UP–NS Merger Sparks Industry Backlash Over Rail Consolidation

Union Pacific’s recently announced $85 billion merger with Norfolk Southern marks a watershed moment in U.S. freight rail history. If approved, the resulting entity will be the country’s first truly transcontinental freight railroad, stretching across 50,000 route-miles and 43 states—from the ports of New Jersey to Southern California. On paper, it promises faster transit times, simplified handoffs, and a seamless rail experience for shippers. In practice, however, it has reignited long-standing fears of unchecked consolidation, rising shipping costs, and diminished service quality—concerns not just from regulators and watchdogs, but from some of the nation’s largest rail customers.

The proposed deal arrives amid a freight industry still recovering from the operational challenges of the past decade: service disruptions, rising fees, declining rail market share to trucking, and a general erosion of trust among many large-scale shippers. The regulatory terrain is also far from smooth. Although the Surface Transportation Board (STB)—the agency that will approve or block the merger—has slightly relaxed its standards for approving rail consolidations, it remains focused on preserving competitive balance, particularly in an industry already dominated by a handful of powerful players.

One of the loudest voices opposing the deal is a coalition of rail shippers that includes 3,500 companies in the chemical, agricultural, manufacturing, and energy sectors. They argue that promises of improved efficiency and better service rarely materialize post-merger. Instead, they point to a historical pattern: fewer choices for customers, higher costs, and degraded service.

From a rail operations perspective, the idea of a unified coast-to-coast network is not new—but it has never materialized in the United States until now. The U.S. rail system has been historically divided between eastern and western carriers. Union Pacific dominates the West; Norfolk Southern and its rival CSX rule the East. The merger aims to eliminate the traditional handoff that occurs when railcars move between these regions, which executives argue slows shipments and frustrates customers.

Railroads liken this inefficiency to how airlines would operate if a traveler needed to switch carriers in Kansas City just to get from New York to Los Angeles. By removing that barrier, proponents claim, the new transcontinental network would improve shipment times by as much as 48 hours and reduce administrative overhead. That, in turn, could make rail more competitive against the trucking industry, which has chipped away at rail’s market share for the past two decades.

Yet for all these benefits, the shipper community remains unconvinced.

Critics argue that the merger will not address the structural issues that have plagued rail logistics. Since the Staggers Rail Act of 1980, which largely deregulated freight railroads, the number of Class I carriers in the U.S. has dropped from over 40 to just six. Today, four of those carriers control more than 90% of U.S. rail freight. That concentration of market power has allowed railroads to push through rate increases and service changes, often with limited recourse for shippers.

One of the most contentious issues is the use of confidential contracts between railroads and their customers. These contracts often fall outside the STB’s jurisdiction, leaving shippers with little leverage when service deteriorates or fees are unilaterally increased. The result, according to industry groups, is a one-sided relationship where any cost savings generated by operational efficiencies are retained by the railroads and their shareholders—not passed down to customers.

The situation is particularly acute for bulk commodity shippers—those moving coal, grain, chemicals, or other products in unit trains from point to point. These shippers often have no alternative but to use a single rail carrier due to the nature of their routes and volumes. The merger, while offering theoretical benefits for intermodal or carload traffic, may do little to enhance competition for these captive customers.

Another aspect under close scrutiny is the history of past railroad mergers, which frequently led to operational disruptions, logistical misfires, and prolonged service issues. Observers point to the integration struggles following the Union Pacific-Southern Pacific merger in the 1990s or the more recent challenges faced during the Canadian Pacific-Kansas City Southern (CPKC) consolidation. Such transitions are rarely seamless, and shippers are rightly wary of reliving those scenarios on a much larger scale.

The financial dimensions of the deal are staggering. With a combined revenue base of $36.5 billion, operating earnings of nearly $18 billion, and expected synergies of $2.75 billion, the merger is a major play not just for operational integration but for investor returns. Analysts estimate that free cash flow could rise from $7 billion in 2024 to $12 billion by 2029—driven by a combination of synergy realization and baseline growth. However, the leverage profile will shift. The combined entity would take on an estimated $70 billion in gross debt, pushing its net debt to EBITDA ratio to nearly 3.8x—a full turn above Union Pacific’s current level.

Executives appear confident, aiming to bring that ratio down to 2.8x by 2028. Share repurchase programs have been suspended to build cash and moderate debt issuance, which could help alleviate market concerns. Still, such numbers reinforce fears among shippers that the real priority of the merger is financial engineering rather than improving the end-user experience.

Some federal and state lawmakers are already signaling caution. Senators from Kansas and Wisconsin have urged the STB to prioritize the interests of shippers and consumers during the review process. Others, particularly from Nebraska—a state that stands to benefit from increased rail activity—are voicing support for the deal. The U.S. Department of Transportation, while not commenting formally, has confirmed that its role will be limited to safety oversight, leaving the bulk of the decision to the STB.

Other major rail carriers have remained mostly quiet. BNSF and CSX declined to comment publicly. Canadian National, however, issued a statement emphasizing that collaboration—not consolidation—is the better path forward for enhancing freight rail efficiency. The company has reason to watch closely; it has deep commercial ties with both Union Pacific and Norfolk Southern, including shared container programs and intermodal routes.

Canadian National itself failed in its 2021 attempt to merge with Kansas City Southern, which instead joined with Canadian Pacific. The CP-KCS merger has served as a recent precedent for transnational consolidation, albeit with its own unique set of regulatory hurdles and service complications.

As the formal review period begins, stakeholders from across the logistics and manufacturing spectrum are preparing to weigh in. The railroads must submit detailed operational, financial, and safety integration plans. Unions are expected to participate actively, given that mergers typically come with workforce reductions and operational realignments.

In the meantime, logistics providers, including PNG Logistics, are monitoring the merger’s implications closely. With operations spanning over-the-road and air transportation across North America, PNG relies on efficient, cost-competitive rail service for its multimodal shipping solutions. Any shift in rates, service reliability, or access—positive or negative—could ripple through the entire supply chain.

From PNG’s vantage point, the focus remains on how the merger might affect bulk shippers, service lead times, and the evolving regulatory landscape. Given that many customers now demand rapid fulfillment, visibility, and contingency-ready options, any service gaps resulting from a large-scale operational merger could introduce risk into otherwise finely tuned delivery models.

In that context, a merger of this magnitude is not simply about integrating networks—it’s about aligning the interests of carriers, customers, and regulators in a way that ensures long-term resilience, competition, and innovation. As past experience has shown, those goals are difficult to achieve without sustained oversight and transparent execution.

Whether Union Pacific and Norfolk Southern can deliver on their promises remains to be seen. The next two years of regulatory review will be crucial—not just for the companies involved, but for the entire U.S. freight ecosystem.