Pan Am Railways is headquartered in Iron Horse Park in North Billerica, Massachusetts. It is a subsidiary of Portsmouth, New Hampshire-based Pan Am Systems, formerly known as Guilford Transportation Industries (GTI). Guilford bought the name, colors and logo of Pan American World Airways in 1998.

History

During much of the twentieth century the trend has been for heavy manufacturing industry to move out of New England, making the region primarily a receiver of freight traffic rather than an originator. The ways to make money in the railroad business are to originate freight or carry it a long distance. New England's railroads have long been handicapped by a traffic flow that makes them delivery agents for other railroads and by short distances. Practically the longest one-railroad haul in New England was Boston & Maine's (B&M) route from the Hudson River to Portland, Maine, 267 miles (430 km) — less than one-eighth of the distance from Seattle to Chicago on the BNSF Railway.

A merger consisting of the B&M, the Maine Central Railroad (MEC), and the Delaware & Hudson Railway (D&H) along with one or more other New England railroads was proposed as long ago as 1929 by the Interstate Commerce Commission (ICC) as part of its nationwide merger proposal. Frederic C. Dumaine, Jr., president at various times of the New York, New Haven & Hartford Railroad (NH), the Bangor & Aroostook Railroad and D&H, proffered much the same idea. The benefits of such a merger would include economies of scale and longer hauls.

In 1977, Timothy Mellon, heir of the wealthy and influential Mellon family of Guilford, Connecticut, teamed up with ex-Penn Central employee David Fink to form Perma Treat, a railroad tie treatment company. Mellon wanted to acquire a railroad and considered several: Illinois Central Railroad and the Detroit, Toledo & Ironton Railroad. None of those ventures panned out, but Mellon's interest in railroads continued. The passage of the Staggers Rail Act in 1980 allowed Mellon and Fink to execute a business plan unlike those of earlier railroads in the region, centering on the idea of buying up as many local railroads as possible, to create full horizontal integration over New England and the northern Mid-Atlantic states, gaining efficiencies of scale.

In June 1981, Mellon purchased MEC and its wholly owned subsidiary Portland Terminal Company (then owned by U.S. Filter Corporation) through his holding company, Guilford Transportation Industries. In June 1983, the B&M became the second piece of the Guilford system, bringing with it a subsidiary, the 6.5-mile (10.5 km) Springfield Terminal Railway, a former interurban line connecting Springfield, Vermont to Charlestown, New Hampshire.

The formation of Penn Central (PC) in 1968 and its takeover of the NH at year's end had left New England with only one non-PC connection to the rest of the country: B&M's interchange with D&H at Mechanicville, New York. The D&H made a logical extension to the Guilford system — and a necessary one if Guilford was to be something more than a terminal company for Conrail traffic moving into New England. D&H was surrounded by Conrail and not doing well. The state of New York, which had financed much of D&H's rehabilitation program, approached Guilford about acquiring the railroad. In October 1981, the Norfolk & Western Railway, which owned D&H through a subsidiary holding company, agreed to sell it to Guilford. The purchase was completed at the beginning of 1984.

By the time the Guilford system was formed, the one-time multiplicity of connecting railroads had become a single, healthy, well-managed railroad: Conrail. Any New England-bound traffic Conrail originated would move as far as possible on Conrail before being handed over to Guilford (e.g. to Springfield, Massachusetts rather than Buffalo, New York), and it would move faster. The Guilford remained a short-haul, terminating railroad.

Abandonments

Guilford's first few years were defined by abandonments, labor unrest and strikes, and a draconian management style that damaged the company's reputation for some time. The railroad struggled financially to turn a profit and implemented cost cutting measures. Guilford then began to shrink its system by eliminating marginal low-density routes.

MEC's Mountain Division from Portland, Maine, to St. Johnsbury, Vermont, carried almost no local traffic and served only to give MEC a connection with a railroad other than B&M. With the formation of the Guilford system it was deemed redundant; B&M was now part of the family, and interchanging traffic with the Canadian Pacific Railway (CP) at Mattawamkeag, Maine, was easier than battling the grades of Crawford Notch in New Hampshire. A section in New Hampshire was salvaged and reborn as the Conway Scenic Railroad.

Similarly, the only business on MEC's Calais Branch from Bangor to Calais, Maine, was at the extreme eastern end, which could be reached by CP. Service on most of the branch was discontinued, and the line was sold to the Maine Department of Transportation (MaineDOT). The remaining service in Calais serves a pulp mill in Woodland and is operated by ST; MaineDOT leases a 10-mile (16 km) segment between Brewer and Ellsworth to the Downeast Scenic Railroad. The remaining 85-mile (137 km) Ellsworth-Calais segment was leased to the Downeast Sunrise Trail, an interim rail trail.

MEC's Rockland Branch from Brunswick to Rockland, Maine, was also on the chopping block, and is now part of the Maine Eastern Railroad, as was part of the Lower Road, the Portland-Waterville route via Augusta, Maine.

Labor disputes and mismanagement

Guilford announced layoffs, shop closings, and pay cuts. MEC's maintenance workers went on strike in March 1986, and the strike spread to B&M and D&H. To take advantage of a lower wage scale and more flexible work rules that apply to shortline railroads, Guilford began leasing portions of the MEC and B&M to B&M subsidiary Springfield Terminal (ST) for operation. This saved money for Guilford, but angered labor, resulting in another, more lengthy strike in 1987. In 1988 an arbitrator on behalf of the ICC ruled that Guilford could not lease D&H to ST and had to abide by pre-ST labor agreements. The ruling precipitated D&H into bankruptcy. Guilford withdrew from D&H, and the New York, Susquehanna & Western Railway was designated to operate the railroad. In 1991, the D&H was sold to CP Rail, where it grew into a more prosperous railroad than it had been during Guilford's tenure. The Philadelphia Inquirer later commented that Guilford had "become the bane of organized labor for a harsh, confrontational approach to trimming costs." Most railroad executives dismissed Mellon as a wealthy heir who suffered from gross mismanagement, possessed a willful misunderstanding of the inner workings of a railroad, and was a "stubborn ideologue".

Amtrak conflicts

Guilford proved to be an unwilling participant in assisting Amtrak on several occasions, forcing the U.S. federal government to get involved. The company had two north-south routes to Canada, the D&H line north from Albany and B&M's Connecticut River Line. The D&H line was in better shape, so Guilford downgraded the B&M route, reducing maintenance. Complications arose, however. B&M and the Central Vermont Railway (CV) each owned a portion of the route. South of Brattleboro and north of Windsor, Vermont, CV maintained its track so that good speeds were possible, but between those two points was a 50-mile (80 km) stretch of B&M track, much of it limited to 10 mph (16 km/h). Amtrak, whose Montrealer used the route, found the slow running intolerable. The train was suspended in 1987, and the ICC ordered B&M to sell the Windsor-Brattleboro segment to Amtrak, which immediately resold it to CV, who rehabilitated the track. The Montrealer was restored in 1989 on a new route: CV all the way from New London, Connecticut, to Cantic, Quebec, bypassing B&M entirely.

Service on Amtrak's new Downeaster line between Boston and Portland was delayed when negotiations between Guilford and the national passenger carrier slowed due to the former's issues with equipment weight and speed limits. In December 1998, a speed limit of 79 miles per hour (127 km/h) was agreed upon between both parties, with the Surface Transportation Board (STB) approving it in 1999. Guilford then refused to assist Amtrak with any track improvements, forcing the STB to deal with Guilford on Amtrak's behalf. Track upgrades were eventually made in 2000, but the proposed 2001 start-up was further delayed when Guilford refused to allow Amtrak speeds in excess of 59 miles per hour (95 km/h) (despite STB approval of 79 mph), as well as prohibiting Amtrak from operating test trains. Again the STB informed Guilford that they were in violation of their agreements signed with Amtrak. Downeaster service finally began on December 14, 2001.

Expansion attempt

In 1985, Guilford entered into an agreement with Norfolk Southern Railway (NS) to run trains to St. Louis. NS was attempting to win approval of a plan to purchase Conrail from the U.S. government and proposed allowing Guilford to lease Conrail lines to St. Louis in order to restore competition that would be lost in the merger. The plan would have allowed Guilford to use the Conrail mainline from Toledo to Ridgeway, Ohio, and from Crestline, Ohio, to St. Louis. Guilford would also purchase 955 miles (1,537 km) of Conrail track and 1,300 freight cars from Norfolk Southern for $53M. NS did not prevail in its attempt to purchase Conrail in 1985, and the Guilford plan was dropped. In 1987, Guilford also placed a bid to buy Southern Pacific.

The paper industry provides the largest source of business, both inbound chemicals, clay and pulp (although Pan Am has lost a lot of that business to trucks), and outbound paper. Rail had[when?] a slightly more than 50% market share for outbound paper shipments from Maine, most of which used Pan Am (truck and boat carry the balance). By comparison, rail has a better than 80% market share from mills in Wisconsin (primarily served by Wisconsin Central Transportation). A 2008 report issued by the American Society of Civil Engineers rated Maine at 48th of the 50 states in volume of freight traffic that moves by rail. The Maine Motor Transport Association web page reports that trucks transport 94% of total manufactured tonnage in Maine.

Despite the general growth in freight transport throughout the U.S., Guilford's growth remained stagnant due to poor management decisions, despite an initial growth spurt in the 1990s. With the creation of Pan Am Railways, traffic dropped considerably. A report issued by MaineDOT listed traffic on MEC as being 162,658 loads in 1972. As of 2008, Pan Am traffic over the remaining portions of MEC was estimated to be less than 69,000 loads. During the same time span, the Association of American Railroads estimates that freight traffic throughout the U.S. more than doubled.

Pan Am Railways (2006-present)

In 1998, Guilford bought the name, colors and logo of Pan American World Airways. In March 2006, Guilford Transportation Industries changed its name to Pan Am Systems, and Guilford Rail System was rebranded as Pan Am Railways (PAR). Then in March 2009, PAR was ordered to pay the largest corporate criminal fine in Massachusetts history — $500,000 — due to the company's refusal to report a spill of hundreds of gallons of diesel fuel in violation of state and federal environmental laws and regulations.

As of 2011, PAR employs 750 people and has a $40 million payroll.

Norfolk Southern

On May 15, 2008, NS announced that it had come to an agreement with PAR to "create an improved rail route between Albany, New York and the Boston, Massachusetts region, named the Patriot Corridor. The STB approved the deal on March 12, 2009, with each railroad owning 50% of a new company known as Pan Am Southern (PAS). PAR's trackage between Ayer, Massachusetts, and Mechanicville, New York, was transferred to PAS and continues to be operated and maintained by PAR's ST subsidiary. NS transferred to PAS cash and property valued at $140 million.

Improvements to the route include track and signal upgrades, and expansion of terminals, including construction of new automotive and intermodal terminals in Ayer and Mechanicville. In March 2012, the Federal Railroad Administration awarded a $2 million grant to the Massachusetts Department of Transportation for preliminary engineering on removing 19 obstacles to allow double stack container trains to use the Patriot Corridor route. The project includes raising clearance by two feet in the 4.75-mile (7.64 km) Hoosac Tunnel.

Routes

PAR's main line runs from Mattawamkeag, Maine, to Mechanicville, New York, via the lines of the following former companies:

MEC: European and North American Railway, MEC main line

B&M: B&M main line, Lowell and Andover Railroad

Boston & Lowell Railroad: Nashua & Lowell Railroad, Stony Brook Railroad