NS, CSX CEOs Tout Service Improvements

CEOs of Norfolk Southern and CSX said in remarks during investor conferences recently that their respective companies are slowly improving their freight service as newly hired conductors qualify for active duty.

The two Class 1 railroads have cited crew shortages as a major contributor to service issues that have drawn the ire of shippers and regulators.

Both spoke at the Cowen Annual Global Transportation & Sustainable Mobility Conference.

As reported by Trains magazine, CSX head James Foote said his railroad is lagging its goal of full train and engine personnel.

CSX now has 6,800 active T&E workers and expects to reach 7,000 active crew members by year’s end.

“We’re gradually, gradually improving,” Foote said. “Service metrics show it. Velocity shows it. Dwell shows it. On-time performance shows it. It’s a grind. It’s been really tough. But we’re continuing to show progress.”

At Norfolk Southern, CEO Alan Shaw said the conductor workforce have increased by 275 since the end of the first quarter with 923 conductors in training.

The level of active T&E crews is up 4 percent and close to matching the level of last year.

Shaw said merchandise on-time performance had improved to 67 percent in early September. Last May it had sagged to 48 percent.

“Demand for our product is exceptional right now, and it exceeds our capacity,” Shaw said. “As we speed up our network, which we have started to do, we have more capacity in our network and can take advantage of the volume opportunities.”

However, NS continues to see higher than desired crew attrition rates at terminals in Fort Wayne and Elkhart, Indiana; Louisville, Kentucky; and Cincinnati.

Foote Defends PSR in Spirited Speech

CSX CEO James Foote gave a spirited defense of the precision scheduled railroading operating model during a speech to a shipper’s association, but acknowledged his company needs to do a lot of things differently.

As reported by Trains magazine on its website, Foote told attendees of the Midwest Association of Rail Shippers that blaming the railroad industry’s recent service issues on PSR is nonsense.

In hindsight, Foote said CSX made mistakes during the COVID-19 pandemic, including laying off workers when business plummeted.

“If I had the decision to make over again . . . we would have never laid off an employee,” Foote said. “Never. But there was no vision of the future, there was no idea what we expected to encounter.”

Foote said at the time he and other railroad executives expected the business downturn to play out as had other business downturns with the same cycle of layoffs and recalls.

CSX laid off about 1,000 operating workers but when it attempted to recall them, many didn’t return.

The CSX train and engine workforce was about 7,000 at the end of 2019, dipped to about 6,000 during the pandemic and rose to 6,800 after recalls went out.

Although CSX hired another 2,000 T&E workers, its workforce has fallen to 6,600 T&E employees because about half of the new hires have quit within the first six months of employment.

Foote said that happened because they began realizing they would have to work on weekends and holidays or miss the birthdays of their children.

He said the industry needs to find ways to make railroad work more attractive.

“We need to provide employees with greater flexibility,” he said. “Is it a different kind of bid arrangement, where they can go work on this kind of job one day, and this kind of job another day — yard jobs, where they can have a regular assignment and work regular days off, and then the people that want to make more money can bid the road jobs.”

Foote also took issue with the criticism that Class 1 railroads are acting at the behest of powerful investors.

“Everybody says, ‘oh, my God, he’s beholden to Wall Street,’ ” Foote said. “Do you have any idea how much money CSX has lost because of our failure to move freight? Enormous amounts of money. This doesn’t benefit me. This doesn’t benefit the shareholder. This doesn’t benefit anybody.”

He described the criticism of PSR as an excuse to “blame the railroad management for something they intentionally did. It’s insanity.”

More of Foote’s comments can be read at https://www.trains.com/trn/news-reviews/news-wire/csxs-foote-blaming-psr-for-rail-problems-is-nonsense/

Data Shows Decline of Class 1 Freight Service

An analysis by Trains magazine of data recently submitted by four Class 1 rail systems to the U.S. Surface Transportation Board found that all of them have seen their on-time delivery performance plummet since May 2019.

Before the pandemic, CSX, Norfolk Southern, Union Pacific and BNSF averaged an 85 percent on-time delivery rate but during the last week of May that had fallen to 67 percent.

The STB considers a shipment to be on time if it arrives at its destination within 24 hours of the projected delivery time given the shipper.

However, the Trains report cautioned that railroads often create trip plans for individual shipments that are tighter than the STB standard.

It also said comparing the performance of railroads against each other can be misleading because of variance in how each carrier collects information and calculates on-time performance and such performance metrics as terminal dwell time and average train speed.

The railroad industry has largely blamed shortages of operating crews for the service issues they have experienced in the past year.

As the average speed of trains has fallen, that has created congestion, which in turn has led to the need for more crews and locomotives.

The problems intensify because new crews and motive power are out of place from where they are needed.

CSX reported its overall on-time performance since May 2019 has slid from 96 percent to 85 percent.

The carrier said the most current figures show carload traffic posted a 66 percent on time rate whereas intermodal shipments were 95 percent on time.

Norfolk Southern said that for the 12 months ending in April 2020, its overall on time figure was 87 percent. It has since fallen to 52 percent.

The report can be read at https://www.trains.com/trn/news-reviews/news-wire/data-reported-to-federal-regulators-reveal-extent-of-deterioration-in-rail-service/

STB Member Downplays Direct Action

The U.S. Surface Transportation wants to see the railroad industry solve its own problems rather than have regulators dictate solutions to them a Board member said last week.

Speaking to the North American Rail Shippers Conference, Patrick Fuchs said STB members are moving toward “transparency and public accountability” rather than direct action.

Although Fuchs said regulators do not want to intervene he also emphasized that they expect the railroad industry to solve its service problems.

“To the Board, carriers are clearly in the best positions to identify and implement steps to improve service,” Fuchs said.

“When the Board has considered intervention, it has been careful to clearly establish that whatever intervention can’t negatively affect other shippers, and that limitation may prevent its use in some cases.

“We want to keep the focus on the carriers, the carriers’ ideas for service recovery, and public accountability from everyone in this room.”

Regulators held two days of hearings in late April into the service issues that Class 1 railroads have experienced in the past year.

Those hearings were triggered by an avalanche of complaints the STB received from shippers about poor rail service.

Since the hearings were held the STB had required Class I railroads to provide performance information over the next six months. It directed BNSF, CSX, Norfolk Southern and Union Pacific to create service recovery plans.

Fuchs agreed with assertions made by the carriers that their service issues stem in part from crew shortages.

“And there is also no doubt that when a railroad is rapidly adjusting its operating plans in the midst of congestion, adding additional complications from the government, which is not on the ground, could be counterproductive,” he said.

AAR Closing Performance Data Website

A website that provided railroad performance measures has been shut down by the Association of American Railroads.

The railroad trade group said the site, which reported weekly Class I figures for terminal dwell, average train speed, and cars online, had outlived its usefulness.

The site was created following Class 1 railroad megamergers of the 1990s.

Canadian Pacific and CSX Transportation stopped providing information to the AAR site after they changing their metrics to a non-standard methodology.

CP, CSX and Canadian National  report weekly performance data in their own formats on their own websites.

Kansas City Southern and Union Pacific report weekly AAR-standard data on their websites while Norfolk Southern has begun providing monthly performance data on its website.

BNSF provides detailed network updates every other week.

All Class 1 railroads still provide AAR-standard performance metrics weekly to the U.S. Surface Transportation Board, which makes that information available to the public.

Some believe that ending the user-friendly Railroad Performance Measures site makes it more difficult for shippers to gather rail performance data.

Shippers and regulators use that date to monitor the rail network as a whole and individual railroads.

When train speeds decline and terminal dwell increase over a period of weeks, it might be a sign of congestion and service problems.

“It does make it harder on shippers and other industry participants to be able to compare how carriers are doing,” Todd Tranausky, a rail analyst with FTR Transportation Intelligence told Trains magazine.

“With each carrier adapting its own methodology, you can only really compare the carrier to itself over time and not to other carriers. It also puts the onus on shippers to pull the data from the STB’s website, and to reconfigure existing systems they had in place to easily pull the data off the RPM website to point to the STB’s spreadsheets and formatting. I think shippers care from the standpoint of it making it harder to have transparency into how carriers are doing and performing. The more sophisticated shippers will find the STB data and update their systems accordingly, but the smaller shippers will be turned off by it as one more example of carriers not wanting to be open and work with them on service performance.”

Analyst Says Cost Cutting Leaves Railroads Vulnerable

Class 1 railroads in North America are captive to the desires of Wall Street and that has left them vulnerable to unexpected although predictable calamities.

Rick Patterson, who works for Loop Capital Markets and was one employed as a railroader in Australia, said that as a result railroads get caught with shortages of crews and locomotives and can’t recover quickly from such things as hurricanes or polar vortexes.

Speaking at a meeting of the North American Rail Shippers Association, Patterson said that in the past five years rail service has been poor more often than it’s been good. He said the industry is trying to please Wall Street stock analysts who are laser focused on operating ratios, which are the percentage of revenue earned by a railroad that goes to pay operating expenses.

That has led to widespread cost-cutting moves, including idling locomotives and reducing the workforce, most often in the name of implementing the precision scheduled railroading model.

Patterson said as a result railroads try to perfectly match crew and motive power resources with their current traffic levels, a process that leaves then with no margin for error.

He said rail service can either be bad, good or truck-like.

Bad service occurs when operating metrics fall 10 percent or more below average and take six to 15 months to recover.

Good service occurs when freight generally arrives on the right day but is neither time-definite nor dependable.

Truck-like service occurs when service has day- and time-definite reliability and predictability.

By his calculations, Patterson said over the past five years service was good only in the past 22 percent of the quarters. It was bad in 35 percent of the quarters and showed no clear trend in the remaining quarters.

Patterson called CSX the best operating railroad in North America at present with its service composite is 41 percent higher than its historic average.

However, it had service problems during a polar vortex in 2013-2014 and during the early months of its transformation to PSR under the late E. Hunger Harrison.

“Hunter Harrison cuts the merchandise network over to PSR without apparently telling anybody, including his own operating people,” Paterson says. “But as usual, he was right and everything worked out and all was forgiven.”

Although PSR encourages cost cutting, Patterson said the operating model is a good one, noting that CSX recovered quickly after a pair of hurricanes last year that hindered service.

However, Norfolk Southern, which was hindered by the same storms, saw its velocity sink to the lowest levels since the Conrail split of 1999.

Patterson said railroads should plan for adverse weather, saying that climate change is likely to produce more extreme flooding, cold snaps, and wildfires.

The carriers could keep a buffer supply of crews and motive power relatively at low cost, which Paterson said would help maintain service levels during trying conditions.

He predicted that the pursuit of lower operating ratios will someday halt as carriers are unable to justify above-inflation freight rate increases and will be forced to seek more robust volume growth, which will require more power and crews.

Patterson called on shippers to encourage railroads to provide more consistent service by doing a better job of communicating expected freight volumes to the railroads.

He also said railroads could reduce locomotive risk by supporting multiple manufacturers and reduce crew risk by moving toward partial autonomous operations.

Another Shipper Group Unhappy With Railroads

A shipper group representing fertilizer producers has joined a growing chorus of customers that is giving the U.S. Surface Transportation Board an earful about service issues.

“Rail service challenges have been ongoing and increasingly pervasive,” wrote Chris Jahn, president of The Fertilizer Institute, in a letter posted on the STB website.

Although Jahn mentioned CSX, he went on to say the carrier, which underwent major operational changes in 2017, is not the only problem spot for his members.

If anything, Jahn said, CSX service has improved recently. But fertilizer produces continue to experience “serious service disruptions” when shipping on Canadian National, Canadian Pacific, Norfolk Southern and Union Pacific.

“Unfortunately, these service challenges are becoming increasingly pervasive,” Jahn wrote.

Some railroad industry analysts say service problems are a missed opportunity for railroad companies during a time when truck capacity is limited. Instead, carload freight volumes have been falling this year.

“This isn’t a crisis — but could lead to a gigantic missed market share opportunity,” Anthony B. Hatch of ABH Consulting said in an interview with Trains magazine.

STB Ending CSX Weekly Service Reports

The U.S. Surface Transportation Board has decided to stop requiring CSX to provide weekly service updates.

The Board, citing service improvements at CSX, said the reports will end effective April 1.

“We recognize that CSX Transportation has shown a marked improvement in its service metrics since the serious service disruptions that occurred throughout last summer and into the fall,” Chairman Ann Begeman and Vice Chairman Deb Miller said in a letter to CSX CEO James M. Foote.

After service issues arose last summer, the STB began requiring the reports last August. However, CSX will, along with other Class 1 railroads be required to provide the STB with a service outlook for the rest of the year.

That request was made this week following the receipt of letters from grain shippers and automakers that complained about slow and erratic service.

The STB said performance metrics at BNSF, CSX, and Kansas City Southern have held steady or improved but the performances of Canadian National, Canadian Pacific, Norfolk Southern and Union Pacific have deteriorated.

STB Seeks Class 1 Service Outlooks

America’s Class 1 railroads have been directed by the Surface Transportation board to submit service outlooks for 2018.

The action came in the wake of complaints the Board has received from two major rail shipper associations about deteriorating service.

Information being sought from the railroads includes locomotive availability; employee resources, including current train and engine employee headcount and managerial resources; local service performance, including locations where performance is trending below norms; this year’s service demand; communication with shippers; and capacity constraints.

“In recent weeks, the Board has become increasingly concerned about the overall state of rail service based on the weekly data collected by the Board,” the STB said in a letter dated March 16 that was sent to the CEOs of the railroads. “Although there are exceptions, most Class I railroads’ data indicate that service is deteriorating.”

The shipper groups that have complained to the STB are the National Grain and Feed Association and the Alliance of Automobile Manufacturers, both of which said their members have seen a significant deterioration in rail service in recent months.

The automobile alliance said there has been a serious shortage of bi-level and tri-level rail cars for transporting finished vehicles.

The grain shippers believes the root cause of the service decline is the “Class I railroads’ aggressive effort to reduce their operating ratios to impress Wall Street investors and shareholders.

“This, in turn, has resulted in the systemic shedding of resources by Class I carriers, including locomotives and crews, that has degraded service to unacceptable levels, and resulted in virtually nonexistent surge capacity to meet rail customers’ needs,” NGFA said in a March 10 letter to the STB.