Headaches & Hopes

It was no secret that the Pennsylvania Railroad Co. had lost money in 1946. The only question was: How much? Last week the Pennsy gave out the dismal figure: $8.5 million (v. a net profit of $49 million in 1945). Never before in its 100-year history had the biggest U.S. railroad gone into the red.

Like all other roads, the Pennsy had watched its revenues decline and its costs zoom since war's end. Thus, while the Pennsy's total 1946 operating revenue of $822 million (down $114 million from 1945) set a new peacetime high, so did its operating expenses.

Too Little. For the Pennsy's woes, President Martin Withington Clement had a two-word explanation: "Government regulation." When rail workers were awarded an 18 1/2-c- wage increase in mid-1946, it was made retroactive to Jan. 1. But ICC delayed giving the railroads a 17.6% rate increase until last December. Furthermore, said Clement, additional boosts are necessary.

Partial justification for Clement's gloom was to be found in preliminary rail earnings reports for January. They showed freight revenues up a whopping 21.2% over 1946; but a drop of 39.5% in passenger revenues pulled the roads' net increase down to an unimpressive 6.5%. Obviously, the industry's problem was to jack up passenger revenues.

Too Much. For the most part, stick-in-the-mud railmen were counting on ICC to do this for them by boosting passenger rates--a dubious solution, because higher rates would probably mean a still smaller volume. A more likely solution was to woo passengers away from planes, buses, autos.

As passenger bait, Alleghany Corp.'s Robert R. Young in January began offering travelers a pay-as-you-go service on the Chesapeake & Ohio, complete with credit cards like those in use by airlines. Last week, 35 other roads announced that they would provide the same service, starting in April.

Bob Young had only begun to prod. This week, in the midst of his maneuvering to take over control of the giant New York Central, Young launched his new Federation for Railway Progress. With onetime Secretary of State Edward R. Stettinius Jr. as chairman of an advisory committee representing the public, the Federation will be open to security holders, labor, shippers and anybody else interested in "revitalizing the industry."

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