Don’t Eliminate Per-Diem Leasing, Level the Playing Field

This Letter to the Editor was in the August 2024 edition of Progressive Railroading, p. 5.

By RSI President Patty Long

Dick Kloster’s recent article in Progressive Railroading magazine (“If I Were King of the Rail-car Fleet,” July 2024, p.14) raised a number of key issues confronting the industry. Dick is correct that if the current AAR rule governing the car hire default rate is not changed, the result will be a severe box-car shortage and/or a TTX-dominated box-car market. That is why the Railway Supply Institute has petitioned the STB to consider requiring changes to the default rate rule. Our petition specifically invites AAR to negotiate with RSI on changes to the rule that would level the playing field for companies desiring to support adequate car supply by investing in rail cars, including box cars. To date, AAR has not accepted that invitation.

However, we believe that Dick is misguided in calling in the elimination of per-diem leasing. The reality is that elimination of per-diem leasing would upend the market for leasing a variety of pooled assets including intermodal well cars and multilevel auto carriers, to say nothing of box cars. Moreover, if done on a level playing field, per diem leasing is an incredibly useful structure to align the interests of shippers, railroads and car owners with respect to payment made for value received.

We look forward to the STB’s pending decision on our petition and hope it will grant our request to consider changes to the default rate rule. Such a decision is in the best interest of shippers, short lines, and car owners and would allow the industry to take a big step forward in alleviate concerns about future rail-car supply.