Southern Pacific Rail Corp. reported a 45 percent drop in second-quarter operating income as revenue declined and operating expenses jumped 6 percentage points.

Revenue slipped $2.1 million, to $804.5 million, despite a 1 percent increase in carloads.Operating costs rose $46 million, to $745.8 million, driving up the ratio of expense to revenue (operating ratio), to 92.6 percent from 86.7 percent.

SP's earnings went against the flow of most other railroads, which have reported higher revenue and net income.

Prior to Tuesday's meeting with securities analysts, SP said it was expecting results below 1994's record-setting operating income of $107.4 million in the second quarter of 1994 because of an intensified effort to boost on-time performance by running more frequent train service.

Second-quarter 1995 operating income was $59.7 million.

A $39.5 million after-tax charge for staff and network reductions pushed second-quarter results, to a $24.0 million loss from $15.5 million net profit. Second quarter 1994 net income was $48.5 million, or 31 cents a share.

The company said the special charge covers elimination of 600 jobs, including 400 clerks and 200 management personnel who will leave SP over the next 12 months.

That cutback will reduce the company's work force by 3 percent.

The charge also covered writing off 600 miles of branch-line tracks that the company hopes to sell, lease or abandon.

Those lines are located in California, Colorado, Texas, Oregon, Missouri and Arizona.

Jerry Davis, chairman, said the railroad plans to cut another $60 million in expense during the second half of 1995. Reductions include storing locomotives, reducing train starts and overtime, deferring some locomotive overhauls until 1996 and lowering fuel costs by using more fuel-efficient engines.

Mr. Davis said the latest changes would not hurt service levels. Because intermodal customers have tight delivery requirements, many of the adjustments will be made to manifest trains that carry general freight, he said. The force reductions and other expense cutbacks translate into a $90 million to $95 million annual saving that could reduce the operating ratio by more than 3 percent.

Higher coal, metals and automotive traffic were offset by declining intermodal, chemicals and forest products business, said Don Orris, president of Southern Pacific Lines.

Intermodal revenue, which dipped 5 percent in the second quarter, could recover later this year because steamship lines that generate half of SP's intermodal revenue are "projecting a very solid second half," Mr. Orris said.

The 5 percent volume growth in intermodal traffic during the first half was offset by a 12 percent decline in business from motor and package carriers and a 19 percent fall in freight from intermodal marketing companies.

Coal revenue increased 22 percent in the second quarter and 17 percent for the first six months, with potential for further increases resulting from service improvements on a line between Colorado and Kansas.

For the first six months, the company posted a $7.5 million loss, compared with a net income of $57.5 million, or 39 cents a share.

Revenue for the first half of the year was $1.57 billion, up 1 percent. Expenses over the same period rose 5 percent, to $1.45 billion, driving up the operating ratio by 3.5 percentage points, to 92.6 percent.


Freightways Gains

Consolidated Freightways Inc. reported its best quarter in six years, but a tough pricing environment kept margins tight inspite of record revenue.

The Palo Alto, Calif., holding company, late Monday reported income of $20.1 million, or 45 cents a share on revenue of $1.32 billion. This compares with earnings of $444,000, or one cent a share, on revenue of $1.06 billion posted in the same period a year earlier, when its largest subsidary, CF MotorFreight, was hit by a 24-day Teamsters strike in April 1994.

CF MotorFreight posted operating income of $2.3 million on revenue of $599.1 million, compared with an operating loss of $42.1 million on revenue of $396.1 million.

Con-Way Transportation Services, CF's family of non-union carriers, had operating income of $28.2 million, on revenue of $288.1 million, compared with a profit of $36.7 million on revenue of $274.0 million.

Emery Worldwide saw operating income fall to $17.7 million from $23.4 million a year ago. Revenue at the air cargo carrier rose to $422.4 million

from $389.7 million.

PAM Transportation

Posts Rise in Net

PAM Transportation Services Inc., a Tontitown, Ark., truckload carrier, reported income of $1.6 million, or 21 cents a share, on revenue of $23.8 million.

In the same quarter in 1994, PAM reported earnings of $1.2 million, or 16 cents a share, on revenue of $19.8 million.

The ratio of operating expenses to revenue was 85.7 percent, an improvement

from the 86.5 percent level a year ago.

GATX Corp. Boosts

Net Income 51 percent

GATX Corp. increased net income by 51 percent in the second quarter to $29.9 million, or $1.23 a share, on a 10 percent increase in revenue to $314.2 million.

The Chicago leasing, logistics and terminal services company posted 33 percent higher net income of $55.6 million, or $2.42 a share for the first half of 1995. Revenue increased 10 percent to $602.4 million over the same period.

The company's railcar leasing and management unit increased earnings 20 percent to $16.1 million, while bulk liquid storage and pipeline activities at GATX Terminals generated 10 percent quarterly earnings growth to $8.3 million.

Earnings at GATX Capital, the equipment financing subsidiary, more than doubled to $11.5 million. GATX Logistics had $200,000 net income in the second quarter, compared to a $100,000 loss.

UAL Reports

Record Income

UAL Corp., the parent of United Airlines, Tuesday reported record income of $151 million, or $9.20 a share, on revenue of $3.8 billion in the second quarter.

This compares with net income of $55 million, or $1.89 a share, on revenue of $3.5 billion recorded in the same period a year earlier.

Cargo revenue increased 10.1 percent, to $185 million from $168 million, the strongest percentage growth of any of its revenue sources. For the first six months of the year, cargo revenue rose 8.4 percent to $360 million from $332 million.

The Elk Grove Village, Ill., company said the quarter saw a strong domestic pricing environment and improved revenue on almost all of the international markets served by United.