Dive Brief:
- CSX lost ground on several key service metrics the railroad has elevated in the age of precision-scheduled railroading (PSR), executives reported on a second quarter earnings call with analysts Wednesday.
- Trip plan compliance fell to 94% from 96.2% in the first quarter and terminal car dwell was up 7.2% compared to the same time last year. The railroad's operating ratio (OR) went from 57% in Q2 2019 to 63% in Q2 2020.
- CEO Jim Foote attributed the loss in speed and efficiency to volatility in freight volume. Intermodal service levels were at a record high in the first quarter. Since then, total volume for the railroad fell 20%. "Sequentially the volume decline was the largest in CSX's history and almost twice as severe as any quarter during the 2009 recession," Foote said. A resurgence in May degraded the railroad's service metrics, executives said.
Dive Insight:
The faltering service metrics of CSX (and Kansas City Southern last week) reveal the difficulty railroads are having navigating dramatic swings in volume.
A principal concern was recalling workers, who may have found interim work elsewhere that could delay their return to the railroad, Foote said. CSX cut 86 staff including management in June and has been reducing its operating workforce throughout 2020. The railroad ended the second quarter with 2,685 fewer employees compared to the same time last year.
CSX executives said the deflated service metrics are an average of several weeks of good service and several weeks of stress from a spike in volume after Memorial Day — imparting that service levels will return when the railroad can catch its breath.
Executive Vice President for Operations Jamie Boychuk said that gaining 20% in volume since Memorial Day taxed the whole network. "It is an enormous task to turn this big ship in six weeks to absorb that kind of volume," Boychuk said.
EVP of Sales and Marketing Mark Wallace said pandemic cost-cutting may work in the railroad's favor despite the service metrics and the uncertain volume coming in for the months ahead. (The railroad has not restored guidance for 2020.)
"In a time when companies are looking to save money during this pandemic, we become, with our service, a very interesting service option for them," said Wallace of shippers usually moving freight via truck.
