September 19, 2018
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Head of new Maine railroad company says he’s building transportation system to last

By Nick McCrea, BDN Staff
Updated:

BANGOR, Maine — The man behind the controls of the company that took over for the defunct Montreal, Maine and Atlantic Railway says he plans to turn a profit by 2015.

That’s not an easy feat, according to John Giles, CEO of Central Maine and Quebec Railway, considering Montreal, Maine and Atlantic Railway was profitable in just three of its 12 years in operation.

“We’re trying to grab this company right now and pull it up by the bootstraps,” said Giles, a 45-year veteran of the rail industry, who came out of retirement to head up the effort to save hundreds of miles of tracks from St. Jean, Quebec, near Montreal, to Searsport.

Giles spoke to a crowd of more than 120 area business leaders, government officials and transportation industry experts at an Action Committee of 50 breakfast gathering on Wednesday morning at Hollywood Casino in Bangor. Action Committee of 50 is a nonprofit economic development corporation geared toward improving trade and logistics in Maine as a way of attracting and growing industry.

Early this year, New York-based Fortress Investment Group, worth about $65 billion, purchased Montreal, Maine and Atlantic Railyway’s assets at auction. The former railway went bankrupt after one of its trains derailed and exploded in Lac-Megantic, Quebec, last year, killing 47 people. Giles represented Fortress during the auction proceedings and ultimately took on the role of president of the company that would replace Montreal, Maine and Atlantic Railway.

Since then, Giles told Wednesday’s crowd, he’s been working to set the stage for a viable, sustainable railroad.

“The Fortress guys aren’t hobbyists, nor am I,” Giles said.

Giles said that crews are driving to complete about $10 million worth of rail improvements before the ground freezes, including nearly 30,000 new railroad ties and new ribbon rail that will replace some of the worst sections of track, especially certain turns.

These replacements will allow much of the system’s 10-mph-limit sections to bump up to 25 mph, according to Giles. That will prove important, because crews that used to take all day to complete a route will reach their destination in half the time and be able to return home on the same day, Giles said. Rather than dropping off a load at the end of their shift and going to rest at a hotel while a second crew takes the train back, one crew will be able to do the return route as well in the same amount of time. That drastically reduces costs.

Giles also gave up to the banks most of Montreal, Maine and Atlantic Railway’s 40 former locomotives, instead bringing in 20 “new to us” models that are more efficient and have cut fuel consumption drastically.

Central Maine and Quebec Railway has 105 employees and is recruiting more. Because it uses fewer locomotives, more employees are being tasked with rail repairs, Giles said.

Fortress has been behind several railway “turnarounds” in the past, two of the most significant examples being RailAmerica and Florida East Coast Railway. At RailAmerica, where Giles served as CEO from 2007-12, the railroad’s operating income when Fortress stepped in was $67 million. By the time RailAmerica was sold to another railroad operator in 2012, the company’s operating income had climbed to $180 million.

During a question-and-answer session, Giles was asked whether he thought a railway could be economically viable without transporting crude oil. Giles said he thought that would be possible, but that as a common carrier, Central Maine and Quebec Railway can’t pick and choose what it hauls unless regulations limit what companies can ship.

In the wake of the Lac-Megantic disaster, Giles and other railroad officials have made regular trips to the Quebec town to “sell our track record our safety and sell our track record of reinvesting in business.” He said that those talks ultimately overcame skepticism and convinced officials that rail shipments should continue through town in order to ensure the economic stability of surrounding towns. Those trips to Lac-Megantic continue on a monthly basis, and rail officials update the town on the progress of capital and safety improvements.

Asked whether there might be any future in a passenger rail line along Central Maine and Quebec Railway’s tracks, Giles said, “It’s just really hard to make money in passenger rail. … That’s not something I’m really going out and soliciting.” He added that that sort of service expansion isn’t his focus at this stage, when he’s trying to save and sustain the railroad.

Follow Nick McCrea on Twitter: @nmccrea213.

 


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