Royal Blue's Blues

Last spring, to celebrate its 110th year and simultaneously to symbolize the new era in railroading, the Baltimore & Ohio Railroad launched a new streamliner named the "Royal Blue." Last week the Royal Blue was still swashbuckling on its New York-Washington run and the B. & O. system was still operating the 12,000 miles of track between Kansas City, Chicago, Pittsburgh and the Atlantic coast that have long made it a ranking U. S. road. But as 1937 expired it became evident that B. & O. would remember it not so much as an anniversary but as one of the bitterest years in the company's history. In 1936 the B. & 0. made $4,538,975. Last week, it declared not only that it faced a probable loss of $1,352,004 for 1937 but that it could not meet its payroll, maintain its present lines or meet maturing obligations without an immediate RFC loan of $8,233,000.

The B. & O.'s plight perfectly exemplifies the poser facing almost every U. S. road-- that operating costs have far outstripped operating revenues. For the first eleven months of 1937 the B. & O.'s total operating revenue of $157,700,000 was $3,000,000more than for the same period of 1936. But its net railway operating income of $24,200,000 (before fixed charges) was $3,000,000 less. In the past month the depression has nipped revenues still further. Because of boom times in the spring the B. & O.'s 1937 carloading total was about 5% over 1936. But during the third week in December the line handled only 29,000 cars against 42,000 in the same week last year.

The RFC in the past has lent the B. & O. a total of $82,110,000. Last week, $79,842,823 of this debt was still outstanding and the RFC held as collateral securities worth $89,279,610 at the present market. In petitioning for an additional $8,233,000 loan--on this same collateral--to be due in 1942, the B. & O. announced that it had been unable to borrow from any other source and that "with these funds the company will be in a position to maintain its property to the present standard of efficiency, avoid the reduction in maintenance forces which might otherwise be required, and assure the employment of maintenance forces of not less than 5,000,000 man-hours. . . ."

Since RFC Chairman Jesse Jones recently said that his commission stood ready to make reasonable railroad loans, it seemed likely last week that the B. & O. would get its loan. Without the loan it seemed equally likely that the line would have to join the 37 other U. S. Class I rail-oad lines now in the courts.

What the B. & 0. hopes to avoid last week overtook the 3,169-mi. Minneapolis, St. Paul and Sault Ste. Marie Railway Co., commonly called the "Soo Line." Flung across Michigan, Wisconsin, Minnesota and North Dakota, the Soo is a subsidiary of the Canadian Pacific Railway Co. Most of the C. P. R.'s other U. S. trackage (the 1,014-mi. Wisconsin Central Railway Co., 559-mi. Duluth, South Shore & Atlantic Railway, 164-mi. Spokane International Railway, 57-mi. Mineral Range Railroad) was already in bankruptcy or receivership last week when the Soo petitioned the courts to reorganize under Section 77 of the Bankruptcy Act. Reason: Greatly reduced earnings plus greatly increased taxes and other costs would prevent it from meeting a $70,000,000 bond issue maturing in July.

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