OMAHA, Neb. (April 1) — CSX Transportation and Union Pacific Railroad agreed to streamline east-west rail traffic through major gateways that connect the two railroads.

The move is designed to cut costs at North America’s largest and third-largest railroads, respectively, and improve service in an industry plagued by poor on-time performance.

The railroads said the alliance would create a formal, structured plan to direct traffic through the most advantageous connections for shippers.

Although railroads traditionally “pre-block” freight cars for connecting railroads, this is the first time two companies will use pre-planned interchanges. The new agreement should simplify how trains are built in the yard before reaching an interchange, making shipments easier to divide when it reaches the gateway.

Union Pacific operates 36,000 miles of track and is the largest railroad in the West. CSX is the largest in the East with 22,000 miles.

CSXT’s and UP’s major interchange points are Chicago, St. Louis, Salem, Ill., Memphis,and New Orleans. Transition to the new routing is expected to take six months to a year. Both railroads operate in Canada.

The rail industry has been roundly criticized for poor service recently, the low point coming in 1997 as Union Pacific’s rocky integration of Southern Pacific Rail Corp. created traffic jams on the tracks.

Interestingly, the CSX-UP deal comes as CSX prepares to begin integrating operations of its portion of Conrail on June 1. CSX and Norfolk Southern Corp., the fourth largest U.S. railroad, bought and divided Conrail last year, but have yet to begin operations.