Class I railroads must prioritise volume growth or risk being forced into transcontinental mergers or downsizing, according to Oliver Wyman partner Adriene Bailey, reports Milwaukee's Trains.

Ms Bailey warned that stagnant traffic and weak revenue growth are pushing railroads to lose market share to trucks. Without growth, CEOs will face pressure to boost earnings or be replaced.

She outlined two options: merging the four largest Class I railroads into two transcontinental systems, or shrinking operations while sharing infrastructure. Both approaches aim to cut costs and improve service.

Mergers could open up underserved watershed markets and expand single-line service, though they may reduce shipper competition. Ms Bailey said railroads would still be incentivised to retain freight volumes.

Infrastructure sharing is already in use, such as the BNSF and Union Pacific Joint Line in Colorado and the Directional Running Zone used by Canadian National and Canadian Pacific Kansas City in British Columbia.

Ms Bailey questioned whether railroads truly want to shrink, noting that all Class I operators now claim to focus on volume growth. She cited intermodal, rail-centric industrial development, and short line expansion as key opportunities.

However, she said the industry lacks commitment to transit reliability and ease of transaction, and investors may not yet support the strategy. Rate hikes without service improvements have stifled growth.

Ms Bailey emphasised that shippers want to use rail but are frustrated by service issues. Without change, the industry risks job losses and infrastructure cuts, undermining nearly two centuries of value creation.