a Pan Am Southern spur connecting Berlin and Waterbury; and track rights stretching down the Naugatuck River valley to Derby.
A Connecticut Department of Transportation study in 2017 noted that at that point, Pan Am Southern was averaging about 1,300 carloads annually for a half-dozen major customers using it for shipments of propane, lumber and other building products; and to transport scrap metal from a Waterbury yard.
CSX already provides freight service through Connecticut on track running east along Long Island Sound to New Haven, and north through Hartford to the Massachusetts border.
If completed in June as planned, the deal will extend CSX’s reach into Vermont, New Hampshire and Maine, giving it 26 states in all where it has operations. The company has vowed to improve Pan Am’s infrastructure and service levels.
The federal Surface Transportation Board signed off on the deal last week, months after the U.S. Department of Justice expressed concerns on how the combination could impact pricing for rail customers.
Speaking in January to members of the Surface Transportation Board, CSX CEO Jim Foote said “there’s some question” whether Pan Am Railways had the resources to accommodate any continued growth in freight rail traffic as an independent entity.
“Future improvement in the Pan Am service levels primarily comes from us improving the infrastructure of the rail network — improving the speed and reliability of the network,” Foote said in January. “It’s going to take some time.”
Through the AFL-CIO and separately, labor unions had taken no stance on the merger except to ask for job protection. The Connecticut Department of Transportation had signaled its support for the combination.
Shares of CSX and other railroads have shot up during the COVID-19 pandemic, as labor shortages and higher fuel costs have hit the trucking industry hard, forcing shippers to look for freight alternatives.
In January, Foote said CSX’s performance could have been even better last year, but for the same labor issues dogging the railroad industry. He noted that 31 CSX employees died of complications from COVID-19, of just over 4,800 workers to have reported contracting the virus.
“We have been challenged finding people to come to work,” Foote told investment analysts in January. “The fact is we have not been able to move the amount of freight we could have had we been staffed up at the appropriate level.”