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Friday, May 1, 1992

The Little Railroad That Could

Mr. Young is a regular contributor to Automobile Quarterly.

Woven into the rich fabric of American history and folklore are some of the most famous railroads still operating today. You needn’t be a railroad buff to recognize them: the Atchison, Topeka and Santa Fe (established 1895), the Grand Trunk Western (1852), and the Union Pacific (1862) to name just three. Among these great railroads are those created recently by mergers of existing companies, with names like Conrail, Burlington Northern, and CSX. Of the thirteen Class 1 freight carriers operating in the United States, the smallest is the Florida East Coast Railway (FEC).[1]

The FEC operates only 783 miles of track between its Jacksonville headquarters and Miami, but in a heavily regulated and unionized industry, it is a model of efficiency and profitability. How has this small railroad, established in 1895, managed to survive and prosper in an industry that has seen countless railroads, both great and small, vanish from the scene?

The Flagler System

Railroading has always attracted the thickest-skinned entrepreneurs—captains of industry and empire builders. This was true of even a small railroad like the FEC. Henry Morrison Flagler (1830-1913) was such a man. The partnership he formed with John D. and William Rockefeller to operate a small refinery in Cleveland eventually grew to become the Standard Oil Company of Ohio. He became a multi-millionaire, and by the 1880s was looking for new empires to build.

In the winter of 1883-84 he visited St. Augustine, Florida. He thought the small city charming and the climate to his liking, but found the accommodations lacking. While considering building a luxury hotel, he became convinced that he could make St. Augustine a travel destination for wealthy Americans. He announced plans to build a hotel to rival anything in Europe, and that was to be the draw.

To get the vast quantities of construction material to the burgeoning city and offer a route to his new hotel, Flagler purchased the bonds to the Jacksonville, St. Augustine and Halifax River Railway. The Ponce de Leon opened in January 1888, the first of many luxury hotels Flagler would build or refurbish in Florida. These became known as the Flagler System Hotels.

Flagler realized that the means of expanding Florida tourism was the railroad, and he began acquiring other lines along the state’s east coast, in 1888 the first all-Pullman vestibule train began running between New York and Florida. He built a bridge across the St. Johns River to permit trains to travel directly to St. Augustine; before, passengers traveled to Jacksonville and took a ferry across the river, then traveled by train to St. Augustine.

Pushing farther south, Flagler established resorts in Palm Beach and Miami. In the spring of 1892, he incorporated a new line, the Florida Coast and Gulf Railway. Later that year, he changed the name to the Jacksonville, St. Augustine and Indian River Railway. In 1895 this became the Florida East Coast Railway, and Flagler merged his other railroads under this banner.

With vision some called folly, Flagler set his sights on Key West as the railroad’s final destination. This massive engineering project, called the Key West Extension, was begun in 1904 and completed in 1912 at a cost of tens of millions of dollars and a loss of more than 700 lives due to storms, diseases, and other mishaps. On the inaugural trip from New York to Key West, Flagler rode in his private railway car, “Rambler.” Nearly blind, he lived to witness, but not see, his greatest accomplishment. The “railroad that went to sea,” as some called it, operated for 23 years, until it was destroyed by a hurricane in 1935.[2]

Freight as well as passengers were vitally important to the FEC during the 1920s and 1930s. The Atlantic Coast Line Railway and the Seaboard Air Line Railroad were its chief competitors in Florida during this time and in the decades that followed. Forced to file for bankruptcy in the Great Depression year of 1931, the FEC continued to operate in receivership, yet stubbornly refused to go under.

Union Trouble

The FEC’s most vexing problems ultimately would come from within, as well as from the government. Between 1950 and 1962, it earned a profit in only one year, 1955. The railroad lost over $29 million during that time.[3] In 1961 the Interstate Commerce Commission awarded trusteeship to Edward Ball, chairman of the board of the FEC, which was now a subsidiary of St. Joe Paper Company, itself a subsidiary of the Alfred I. dupont Estate. As a trustee of the estate, Ball had been buying up the second mortgage bonds of the FEC since 1941. For the next 20 years, he was the railroad’s greatest champion and defender. That did not include, however, supporting a bloated payroll. As part of reorganization efforts, he cut the number of employees from 3,300 to 2,200.

Ball conferred closely with two other officers of the company, Raymond W. Wyckoff and Winfred L. Thornton. They soon agreed that to save the railroad, they would have to challenge the unions. In 1962 the FEC refused union wage demands and decided to negotiate directly withits employees. One of the longest and most destructive strikes in American railroad history, involving five operating unions and 22 nonoperating unions (those not running the trains), began on January 23, 1963.

In the first 10 days of the strike, nothing moved on FEC tracks. Ed Ball was resolute: He would not acquiesce to union demands, despite intense pressure from the Kennedy administration. Company officers made a bold decision. They would operate the railroad with supervisory personnel and employ new workers. The alternative was a return to bankruptcy. On February 3, 1963, the first tram with a supervisory crew set out from the Bowden terminal in Jacksonville.

In the months that followed, hundreds of acts of violence and sabotage were committed against the railroad. These included removing rails, damaging switches, and firing gunshots at the locomotive cabs. There were several wrecks and in two instances trains were blown up, but there were no serious injuries or deaths.

No passengers were carried during the strike until the Florida Railroad and Public Utilities Commission (FR&PUC) examined the company’s charter and ordered the FEC to reinstate passenger service. On August 2, 1965, passenger trains once again were running between Jacksonville and Miami, but the railroad warned passengers they traveled at their own risk.

Rail travel in general had been declining since the 1950s. The FEC had been losing money for years on its passenger service, and the strike exacerbated the situation. The company petitioned the FR&PUC to end service, and this was granted. The last FEC passenger train ran on July 31, 1968.

The strikes dragged on into the 1970s. Many railroad workers gave up hope of there ever being a settlement and moved on to other jobs, never to return to the industry. The strike by the non-operating unions didn’t end until December 1974. The National Mediation Board finally called a halt to the strikes by the operating unions on May 3, 1977.

Cutting the Fat

The strike and subsequent operation by supervisory personnel and new hires proved to the FEC just how much featherbedding there had been. The railroad found it could operate with far fewer workers.

The FEC implemented changes that were radical for the industry—changes that would make the railroad profitable. The following work rules were eliminated:

1.       The archaic 100-mile-day rule that required three separate five-man crews to move a train from Jacksonville to Miami. The FEC implemented an eight-hour day, plus time-and-a-half for overtime. In the process, they reduced the crew to two operators per train for the entire trip, eliminating 13 non-essential workers.

2.       Restrictions on road crews operating within a terminal.

3.       Rules preventing yard crews from performing road work, or vice versa.

4.       Restrictions fixing the number of men in a yard or train crew.

5.       Rules dictating when yard engines (locomotives) could be started.

The FEC also established a single seniority date—the date of hire—for all engine and train employees in both yard and road service, so that an employee could apply for the different positions he was qualified to hold without penalty. This has given employees unprecedented flexibility in planning their careers.

In addition, the FEC started an aggressive capital improvement program that today is the model for the industry. In the mid-1960s, the FEC began developing concrete ties, which are now used on all the company’s main track from Jacksonville to Miami. This greatly reduces track maintenance and costs.

To insure safety and optimal equipment operation, automatic devices installed every 20 miles of track check for loose wheels, overheated journals, and dragging equipment, and verify the presence of the tail-end monitor since cabooses are no longer used. Overhead gantries fitted with photo-beams check for shifted loads every 40 miles.

The FEC’s outstanding profits come from its ability to quickly load trailers coming off the inter-state, usually two to a flatcar; keeping the trains short, usually 20 cars per train, permits quick turnaround and frequent departures held to a strict timetable. This piggyback service saves wear and tear on customer equipment, reduces driver fatigue, and cuts freight costs to and from Miami. High volume permits the FEC to keep its rates low.

A Lesson to Follow

Can the FEC’s innovations be adopted by other railroads? This has been bandied about for years. Some railroads have adopted aspects of the FEC’s operations, but these are exceptions. Others have tried, only to be driven back by the unions. Some industry analysts say the FEC’s position is unique. Nevertheless, company officers would be the first to say procedures such as theirs could be implemented, but the industry mindset precludes it. FEC president W. L. Thornton made his views clear: “The Florida East Coast has demonstrated how much you can do if you allow yourself not to be constrained by the way things have been done. You see all kinds of things done unconventionally on the FEC, at all levels—in the mechanical department, in operations, in the yards. One reason for this is that they brought in ‘inexperienced’ people instead of embracing the institutionalized verities that were there before them. Conventional wisdom went out the window, where it so often belongs.”[4]

Clearly, the FEC’s key executives have embraced this view for the past three decades. It would take a similar commitment for other, larger railroads to make comparable changes. In any event, the Florida East Coast Railway will continue to be an innovative leader, an example of what can be done if the will to do so is there. 

1.   The Interstate Commerce Commission ranks railroads according to size- Rail systems with operating revenues of $93.5 million or more are categorized Class 1.

2.   Pat Parks, The Railroad That Died at Sea (Key West, Fla.: The Langley Press, 1968), p. 38.

3.   Seth H. Bramson, Speedway to Sunshine (Erin, Ontario, Canada: Boston Mills Press, 1984), p. 141.

4.   Quoted by Luther S. Miller, editor, Railway Age, May 8,1978.