CHATTANOOGA – If competition is the central issue in the regulatory future of the proposed Union Pacific-Norfolk Southern merger, the two railroads’ chief executives say their latest filing gives them a stronger case for approval.

Union Pacific (NYSE: UNP) CEO Jim Vena said the Surface Transportation Board should view the deal as pro-competitive because it would improve end-to-end service and reduce costs for customers.

“If the STB is concerned about the customer,” Vena said Tuesday during an appearance with Norfolk Southern (NYSE: NSC) CEO Mark George at the FreightWaves TrainsPro Future of Rail Symposium, “if you limit faster service end to end, if you think that it’s not good to have an end-to-end move across the country that is normally less expensive … and you rule that other railroads should be kept whole, you’re actually increasing the price to consumers.

“That’s why this is going to go through. … Let [the other railroads] go compete. They can drop their price. They can provide a higher level of service to compete against us,” he said.

George said the merger announcement has already affected competition, but added that the application now includes additional measures that strengthen the railroads’ argument as the STB reviews whether the deal would serve customers and preserve enough market pressure.

“There’s no denying competition has already been enhanced just by the announcement of it,” George said. “That won’t be enough to satisfy the STB, I’m sure. But the other features that we’ve added in the application clearly pass a threshold of enhancement.”

The latest additions were included in a 412-page supplemental filing submitted Monday. It was the second of two filings this month responding to questions the STB raised when it accepted the railroads’ revised merger application in May.

One major change expands the Committed Gateway Pricing program included in the original proposal. The revised version doubles the number of eligible shippers and adds bulk unit train moves, which were not included before.

Vena said the change was shaped by customer feedback.

“They truly thought it was going to be helpful in their negotiations with the other railroads, to be able to get their products moving in a manner that was better than what we had offered up with just the products that were included,” Vena said. “And we looked at it and we said, ‘Listen, we’re okay with competing.’”

George said the updated proposal materially strengthens the merger’s competitive case.

“We’ve gone beyond what any Class I merger in the past has done in terms of offering up new competition,” George said. “I think when you couple that with what we did with CN (NYSE: CNI) and having that agreement with CN, we’re really in uncharted waters here in terms of changing the competitive landscape for the better.”

Last week, Union Pacific and Canadian National announced an agreement that gives CN access to Kansas City, Missouri, and the Union Pacific gateway to Mexico at Eagle Pass, Texas, while Union Pacific will be able to move some trains around Chicago using CN’s former Elgin, Joliet & Eastern route. Some parts of the agreement are not contingent on approval of the UP-NS merger, while others depend on that approval and will require STB sign-off.

“It resolves Kansas City for us,” George said, referring to the fact that the merger will give Union Pacific parallel routes across Missouri. “It also gives CN access to Kansas City, so now you’ve created more competition in that market. … I think the enhanced competition features dealing with St. Louis and Kansas City are a big plus.”

BNSF (NYSE: BRK-B) argued this week that the UP-CN agreement shows that a merger is not necessary to improve service. Vena, without naming Union Pacific’s western rival, said the deal would not have happened without the merger.

When Trains Editor Bill Stephens asked what would have happened if Vena had gone to CN headquarters and requested a deal to use the EJ&E without a merger in place, Vena joked that he likely would not have made it inside.

“I think I wouldn’t have gotten through the turnstiles at the front,” Vena said. “They would have kicked me out of the building. They would have said hi first because a lot of people remember me there. [Vena was at CN from 1977 until 2016, when he retired as chief operating officer.] But yes, that would have been a nonstarter.”

Vena also discussed another part of Monday’s filing, which would create a process for customers to seek relief from the STB in the form of reciprocal switching if Union Pacific service worsens during the railroads’ integration. That provision is aimed at reassuring shippers that they would still have a venue to raise service problems while the carriers combine networks.

“I think we can handle it two ways,” Vena said. “One is we’ll make deals with customers. Let’s say during the integration, if you feel some pain, we’ll open up a spot for you. We have no problem doing that. So it’s not just putting it in for the STB to handle. I would rather handle it with customers directly.”

George said the measure adds another avenue beyond the board’s existing remedies.

“It’s really an augmentation to what the STB’s remedies are,” George said. “We’re providing another avenue.”

He also said the merger would create 88,000 single-line lanes instead of interline routes, which he said should make rail more attractive than truck.

“We know when single line is offered, shippers are two to three times more likely to select rail versus truck as opposed to an interline move via rail,” George said. “So we have just created an enormous public benefit when we come together by offering all these new single-line options. … [Shippers] know they’re going to get cost savings because it’s proven that single-line is 27% less costly than interline.”

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