| Railway Express Agency | |
| Predecessors: | Railway express operations of: |
| Location Country: | United States |
Railway Express Agency (aka REA Express) (REA), founded as the American Railway Express Agency and later renamed the American Railway Express Inc., was a national package delivery service that operated in the United States from 1918 to 1975. REA arranged transport and delivery via existing railroad infrastructure, much as today's UPS or DHL companies use roads and air transport. It was created through the forced consolidation of existing services into a national near-monopoly to ensure the rapid and safe movement of parcels, money, and goods during World War I.
REA ceased operations in 1975, unable to adapt to changes in the rail industry, and increased competition from other modes of package delivery.
Express delivery in the early 19th century was almost all by horse, whether by stagecoach or riders on horseback. The first parcel express agency in the United States is generally considered to have been started by William Frederick Harnden (1812–1845), who in 1839 began regular trips between New York City and Boston, Massachusetts, as a courier transporting small parcels, currency and other valuables. Another, Wells Fargo & Co, was founded in 1853. Other early express companies included Southern Express Company, Adams Express Company; and Butterfield Overland Mail.
As railroads developed and expanded through the United States, linking towns of all sizes, stagecoach and horseback gave way to rail.
The United States Post Office Department introduced parcel post in 1913. This service enabled an individual to mail a item larger than a letter, up to 11lbs in weight.[1] This was on top of laws, Private Express Statutes, that gave the US Post Office the exclusive right to transport letters. Express companies could not transport letters, unless the letter had the correct United States Postage applied, on top of the rates the express company charged.
The express business flourished in the latter half of the 19th century, and by 1900 there were four principal parcel express companies, all of which included the rapidly advancing railways as one of their means of transport: Adams Express Company, Southern Express Company, American Express Company, and Wells Fargo. Another competitor arrived in 1913: the United States Postal Service expanded its services to offer Parcel Post. Still, private railway express business increased steadily through the end of World War I.
During the winter of 1917, the United States suffered a severe coal shortage. On December 26, President Woodrow Wilson nationalized the railroads in order to move federal troops, their supplies, and coal. Treasury Secretary William Gibbs McAdoo was appointed Director General of the newly formed United States Railroad Administration (USRA), which controlled all significant railroads in the country temporarily starting on 28 December 1917. This order however, did not include the various major express companies.
McAdoo did not view the multiple companies as a favorable arrangement, and pushed for their consolidation into a single organization, which was done on 1 July 1918. Railroad owned Great Northern Express, Northern Express, Western Express, and non-railroad owned Adams Express, American Express, Wells Fargo, Southern Express were merged into a single unified entity, American Railway Express Company.All contracts between express companies and railroads were nullified, and McAdoo proposed that all existing express companies be consolidated into a single company to serve the country's needs. The result was a new company called the American Railway Express Agency, which was formed in July 1918 as a consolidation of the four major and three minor express companies.[2] The new entity took custody of all the pooled equipment and property of existing express companies (40%, the largest share, came from American Express, who had owned the rights to the express business over 71280miles of railroad lines, and had 10,000 offices, with over 30,000 employees). During the war, redundant facilities were eliminated, staff transferred and procedures refined and improved within the new single company.
Following the return of railroads to private ownership and operation on 1 March 1920, the task of unwinding American Railway Express needed to be done. The efforts to improve the organization during the war and eliminate inefficiencies, particularly redundant facilities had now created an issue. The elimination of redundant facilities and pooling of equipment and personnel had made dismantling it and returning it to its pre-war state effectively impossible. With few options, the ICC granting approval for a monopoly to exist, but encouraged railroads to start their own independent express services.
Sixty-nine railroads would take over American Railway Express Inc. on 1 March 1929, under the Railway Express Agency. This take over consisted of allocating 1,000 shares of stock, according to the levels of express revenue generated by a railroad. This prevented a single railroad from owning the company, as Pennsylvania Railroad received only 126 shares, New York Central 98 shares, and third and fourth highest Southern Pacific and Santa Fe with 46 shares each. Some of the smallest railroads to receive any shares, such as the Bangor & Aroostook, received only a single share. Share ownership was not required to participate in the Railway Express Agency, with share-less railroads still moving REA traffic. However they wouldn't receive profits from REA, that were paid out according to share ownership. A notable standout from the take over was Southern Railway, that had its own railway express service, Southeastern Express Co, who remained independent until being taken over in 1938.
In March 1929, the assets and operations of American Railway Express Inc. were transferred to Railway Express Agency (REA). REA was owned by 86 railroads in proportion to the express traffic on their lines; no one railroad or group of railroads controlled the agency. In response to customer demand, REA added a Chicago-based refrigerator car line. In 1927, REA began an Air Express Division.[3] In 1938, the remainder of Southern Express also joined the consolidated REA.
Following the end of the war, express operations remained profitable into the 1950s. As passenger operations struggled from the growing airline industry and automobile ownership, express revenues did better than passenger in some situations. The reality was less ideal, as increased profitability observed in the early 1950s were result of shipping rate increases. Traffic was on a decline compared to the 1940s. In 4 years, 1946 to 1950, shipments fell 62 percent.
| Year | Shipments (in millions) | Percent decrease compared to 1946 | |
|---|---|---|---|
| 1946 | 231 | ||
| 1950 | 87 | 62% | |
| 1954 | 77 | 66% | |
| 1958 | 73 | 68% | |
| 1964 | 68 | 70% |
REA concentrated on express refrigerator service after 1940, and continued to expand its fleet of express reefers until the mid- to late-1950s. At that time, business declined dramatically owing to competition from refrigerated motor trucks. By this time, overall rail express volume had also decreased substantially. Federal investment in the interstate highway system after WWII meant that trucks and other vehicles had more flexibility in transporting goods to a variety of cities. The increase in private ownership of automobiles doomed many passenger lines of the railroads, and industrywide restructuring took place.
In 1959, REA negotiated a new contract, allowing it to use any mode of transportation. It also acquired rights to allow continued service by truck freight after passenger trains were discontinued. REA unsuccessfully attempted entering the piggyback and container business. Another blow came when the Civil Aeronautics Board terminated REA's exclusive agreement with the airlines for air express.
By 1965 many of REA's refrigerator cars, stripped of their refrigeration equipment, were in lease service as bulk mail carriers. Many were relegated to work train service.
In February 1964, Greyhound Lines attempted to buy a majority ownership stake in Railway Express Agency, for $20 per share, for at least 50% of all shares, and to demonstrate their commitment to the offer, bought 500,000 unissued shares from a 1963 stock split. Some railroads objected to this effort, and initiated legal action, and eventually Greyhound withdrew their offer. Attempts to buy REA would continue through the rest of the 1960s. By 1969, arrangements were made to sell REA. Five existing REA cooperate officers would buy out the shares at $1 per share, or around $2.5 million in total. In November, Tom Kole, formerly of Ryder Truck Lines, was brought to lead marketing.By then Railway Express Agency only received 10% of revenue from its rail operations, the remaining amounts came from trucking, 60% and air express, 40%.
On 1 June 1970, the company adopted the new name REA Express, Inc., revealing a new image to distance itself from its railroad past and nearly everything that reminded of it. Newly delivered trucks were now a light gray with a blue arrow pointing diagonally upward. No green or red anywhere to be found in the new paint scheme. The iconic red diamond was revised to have the abbreviation "REX". Tom Kole, having only joined REA Express the previous year, had taken over as president and CEO of REA Express, Inc, dethroning Spenser D. Mosely, who'd led the buyout in 1969.
In 1971, REA Express initiated a lawsuit against 160 railroads for $145 million over a number of issues. They also initiated a lawsuit against United Parcel Service, alleging that UPS had conspired for 60 years to monopolize the small parcels' market. The company also became involved with lawsuits with unions over the efforts to layoff large numbers of employees at once. ICC data revealed that REA Express now only handled 1% of intercity small parcels traffic. During the railroad strike of October 1974, the first Altair 8800 microcomputer was lost. It had been shipped from Albuquerque to Popular Electronics magazine in New York via REA and never arrived.[4]
From 1969 to the end in 1975, REA Express, Inc. lost an average of $50,000,000 ($ in 2022) every year. On February 18, 1975, REA Express, Inc. filed for Chapter 11 bankruptcy, blaming: high inflation, lack of available credit, a downturn in express shipments and losses due to continued issues with railroads.[5] In June 1975, wildcat strikes occurred at facilities in New York City, Chicago, St Louis, Kansas City, Philadelphia and Oklahoma in reaction to bankruptcy reorganization efforts during the preceding months, including a 10 percent pay cut, the dismissal of 3,200 employees and closure of 114 terminals.[6] Despite reorganization efforts, the company wouldn't last long, collapsing eight months later on 6 November 1975.[7]
In 1978, former REA Express president and CEO Tom Kole would be indicted of six counts in federal court: Three counts of embezzlement, two counts of making false statements to the Interstate Commerce Commission, and one count of conspiracy.[8] Kole, along with others, were accused of embezzling over $100,000 from REA Express during its final years. Kole was sentenced to two years in prison in early 1978 after pleading guilty to the conspiracy charge on 16 January 1977.[9]
The original 1929 contract with railroads lasted 25 years, ending in 1954. The arrangement granted REA the exclusive right to express services on railroads. The railroads would provide rolling stock, space at stations, access to railroad platforms, as well as space in any baggage cars that was not being used. In turn, REA would provide 85% of gross revenue from its rail car shipments to the railroads. After operating expenses were calculated, any profits would be disbursed monthly to the shareholder railroads, according to REA traffic on the railroads.
In 1954, this arrangement remained largely the same, however changes in railroad operations, as passenger rail was gradually vanishing, combined with increased competition from a growing less-than-truckload trucking industry forced revaluation of the agreement in October 1959. The structure of the agreement was completely overhauled, with REA now required to buy space on trains as required for their shipments. However, REA was no longer required to get permission from a railroad to use a mode of transport other than rail. The payment structure was also revised, now a simple 50-50 split with the railroad, airline or motor carrier being used for that journey. This would be momentarily successful, but ultimately not enough for REA to make a meaningful turn around.
Railroad rolling stock made a huge backbone of REA's fleet, particularly prior to the 1950s. The cars stood out with the simple dark green paint scheme and Railway Express Agency on the side. From the 1950s onward, the iconic red diamond logo was also painted on the side.
The fleets consisted of baggage cars, refrigerator cars and box cars, all capable of high speed operation and equipped to be added to passenger train consists.
Despite being known for their railroad connection, Railway Express Agency maintained an extensive fleet of motor vehicles. In 1925, the English electrical engineer, Frank Ayton reckoned that with 1,800 electrical vehicles in operation, they were the biggest user of electric vehicles in the world.[10] They also used 4,700 gasoline-powered vehicles for long-distance work and 17,500 horses.
By December 1941, REA had acquired 12,000 trucks. Most of these were delivery style trucks for local deliveries between terminals and customers, with a smaller amount of semi-trailers. Due to REA's connections to the railroads and ICC regulations for most of its existence, packages were required to be transported by rail. Transport by truck or other mode required explicit permission from the railroad impacted by the change of transport mode. Even following loosening of these regulations still had notable limitations, such as a package being allowed by truck, only if the package either traveled by rail earlier in its journey or would go by rail in a later portion of its journey.
American Railway Express would be one of the first air freight companies in the United States, making a test flight on 14 November 1919. This early success would persist, for decades, with REA dominating the field through 1950s. REA didn't operate its own aircraft, similar to its arrangement with railroads to use space in baggage cars, the company had agreements with dozens of airlines to transport express freight on their aircraft.
REA's domination of air express freight would come to an end shortly before its demise, when the Civil Aeronautics Board, responsible for regulation of aviation operations, required airlines that REA was using to ship its express cargo, to discontinue the practice by 5 June 1974.
REALCO, REA Leasing, Co., was a subsidiary of Railway Express Agency, intended to be a fleet of semi-trailers that were owned and serviced by REA and leased to railroads, often decorated with the leasing railroads logo and colors, under either the general reporting mark 'REAZ' or a company specific reporting mark starting with an "R". In 1969, REA sold off REALCO to Integrated Container Services.