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MidSouth Rail Corporation: An ICG Spinoff

Published: November 22, 2024

By: Adam Burns

The MidSouth Rail Corporation, which operated from 1986 to 1994, was a regional railroad formed when Illinois Central Gulf began shedding large chunks of unwanted trackage during the 1980s in an effort to return to profitability. 

Despite its short existence, MidSouth Rail left a notable footprint on the rail industry, demonstrating how strategic management and focused operations could revitalize rail lines that were seen as unprofitable under larger systems in the post-Staggers Act era.

A growing Kansas City Southern acquired the system in 1994 as it aimed to handle untapped potential in the Dallas - Deep South market.  Today, this route is known as the "Meridian Speedway."

A former MidSouth Rail GP10, #9004, is ahead of a KCS local waiting on an Illinois Central freight, led by SD40-2u #6257 and SD40-2 #6052, entering the KCS yard in Jackson, Mississippi on April 15, 2000. Doug Kroll photo.

Origins and Formation

The MidSouth Rail Corporation was born out of a necessity to streamline operations and improve the profitability of rail routes that had been left behind by the major rail carriers. Its formation is a classic case of rail line rationalization that swept through the industry during the 1980s—a period marked by deregulation and the pressure on major railroads to profitably manage their sprawling networks.

MidSouth emerged in March, 1986 when Illinois Central Gulf (ICG) decided to shed some of its less profitable lines.  These initially totaled 373 miles of its former main line between Meridian, Mississippi, to Shreveport, Louisiana.

MidSouth was one of three major regional railroads formed through ICG's large spinoffs following deregulation which also included the Chicago, Central & Pacific (1985) and the Gulf & Mississippi (1985).

Despite its historic significance, the Meridian-Shreveport line didn't align with ICG's primarily north-south traffic, although it was in relatively good shape by 1986 standards. This made it an attractive offering for investors.

When operations kicked off, MidSouth encompassed a total of 418 track miles as well as all equipment (58 locomotives, 15 cabooses, and 25 pulpwood cars) and most employees (300) of ICG lineage.

It primarily transported paper and chemicals but also handled pulpwood, lumber, and grain. Revenue was bolstered by overhead traffic, thanks to the following connections:

• Norfolk Southern in Meridian
• Illinois Central Gulf in Jackson
• Missouri Pacific in Monroe
• Cotton Belt in Bossier City
• Southern Pacific and Union Pacific in Shreveport

Additionally, MidSouth interchanged with five shortlines and regional Gulf & Mississippi between its terminals. The headquarters sat in Jackson, with significant car and locomotive shops in Vicksburg.

A separate section from Hattiesburg to Gulfport was part of the MidSouth lineup, tracing the old Gulf & Ship Island line connecting the coast to Jackson, backed by haulage rights from ICG for the stretch between Hattiesburg and Jackson.

Operations and Strategy

MidSouth's operational strategy was rooted in lean management and customer-focused service. They achieved this through a combination of local management, competitive pricing, and improved service, all aimed at capturing business that somehow had been overlooked or neglected by larger carriers.

Furthermore, MidSouth strategically invested in its infrastructure, improving track conditions and enhancing the reliability of its operations. 

Interestingly, due to the railroad's efficiency and success, the rebranded Illinois Central actually offered to repurchase the property in 1990 but the regional declined. 

Just a year into its operations, MidSouth embarked on the first of three strategic expansions across Mississippi and Louisiana. The initial move involved acquiring the North Louisiana & Gulf shortline in 1987.

This line had long operated a 40-mile route from its ICG connection in Gibsland, Louisiana, down to a major paper mill in Hodge, with additional operations on a section of the former Rock Island mainline nearby. The acquisition resulted in the creation of a new subsidiary, MidLouisiana Rail.

In 1988, MidSouth expanded further by rescuing the troubled Gulf & Mississippi from bankruptcy. This involved taking over its challenging 732-mile spread of former GM&O lines, which then became a second subsidiary named SouthRail Corporation. Gulf & Mississippi had not been as successful as ICG's other spinoffs, struggling with poor track conditions and competition from ICG itself and Burlington Northern.

By integrating the connections at Newton and Meridian, MidSouth effectively wove GMSR's predominantly forest product traffic into its operational framework and undertook necessary infrastructure improvements.

The final expansion occurred in 1991 with the acquisition of the 16-mile Corinth & Counce shortline in northeast Mississippi, leading to the establishment of a third subsidiary named TennRail.

Acquisition and Legacy

Kansas City Southern soon became interested in the growing operation as the Class 1 saw MidSouth's Meridian-Shreverport main line as high-speed corridor for intermodal and other freight to Dallas, Texas.

The acquisition was finalized in 1994 and KCS set about upgrading the route with welded rail, improved signaling, improved yard and siding capacity, and additional passing sidings.  Today, the line is known as the Meridian Speedway.

Although MidSouth Rail's independent existence was relatively brief, its legacy persists today. It showcased the potential for management-intensive regional railroads to efficiently operate lines and serve local markets better than larger, less flexible rail systems.

Diesel Roster

MidSouth's approach to customer service, commitment to operational efficiency, and focused market strategy proved visionary, providing a template for other regional and short-line railroads.

In retrospect, MidSouth's journey illustrates the importance of adaptive strategies and local market knowledge in the rail industry. As an exemplar of successful rail line rationalization, its story serves as a case study in effective railroad management and regional economic contribution. While it may have been absorbed into the larger network of KCS, its influence and lessons continue to resonate within the rail industry.