CSX Sees Success in Winning Traffic From Trucks

Amid a steady stream of gloomy news and prognostications about falling railroad freight volumes, CSX CEO James Foote said this week that his carrier is starting to see some success in winning back business from truckers.

Speaking at the Baird 2019 Global Industrial Conference, Foote said CSX is starting to reverse the loss of business to highways.

“Our customers are coming to us, in many instances, and saying how can we ship more by rail?” Foote said.

He said improved service and lower rates than truck will help CSX regain market share.

“What it boils down to is running a really, really good railroad,” Foote said.

Foote said CSX’s merchandise volumes are outperforming the rest of the industry, which he said is a sign that the railroad has regained traffic from truckers.

Through Sept. 30 CSX merchandise traffic was up 1 percent while eastern rival Norfolk Southern has seen its merchandise volume fall 3 during the same period.

Foote expects CSX to post gains next year in domestic intermodal volumes but coal traffic whether for domestic use or exports, will remain challenged due to lower-priced natural gas and less global demand for metallurgical coal.

Foote said trip plan compliance for intermodal traffic has of late been in the 95 percent range while carload freight compliance has been 82.5 percent.

Noting that railroads have been losing market share of merchandise traffic to trucks for decades, Foote said that was because truckers provided better service while railroad service was poor.

“There is a tremendous amount of opportunity for us to grow our merchandise franchise, just tremendous,” Foote said.

Currently, railroads have an 8 percent share of the transportation business in North America.

Foote was reluctant to say if merchandise traffic at CSX could grow as fast as the overall economy or at least faster than the rate of industrial production because there is too much economic uncertainty, global trade tensions, and a slowing industrial economy.

An audience member asked Foote about CSX’s operating ratio, which was 56.8 percent in the third quarter and if it would remain in the mid-50s.

In response Foote said the OR is a measure of how well a railroad is growing revenue and controlling costs and he said he didn’t know if an OR of 56 percent or even 60 percent would enable CSX to produce consistent earnings growth year after year.

“It’s not a quest to get as low as you want it to be,” Foote said. “If somebody was going to give me an award for giving you a 55, I could probably get to a 55 tomorrow. But you’d have to chop off a whole bunch of business to do it, and that’s not what we’re here to do.”

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