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In the midst of its worst network congestion since the Southern Pacific Railroad merger and having handled a record number of carloads during the second quarter, Union Pacific Railroad recently devised a plan to improve traffic flow before and during the fall peak, when traffic typically spikes: controlling carload volume.

Yesterday, the Class I announced it's implementing additional measures to manage traffic growth, such as creating an allocation system for certain shipments through key terminals and reducing train starts.

The moves will impact each of the railroad's six commodity groups, but annual commodity revenue still is expected to increase between 4 percent and 6 percent compared with 2003, and second-half traffic volume will rise as previously projected, UP officials believe.

"Our international intermodal volume in June was already at levels matching last year's peak season volume … and demand for our service continues to rise," said Executive Vice President of Marketing and Sales Jack Koraleski in a customer letter dated July 8. "The steady increase in demand for carloadings has meant that we have been unable to gain on the situation. Our velocity has remained stubbornly flat for several weeks [and] there has been no improvement in terminal dwell. Spot power imbalances continue to be a problem, and yard congestion remains in several key locations, such as the Pacific Northwest, northern California and Texas."

UP plans to control traffic volume in several key corridors and terminals — including the Interstate-5 corridor between Seattle and Roseville, Calif.; routes between Los Angeles, and El Paso, Texas, and Salt Lake City; and a central corridor through Iowa and Illinois — by limiting carloadings and reducing cars on line. The railroad will allocate certain shipments to prevent terminal overloads, temporarily limit the number of rock and aggregate material carloads handled in Texas, consolidate selected automobile and chemical trains, regulate the volume of selected agricultural commodities and cap train starts.

"While the timing of our recovery remains uncertain, we are convinced that the actions we have undertaken are the right ones," said UP Chairman and Chief Executive Officer Dick Davidson in a prepared statement. "We are absolutely committed to restoring our operational efficiency so that we can take advantage of the opportunities ahead."

During the past nine months, UP has focused on hiring and training train and engine-service workers, resulting in about 2,500 new trainmen and 700 conductors placed in engineer training programs. By the end of the third quarter, UP officials expect another 1,250 trainmen to complete training. The Class I also acquired 500 locomotives to keep up with traffic demands.