CSX Lost 20% of its Traffic in Second Quarter

CSX posted a decline of 20 percent in traffic volume during the second quarter of 2020 as the COVID-19 pandemic took hold accompanied by an economic recession.

It was the largest quarterly decline in company history and twice as severe as what it experienced during the Great Recession of 2008.

Operating income fell 37 percent to $828 million while revenue tumbled 26 percent to $2.25 billion. Earnings per share fell 40 percent to 65 cents.

Despite cutting costs by 19 percent, CSX saw its operating ratio rise 5.9 points, to 63.3 percent .

Operating ratio is the percentage of revenue devoted to expenses.

All traffic categories fell with coal volume plunging 44 percent, merchandise traffic off 22 percent and intermodal sinking 11 percent.

There was a bit of good news, though. Traffic has risen about 25 percent since the low point of the pandemic in May.

“Wow. Where do I start in talking about this quarter?” said CSX CEO James Foote during an earnings call.

“This was the most disruptive quarter I have experienced in my career, with both the fastest decline in volumes followed by one of the most rapid increases in volumes in the company’s history,” he said.

Foote expressed pleasure, through, at seeing traffic rebound from its May nadir, which he attributed to a strengthening economy marked by the reopening of North American auto assembly plants and their accompanying finished vehicle traffic.

Although Foote said the trends are encouraging, he said it’s still too early to predict the direction of the economic recovery due to lingering uncertainty over the durability of the economic rebound and the potential impact of the COVID-19 pandemic’s spread.

CSX said carload trip plan performance was 80.5 percent, a decline from the first quarter of 6.1 points above the second quarter a year ago.

Intermodal trip plan performance was 94 percent, down 2.2 points from the first quarter but up from 89.9 percent a year ago.

Most of the falloff in trip plan compliance came in in June as volume began rebuilding and there were delays in recalling furloughed employees.

CSX dropped road train starts in line with the steep volume declines that began in March. But in April the railroad began moving its tonnage on fewer but longer trains, which cut train starts more deeply than the volume decline.

Train starts came within 7 percent of pre-pandemic levels but road train starts remained 17 percent below March levels.

Jamie Boychuk, executive vice president of operations, indicated that fewer train starts are likely to be permanent.

“We are mixing the auto network with our manifest and in some areas with our intermodal network,” he said. “And reducing those train starts … is going to be a good lasting effect as we move forward.”

The CSX workforce, although regaining numbers was 12 percent lower in the second quarter than it was in the same period in 2019.

The railroad has recalled hundreds of train and engine employees from furlough.

Mark Wallace, executive vice president of sales and marketing, said domestic intermodal volume began snapping back in June as retailers restocked store shelves and e-commerce sales were strong.

With some canceled sailing from Asia and elsewhere being reinstated, the outlook for international intermodal has also improved.

Wallace said the future of carload traffic hinges on the recovery of the industrial economy, which is reviving more slowly. He said coal volumes will continue to be challenged.

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