Revived Rails

(See front cover)

With most U. S. railroads having by last week reported their first half incomes for 1929, statisticians, investors, speculators and railroaders noted and interpreted the following railroad facts:

General Earnings. Estimators figured that the operating net income for all U. S. railroads for the first half of 1929 was at the rate of annual earnings of 6.11% of railroad valuation (by the roads), whereas the same figure for corresponding 1928 period was at the annual rate of 4.78% on valuation.

Notable Earners. Pennsylvania, New Haven, Erie, and Union Pacific showed earnings that reached or approached the records made in their entire corporate lives. Largest net operating incomes for the six months were:

1929 1928

Pennsylvania $65,318,909 $50,760,063

New York Central . . 31,247,488 28,545,314

Southern Pacific. . . . 26,531,328 21,843.134

Atchison, Topeka & Santa Fe . . 25,321,779 13,232,801

Baltimore & Ohio 22,490,840 17,712,360

Stocks. Rail stocks which started up the O'Fallon decision (TIME, May 27). remained strong. Yet not many were selling at 15 times earnings. The following table shows last week's closing on ten rails and the figure those rails would have closed at had they reached the 15 times earnings mark:

15 Times Indicated Last Week's Earnings Closing

Atchison $330 $262

Baltimore & Ohio . 210 135

Chesapeake & Ohio 360 260

Erie 120 83

Illinois Central . . 150 147

New York Central 300 241

Northern Pacific . 150 108

Pennsylvania 135 95

Southern Pacific .... 195 143

Union Pacific 330 271

Passenger Traffic. Railroad passenger traffic has steadily declined since 1921, but every month since November 1928 the rate of decrease has grown smaller. Railroad men feel that passenger traffic has reached its minimum, will improve in the future. As 60 passengers can be hauled in the same coach and at the same cost as 30, an increase in passenger traffic would be very healthy for net incomes.

Porter Plan. Eastern roads are looking forward to the fall announcement of a rail consolidation plan prepared by Claude R. Porter of the Interstate Commerce Commission. Details of this plan have not been made public, but almost any definite program would be preferable to the present uncertainty as to the I. C. C.'s position on almost every rail project.

Improvement in railway net operating income has generally resulted not so much from increases in gross income as from decreases in operating costs. Railroads are being more efficiently run, and by more capable managers. Nor is there any more typical example of the modern rail executive than Southern Pacific's Paul Shoup, man most responsible for Southern Pacific's present scope and vigor.

Indeed, when seven members of California's Bohemian Club* were asked to write on a slip of paper the name of the most potent westerner of the present generation, five of the ballots bore the name of Paul Shoup.

At 18, Paul Shoup was a Southern Pacific ticket agent and freight clerk; at 31 he was assistant general freight agent with headquarters at Portland. Then (1906) came the San Francisco fire and with this first great emergency his first great opportunity. For the late great E. H. Harriman arrived in San Francisco in the wake of the fire and Mr. Shoup assisted him in relief work. So helpful was Mr. Shoup that there is a popular fable that he was a Harriman protege. It was, however, during the Southern Pacific's post-Harriman period that Mr. Shoup really rose to a prominent position, particularly through his management of the railroad's electric traction interurban lines and oil interests. He managed Pacific Oil Co. and Associated Oil Co., Southern Pacific subsidiaries, which later were sold to Standard Oil of California and Tidewater Oil, respectively.

In 1925 Mr. Shoup became Executive Vice President and in January 1929 succeeded William Sproule to the presidency.

Strong is Southern Pacific's position and large its earnings, yet in its position is one bearish item. Like other western roads, the Southern Pacific has watched with growing concern the increase of traffic through the Panama Canal. When transcontinental railroads were first built the driving of a golden spike was the final ceremonial of their completion. But the real gold spike was Cape Horn. Freighters could not compete with freight trains as long as freighters had to wallow around the Horn. But the opening of the Panama Canal furnished a short water route from U. S. coast-to-coast. Fast new freighters go from San Diego to New York in 13 days; freight cars take about 14 days from seaboard to seaboard. In 1928, 9,868,000 tons of coast-to-coast freight went through the Canal.

Ship lines, well aware of their advantages, are rapidly increasing their competition. Last month a shapely steel whale plunged down the ways at Newport News. Va., and was christened Pennsylvania. Last week fitters were busy installing finishings, running gear and, of special significance in a modern freight carrier, refrigerating and air-cooling machinery. Owned by the Panama Pacific line, turbo-electric driven, the Pennsylvania has twin sisters, Virginia and California. The Virginia began last winter to carry 33,000-ton loads of freight between Atlantic and Pacific ports. The California made her maiden voyage the winter before. The Pennsylvania will be ready for service in October or November.

*The Bohemian Club of San Francisco was founded in 1872 as a club for artists, dramatists, musicians, authors and persons appreciative of the arts. Among the membership of 2000 are David S. Jordan, Lieutenant-General Hunter Liggett, John Masefield, Edwin Markham, E. H. Sothern, William Howard Taft, David Warfield, Dr. Ray Lyman Wilbur, Ignace Paderewski. Honorary members include Crown Prince Gustaf Adolf of Sweden: Sir Hubert Brand. Rear Admiral, British Navy; Nicholas Murray Butler, President of Columbia University. On the Russian River, near Monte Rio, is located Bohemian Grove, where Bohemians gather each summer. On the August Saturday night nearest the full moon they give a play. The 1929 play, A Guest of Robin Hood, performed last week with Mr. Shoup in the audience, was written by Charles G. Norris with music by Robert C. Newell.