The ratings reflect Union Pacific Corp.'s solid competitive position as the largest railroad in the U.S., and the favorable risk characteristics of the U.S. railroad industry, offset by a financial profile gradually recovering from the impact of serious traffic congestion during the late 1990s. During that period, a combination of several factors, including crew shortages at the acquired Southern Pacific Corp. and greater-than-anticipated traffic, led to serious congestion from late summer 1997 until around the end of the third quarter of 1998, resulting in losses and higher debt levels. Operations have fully recovered and Union Pacific has a well-diversified traffic base, including coal (23% of revenues), chemicals (15%), and intermodal (18%). The diverse traffic base and large network covering the
