Rail Industry Overview - Trains Explained

By the early 20th century, rail had outgrown its boom and bust era. But just as things were starting to stabilize, rail faced new competition from cars, trucks, and planes. Over the next 100 years, rail lost much of its dominance as a result. In this marketplace of movement, passengers and freight shippers have options. And competition comes down to three key factors – cost, speed, and degree of control. Compared to planes, trains score poorly on speed. Compared to cars and trucks, trains score poorly on control. As the comedian Michael Palin put it, a train takes you from somewhere you don't want to be to somewhere you don't want to go at a time that's inconvenient for you. However, within the overall transportation landscape, there are a few distinct pockets where rail continues to shine. This overall landscape can be understood through two dimensions. Passenger versus freight, and the total distance of travel – short, medium, or long distances. Trains are great for moving passengers short distances, say less than 50 miles or so, particularly in or near dense cities. This segment is served by urban or metro trains, like the New York subway or London Underground, and commuter trains like the MTA and the Long Island Railroad in New York. Rail is highly space efficient. Hundreds of people can move together over a narrow track, a fraction of the space that would be occupied if those people were all in separate cars. This passenger density makes it a very effective public transit option in densely populated areas, on both cost and speed, when road traffic is considered. At medium distances, say 50 to 500 miles, a segment served by regional trains, the passenger rail picture is more mixed. In dense regions of the world, like East Asia, parts of Europe, and the U.S.'s so-called Northeast Corridor, or NAC, medium-distance passenger transit is also a robust segment. In Europe, rail accounts for nearly 50% of medium-distance passenger journeys. In other parts of the world, like much of North America, rail plays a small role in this segment. At long distances, ones over 500 miles, served by national and international trains, passenger rail is viable but not so attractive unless the trains are moving at high speeds, usually defined as more than 150 miles per hour. To date, only Europe, China, and Japan have substantial high-speed rail infrastructure. Long-distance passenger rail travel in North America is slow and not competitive with air travel. In freight, on the other hand, long distances represent another sweet spot for the rail industry. Rail freight is particularly suited for large or heavy goods, or those that prefer the lowest-cost option. Medium-distance freight, like medium-distance passenger, is a mixed picture. For many goods, trucking is often preferred at distances shorter than 500 miles, particularly given the increased ability to run more point-to-point logistics. There is very little short-distance freight rail, with the exception of near industrial sites or shipping ports. For example, trains can move shipping containers from the port to nearby inland distribution centers, or move mined ore from a mine site to a processing facility. While rail's relative success varies across these segments, as do the finer details about what it takes to operate a rail business in each segment, many of the industry fundamentals are similar across the board. In this primer, we'll emphasize the key commonalities across segments while clarifying where there are meaningful differences.