CSX Transportation reports dramatic operational improvements under Harrison

Railroad may wind up with only three hump yards
RELATED TOPICS: CSX | EHH | OPERATIONS | FINANCIALS
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BOSTON — CSX Transportation executives say their railroad is improving by operational leaps in the 10 weeks since E. Hunter Harrison took over as CEO. The improvements are headlined by a 52-percent jump in on-time performance.

“We’re at the beginning of an amazing transformation,” Chief Financial Officer Frank Lonegro said at a transportation conference on May 18.

Train velocity was up 14 percent and terminal dwell was down 11 percent as CSX rolls out Harrison’s precision scheduled railroad operating model. On-time originations rose 16 percent, to 91.6 percent, while on-time arrivals jumped to 87.6 percent from just 57.8 percent.

CSX also is becoming more efficient by hauling the same amount of tonnage on far fewer trains. The railroad’s revenue-ton miles have held steady while the active train count has fallen by 15 percent.

“You’re going to continue to see that improve,” Lonegro says.

Lonegro credits Harrison for creating a winning mentality in the railroad’s Jacksonville, Fla., headquarters while driving “an unheard of” pace of change.

“He really has hit the ground running and has begun to implement precision scheduled railroading across our railroad,” Lonegro says.

Keys to the improvements include running a balanced train plan, keeping terminals fluid, and reducing handling en route.

“Hunter’s philosophy is move the freight as far as you can as fast as you can and touch it as few times as you possibly can,” Lonegro says.

And that means don’t put traffic through hump yards if you don’t have to.

“At CSX historically we have been a big believer that the most efficient way to class traffic is through a hump yard,” Lonegro says. “Hunter has totally debunked that.”

CSX has already converted four hump yards — Toledo, Ohio; Louisville, Ky.; Hamlet, N.C.; and Atlanta — to flat-switching facilities. As part of the conversions, train plans have been modified so that traffic bypasses the yards, with the exception of cars destined for those locations.

The remaining eight hump yards are under “heavy evaluation” Lonegro says. More hump yards will be converted to flat switching this quarter, he says, and CSX ultimately will be left with just three or so hump yards. The final number could be two or four active humps, Lonegro adds.

CSX has stored 551 locomotives and parked, scrapped, or returned more than 22,000 freight cars so far this year as it is able to move freight more efficiently.

Is CSX hearing negative reactions from shippers or seeing volumes shift to Norfolk Southern as it makes operational changes?

“We’re really not seeing any market share shifts,” Lonegro says, although he acknowledges that the potential for service missteps as changes unfold. But he says customers are getting faster transit times, improved on-time performance, and better cycle times on their freight cars.

With better service and lower costs, CSX should be able to grab business from trucks, and not just intermodal business. Harrison “believes we can grow merchandise, which was not necessarily something we thought we could do absent economic lift,” Lonegro says.

Lonegro spoke at the Bank of America Merrill Lynch 2017 Transportation Conference.

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