There are many people interested in former transportation companies, whether they were trucking companies, railroads, airlines or ocean lines. They are called “fallen flags,” and the term describes those companies whose corporate names have been dissolved through merger, bankruptcy or liquidation.
As reported in Part 1 of this article, the Illinois Central Railroad (IC) is among the most notable of the railroads that are now considered fallen flags. The IC’s slogan, “The Main Line of Mid-America,” is an apt description of its north-south routing. It ran from Chicago to the Gulf Coast (and so much more).
Serving Chicago’s commuters
Part of that “so much more” was the Illinois Central’s electrified commuter lines. The IC was headquartered in Chicago; many in the area were familiar with its passenger and freight trains. However, many commuters in the greater Chicago area knew the Illinois Central best for its electrified commuter lines. As part of Chicago’s 1919 Lake Front Ordinance, IC agreed to remove all of its grade crossings within the city limits. It also agreed to energize its suburban lines.
The suburban commuter lines used a direct-current, 1,500-volt system. They began to run on August 7, 1926. Until diesel locomotives were introduced, the electrification system also served the IC’s freight operations within the city. The electrification remains in operation under Metra, the Chicago area commuter system.
Early 20th century
Following the death of Edward Harriman, who led the Illinois Central from 1883 to 1909, the railroad’s growth slowed during the first two decades of the century. This was primarily because of World War I and the nationalization of the nation’s railroads by the United States Railroad Administration.
However, during the 1920s the IC undertook a $300 million series of improvements. New locomotives were purchased, a large classification yard near Chicago was built and a new 169-mile cutoff was constructed between Edgewood, Illinois and Fulton, Kentucky to ease the flow of traffic through southern Illinois.
Two additions to the IC system were also made. The Gulf & Ship Island Railroad was acquired in 1925; it ran 90 miles from Jackson to Gulfport, Mississippi. In 1926, the “Vicksburg Route” was leased from the Alabama & Vicksburg and Vicksburg, Shreveport & Pacific railroads.
The modern Illinois Central
The Illinois Central reached its greatest size as a network of 6,721 miles of track in 1929. Because of sound management and the investments in the railroad made during the 1920s before the Great Depression, the IC avoided bankruptcy during the 1930s.
Then in the late 1930s the IC’s business (and that of most railroads) increased due to transportation of war materiel for Great Britain. When the United States entered the war, the Illinois Central stayed busy carrying war-related freight and passengers.
The IC was also among the first railroads to experiment with diesel locomotives; it acquired its first from General Electric/Ingersoll-Rand in 1929. It also introduced its Green Diamond, an innovative streamliner, in 1936. Its continued strength in freight was hauling coal, but it hauled other commodities as well. The railroad retired its last steam-powered locomotive until 1961.
Other improvements that IC began in the 1950s included implementation of centralized traffic control (also known as CTC). CTC is a form of railway signaling that consolidates train routing decisions that were previously carried out by local signal operators or train crews. The system “consists of a centralized train dispatcher’s office that controls railroad interlockings and traffic flows in portions of the rail system designated as CTC territory.” The IC also began to use heavier rails on key lines (which allowed the railroad to run heavier loads), further modernized several of its key railyards and, like a number of other railroads, implemented the piggyback/trailer-on-flatcar (TOFC) service in 1955. (Many railroads began TOFC in the early to mid-1950s in order to better compete with the trucking industry.)
Creating a holding company
By the 1960s the U.S. railroad industry in general was in decline. This was due to competition from other transportation modes (most particularly the trucking industry), rising costs and strict federal regulation by the Interstate Commerce Commission. Several major railroads formed holding companies in an effort to survive the increasingly difficult period. The Illinois Central’s management also decided on that course of action.
The premise of a holding company was to place a railroad in a “paper” corporation and then use the railroad’s assets to acquire other companies that offered a higher rate of return. If the premise worked, greater profits could be achieved.
That led to the launch of Illinois Central Industries in 1963. The holding company bought a variety of businesses, from the American Brake Shoe Company to Pepsi-Cola General Bottlers of Chicago.
The last acquisition made by the IC before railroad deregulation took place nearly 40 years after its last acquisition. The Tennessee Central Railway (TC) ceased operations on September 1, 1968. Pieces of the TC network were purchased by several railroads; the IC purchased its main line, which ran from Hopkinsville to Nashville.
As mentioned previously, the IC had traditionally been managed conservatively. That changed under the leadership of William Johnson. Railroad and business historians have mixed views of Johnson’s leadership. While some credit him with a number of new ideas, others believe he stayed with the failing holding company plan for too long.
The primary issue with a holding company is that whatever success the parent company might have, the railroad’s key problems of high costs and low returns remained.
A disappointing merger
Johnson’s next questionable action was the merger with its smaller rival, the Gulf, Mobile & Ohio Railroad.
The Gulf, Mobile & Ohio was also known as the “Rebel Route.” It served many of the same markets as the IC, but its network contained just 2,700 miles of track. While neither railroad’s management was happy with the merger, they believed it was necessary because of the other mergers occurring in the industry. The two railroads merged on August 10, 1972; the 9,500-mile Illinois Central Gulf Railroad (ICG) was created.
Deregulation and beyond
As noted in Part 1 of this article, railroad historians consider the merger unsuccessful. The ICG spent more than a decade after the merger trying to reestablish profitability. While the railroad’s gross revenues increased, its expenses outpaced earnings. By the early 1980s ICG was in danger of entering receivership.
Like many U.S. railroads at that time, passage of the 1980 Staggers Act may have saved the ICG. A wave of deregulation was taking place (the airlines in 1978 and the trucking industry also in 1980). Deregulation (which included the demise of the despised Interstate Commerce Commission) brought regulatory relief to the industry. Among the new freedoms was the ability to more easily abandon or sell large segments of track. Under new president Harry Bruce, the ICG did so.
The ICG made six large sales in the 1980s after deregulation:
Iowa Division – 100 miles of track were sold in 1984 to a new short line railroad (the Cedar Valley Railroad).
GM&O – 737 miles of primarily ex-GM&O track in Mississippi and Alabama was sold to create the Gulf & Mississippi Railroad.
Iowa Division – in 1985 the rest of the Iowa Division was sold to form the Chicago, Central & Pacific Railroad. The new regional line was owned by John Haley, who also controlled the Cedar Valley Railroad.
In 1986 the IC sold trackage that created: the MidSouth Railroad (which used 418 miles of the Meridian-Shreveport line and an extension to Gulfport); the Indiana Rail Road purchased the 100-mile rail line to Indianapolis; and the Paducah & Louisville Railroad bought the 287 miles of track between its namesake cities.
The last sale took place in May 1987. The Chicago, Missouri & Western Railroad purchased 631 miles of the former Chicago & Alton (GM&O) between Kansas City, St. Louis and Chicago total.
Rebirth of the Illinois Central
Through these sales, ICG’s network was reduced dramatically. In addition, the holding company spun off the railroad as an independent company as of January 1, 1989. When that occurred, the railroad’s name was changed as well – it was once more the Illinois Central Railroad.
Although its network was only about one-third the size of the ICG’s, a more nimble IC spent much of the 1990s reducing its operating ratio while increasing its profits. It also did something almost unprecedented – the IC reacquired track it had formerly owned.
The Illinois Central purchased the Chicago, Central & Pacific Railroad in January 1996. This gave the IC access once again to Omaha. And although the IC was smaller, it still had a very strategic system that made it a target for larger railroads.
Acquisition of the IC
Canadian National Railway (CN) sought the IC because of its strategic network. Acquiring the IC would allow the CN to reach the Gulf Coast while gaining a number of new markets as well. The acquisition was finalized in 1998 and CN took control of the IC on July 1, 1999.
The IC’s legacy
The IC name continues as a paper corporation under Canadian National. However, its identity has completely disappeared. Nonetheless, the Illinois Central routes acquired by Canadian National more than 20 years ago are key parts of CN’s network.
In addition, the IC’s commuter network still carries commuters around Chicago via Metra. Amtrak resumed the fabled City of New Orleans between Chicago and New Orleans. In addition, all of the corridors sold by the IC during the 1980s are still in active service.
Author’s note: This article would not have been possible without the resources made available by Adam Burns of American-Rails.com. Those interested in learning more about the railroads operating now in North America – and those that are now “fallen flags” – should explore the American-Rails site.