The Union Pacific-Norfolk Southern merger could boost traffic by nearly 10%
The windfall from a transcontinental system would be a sharp turnaround for both railroads, which have struggled to return to pre-pandemic traffic levels
OMAHA, Neb. — The proposed Union Pacific and Norfolk Southern transcontinental merger could lead to nearly 10% traffic growth by 2030 — a significant turnaround for railroads that have yet to rebound to their pre-pandemic volume levels.
UP and NS did not provide traffic growth projections as part of their July 29 merger announcement.
Rather, they said the combination would produce $2.75 billion in synergies, with $1 billion coming from productivity and cost savings and $1.75 billion coming from growth.
That $1.75 billion figure, however, was not revenue, the traditional yardstick for measuring merger-related growth. Instead, it referred to earnings before income taxes, depreciation, and amortization, or EBITDA.
“That means the expected revenues jump to $3 billion plus,” independent analyst Anthony B. Hatch wrote in a note. “Since $3 billion-plus is much bigger than $1.75 billion, it’s a wonder why they buried the lede.”
Either way, the financials allow analysts to back into a traffic growth number using a formula that takes into account the railroads’ combined revenues and EBITDA as well as their combined average revenue per carload and intermodal unit.
Rick Paterson, an analyst with Loop Capital Markets, says that his back-of-the-envelope math shows UP-NS revenue growth would top $3.48 billion as traffic grows 9.9% — or 1.55 million additional loads — by year three of the merger.
The railroads’ merger application, which will be filed with the Surface Transportation Board between Oct. 29 and Jan. 29, will detail traffic projections, including how many truckloads the railroads believe they can convert to intermodal and carload business. The railroads expect to close on the $85 billion transaction by early 2027.
UP CEO Jim Vena and NS CEO Mark George have said the combined company will deliver faster, more comprehensive freight service by eliminating interchange delays, opening new single-line routes, expanding intermodal service, and reducing distance and transit times.
George says the initial earnings growth expectations likely underestimate the potential of the transcontinental system, should it gain regulatory approval.
Both railroads have struggled to return to 2019 volume levels. In 2024, UP’s traffic was down 2.7% compared to the pre-pandemic 2019, while NS volume was off 7.1% over the same stretch.
Overall North American 2024 rail freight volume was down 4.4% since 2019, according to Association of American Railroads data. Carload traffic was down 7.8%; intermodal declined 0.92%; and coal sank 24%.
For the first half of 2025, UP’s volume is up 5%, putting it nearly even with the halfway mark of 2019, with volume off by just 0.3%. Norfolk Southern’s first-half volume was up 2% but still remained 8% behind the first six months of 2019.
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