Foote Expects Reliable Service to Equal Traffic Growth

CSX head James Foot told investors this week that with service reliability will come traffic growth.

Speaking at the Bernstein Strategic Decisions Conference, the CSX CEO said the railroad’s improving performance metrics show that the precision scheduled railroading model can work at CSX with its vast and far-flung route network.

“We’re in the early stages of a turnaround and making great progress toward our goals right now,” Foote said.

Among the numbers Foote cited was an industry-leading first-quarter operating ratio, record average velocity and dwell times, and carrying the same tonnage as last year with 1,000 fewer locomotives.

Still, Foote acknowledged that on-time performance is not where it needs to be and reliability of service needs to be increased.

Saying that too many industry observers are focused on weekly carload reports, Foote said CSX is only seeking profitable traffic.

“You can easily add a ton of volume to your railroad and look good on the charts,” he said. “But it’s more of a challenge to put higher-margin business on the railroad.”

Of all the traffic that CSX handles, Foote said his only concern is for domestic utility coal.

CSX has lost nearly $1 billion in revenue due to lost coal business as utilities increased their use of lower-cost natural gas. Foote expects the export coal business, though, to remain strong.

In an example of how the railroad’s new operating model has changed thing for the better for customers, Foote said cycle times for export coal train sets have been cut in half.

The use of distributed power has enabled CSX to combine three trains into two longer trains.

The current operating model creates a trip plan for each individual carload and intermodal container.

Foote said this approach emphasizes consistent on-time delivery for the customer rather than railroad-centric measures as train performance.

CSX is now providing a baseload service for merchandise customers, who pay a premium for trucks to handle other freight to make sure that it arrives on time.

Foote said that as the CSX merchandise network becomes more reliable, shippers will convert more traffic from road to rail.

Asked what effect the development of autonomous trucks might have on railroads, Foote said railroads are technologically ahead of trucking due to positive train control, line side sensors, a private right-of-way, and locomotive technology such as Trip Optimizer that essentially acts like cruise control.

“We could run the railroad with robots today, leveraging all of this technology,” Foote said.

One thing technology can’t control, though, is weather. Foote said CSX needs to harden its infrastructure to be more resilient in the face of increasingly powerful and more frequent storms.

In instances, areas have flooded that never flooded before.

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