Express services began in the 1830s
Express service has been defined as the prompt and safe movement of parcels, money and goods at rates higher than standard freight rates.
Many historians credit William Harnden for starting the business category. In 1839 he began carrying express goods on regular trips between New York and Boston (even though a direct New York to Boston rail line was not yet in service). As business grew he formed Harnden’s First Express and even initiated shipments by steamboat.
In 1845, following Harnden’s death, the company was merged with Adams Express as a new business sector grew rapidly. Its growth was sparked by the ever-expanding railroads. Movement of freight, packages and people that once took days or weeks could now be accomplished in a fraction of the time.
Others who began express service businesses in that era include William G. Fargo, a New York Central Railroad freight clerk and Henry Wells, a leather worker, who organized Wells Fargo & Co. in 1853; and Henry B. Plant, who formed Southern Express.
In the latter half of the 19th century, the primary method to move freight in the U.S. was by rail. The rail express services provided small package and parcel transportation using the American railroad infrastructure in much the same way that UPS and FedEx use the highway and air freight systems today. The enterprises focused on providing rail express services did well during the second half of the 19th century. By 1900 four companies provided the lion’s share of express services – Adams, Southern, American and Wells Fargo.
Then the U.S. Post Office (as it was known at that time) introduced parcel post in 1913; this was the first major competition that the express companies faced. Nonetheless, the use of express services continued to increase until 1920, and then remained stable for a decade.
However, there were complaints about some of the express services. The Interstate Commerce Commission (ICC) was the federal agency that had regulated the railroad industry since the late 1880s. The ICC’s powers were increased by Congress, and it was given extended authority to oversee the express business category on February 1, 1914.
World War I
Eight months after the U.S. entry into World War I, President Woodrow Wilson announced that the federal government was nationalizing the majority of the country’s railroads. This was carried out by the United States Railway Administration, or USRA. In addition, the USRA also nationalized the seven major express services companies in June 1918.
Included in the nationalization effort were the businesses and property of the nation’s four largest express carriers – Adams & Company (founded in 1842), American Express Company (founded in 1850), Wells, Fargo & Company (founded in 1852) and Southern Express Company (founded in 1861). They were merged into an entity named American Railway Express Co., Inc. The company was formed because the government was concerned about the rapid, safe movement of parcels, money, and goods during World War I.
Following the end of World War I, the railroads were returned to their private sector owners via an act of Congress (the Transportation Act of 1920). However, the express businesses were not; they remained a part of the American Railway Express Company. A less well-known clause in the legislation made American Railway Express a private corporation.
The formation of REA
On December 7, 1928, 86 of the nation’s railroads established Railway Express Agency, Inc. More than a decade after the end of World War I, REA bought out the American Railway Express Company in March 1929 and operated the express business under the joint private ownership of the railroads (in direct proportion to the express traffic on their lines – no one railroad or group of railroads had control of the agency).
Soon after REA was founded, the classic red diamond logo debuted. The iconic emblem remained unchanged during the next four decades. REA also retained the red and green colors used previously by American Railway Express Company.
The REA was an industry monopoly; it was the sole express business to move goods via rail. A wide variety of products were shipped via REA, including animals, hazardous materials, explosives, and even fruits and vegetables.
The railroads provided railcars, as well as space at their terminals and stations to REA. The REA railcars were moved by the railroads at their expense on their regularly scheduled trains. On passenger trains, at least one railcar (usually a baggage car) carried the REA markings.
REA paid for its own expenses and divided its profit among the railroads in proportion to the express traffic they carried.
In the larger towns and cities, goods carried by REA could be picked up at the railroad station or delivered by independent businesses. In smaller towns, it was not uncommon for railroad station agents to supplement their income by becoming local REA franchisees. They provided local delivery direct to homes and businesses, first by horse and wagon and later by truck.
In time, REA expanded across the U.S. with thousands of small offices located nationwide. People came to depend on REA for their shipping needs. With its memorable red diamond sign, green delivery trucks, baggage carts, and railroad equipment, REA was common in communities large and small. Until the early 1960s, REA provided a tremendous service; it was a third-party that handled all express shipments, so that the railroads did not have to deal with the shipments themselves.
Customer service was a very high priority for the company. REA guaranteed delivery, anywhere in the country, within five days and went to great lengths to ensure this promise. In addition, shipments always carried two labels to eliminate the potential of lost addresses. Moreover, the company would transport virtually anything, regardless of size or oddity.
World War II, post-war and the 1950s
The most profitable period for REA was during World War II. However, the railroad industry’s grip on passengers and freight began to diminish after the war. However, although express volume fell after World War II, REA revenues remained at profitable levels into the 1950s. Subsequent rate increases caused revenues to drop, and the railroads that owned REA began to question the expenses of the business.
When the 86 railroads signed the original contract in 1929, it stated that they would subsidize and handle REA shipments for 25 years (until February 28, 1954). At that point a new contract was written with a 20-year time limit. However, only 60 of the original 86 railroads agreed to the extension.
Then in 1959 REA and the railroads negotiated a new contract that allowed the company to use any mode of transportation, and it acquired interstate trucking rights from the ICC to allow continued service after many passenger trains were discontinued. It experimented with the piggyback option that railroads expanded during the 1950s, but that did little for the business.
With increased competition in the late 1950s, REA began to have more severe financial difficulties. As REA’s owners, the railroads in the venture were responsible for all incurred debt; unfortunately REA was not a profitable venture. Competitors like UPS and the U.S. Post Office were impacting REA’s business.
For example, REA’s operating revenue in 1946 was $427 million. By 1951, the amount had decreased to $315 million. As early as 1945 REA was posting annual deficits of nearly $100 million. A key sign that the REA operating model was not as profitable as it had once been was that the agency’s largest shareholder, the New York Central Railroad, sold its stake in REA in January 1960. At that time, Al Perlman, the New York Central’s president, stated that REA was outdated (as was the railroads’ passenger service).
In November 1960, Railway Express changed its public name to REA Express. The company tried to distance itself from the railroads. REA Express also made an attempt to expand into the growing air express business.
Under a new president (Bill Johnson) REA Express earned its first-ever profit in 1962. However, the $4 million profit was generated primarily by cost-cutting measures and not by increased revenue.
Johnson left REA Express in 1966 to become CEO of the Illinois Central Railroad. Then in 1968 REA Express became a private, for-profit company; a group of investors acquired its assets for $2.5 million. At that point the railroads were officially out of the express business after 40 years.
That year the company lost $15 million. The company’s name was changed in 1969 to REA Express, Inc. and a new logo featured an arrow pointing upward at a 45-degree angle. The company’s trucks and railcars featured a red diamond emblem with “REA” and a large white “X.”
The end of REA
REA’s final decade was not a good one. Well over half of its business derived directly from trucking its freight and it expanded upon this by purchasing new vehicles.
By 1969, the company had experienced several years of deficits. At that point only 10% of its business moved by rail and it moved less than 10% of all intercity parcel traffic.
REA seemingly lost its way after abandoning the railroads. When Amtrak, a quasi-government agency, took over most intercity passenger rail services on May 1, 1971, only around 5% of REA’s business still moved by rail.
Events spiraled through the first half of the 1970s as business declined by about 50%. Poor management, strikes by the Brotherhood of Railway & Airline Clerks union, and increased competition from the U.S. Postal Service, UPS and Federal Express led to drastic financial losses.
On February 18, 1975, REA filed for bankruptcy and was adjudicated bankrupt nine months later. REA Express terminated operations in November 1975. The company’s assets were ordered liquidated, which was complicated by trials of its officers for fraud and embezzlement.
In 1979 REA Express sold its operating rights across the country; the final chapter in the company’s history ended.
While the company itself is generally unknown to most members of the public under 50 years of age, REA’s legacy lives on in other ways.
It was the first company to offer such shipping services as insurance, pick-up service and guaranteed arrival times. These services that REA pioneered are now commonplace in the industry.
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.
In addition, the sources of for the photographs and images used in this and other FreightWaves Classics/ FreightWaves Haul of Fame are recognized for their assistance.