Dive Brief:
- CSX executives told investors in an earnings call they hope intermodal lane cuts are nearing their end, even as the railroad's transformation is still in its early stages.
- In a series of "rationalizations" — with the first round in October, and a second taking effect on Jan. 3 — CSX took 8% of its intermodal volume offline. The changes were made on top of a round of cuts that affected 7% of the business in 2017.
- "I don't foresee and I don't anticipate any other significant announcements in intermodal changes anytime soon. I hope we don't have to do anymore," said Mark Wallace, executive vice president of sales and marketing at CSX.
Dive Insight:
The network cuts have consistently affected shippers working with CSX over the past two years, but the railroad executives insist the result is better service and a more efficient network.
"I think we are getting the network down to a manageable area where we can really focus on the lanes, where we can really compete and deliver superior service," Wallace said.
During the earnings call, company executives pointed to its improved operating ratio (a "historic" 60.3%), and increased year-over-year intermodal business as a sign customers appreciate the shifts.
"We took 7% of the volume off the railroad [in 2017]," CEO Jim Foote said. "Well we came out of the year with 2% up. So the 2% plus 7% means recurring about 9%, okay. So I would say, under the circumstances, pretty good."
The growth was driven by "existing customer growth, a tight truck market, and new service offerings to inland ports," according to the fourth-quarter earnings presentation.
Based on those trends, the railroad is projecting flat or slightly increased growth of its intermodal business in 2019, despite the fact it removed another 8% of volume off its network between October 2018 and January 2019. Executives said they are betting they can continue to convert shippers to rail from truck, if they provide a transportation service that is seen as more than a commodity.
"The customer decides, I will go with truck or I will go with railroad, whoever gives me the lowest price," Foote said. He added providing a "valuable service" is "changing the dynamics and we are starting to get business from truck that historically moved on rail that's now coming back because of the changes we have made."
Later, Foote joked: "Mark and I and everyone here now who have seen the benefits of this transformation recognize that the customers are actually starting to like us for the first time in a long time."
