Harrison may cut the hump at Willard amid improved quarterly earnings

CEO reports operational progress throughout the CSX Transportation network
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CSX CEO E. Hunter Harrison
R.G. Edmonson
JACKSONVILLE, Fla. — CSX Transportation’s earnings improved in the third quarter despite the impact of operational challenges and a hurricane strike, the railroad reported this morning.

CSX executives say the railroad’s net profit was up 4 percent, to $459 million, as revenue inched up 1 percent, to $2.7 billion. Earnings per share was up 6 percent, matching the 51-cent expectations of Wall Street analysts.

The railroad’s operating ratio fell to 68.1 percent, down from 69 percent a year ago.

“The company’s results for the third quarter reflect the resiliency of Precision Scheduled Railroading, even during times of transition,” CEO E. Hunter Harrison said in a statement. "With that transition largely behind us, we are now intensely focused on driving superior service for our customers and lasting value for our shareholders.”

Overall, traffic was up 1 percent for the quarter. Merchandise traffic declined 5 percent, but coal and intermodal both grew 5 percent compared to a year ago.

Executives were asked if the railroad will regain traffic lost to the highway and rival Norfolk Southern during this summer’s service disruptions, which pushed on-time performance to just 48 percent during the quarter.

“I think it shifts back immediately,” Harrison says. “Shippers out there, they’re trying to get the best bargain they can get.”

Weekly traffic figures, which show 12 percent intermodal growth this month, reflect that CSX service is improving.

“The customers are coming back to us very rapidly,” says Fredrik Eliasson, chief sales and marketing officer.

Noting that service problems are generally fixed, Harrison said that CSX will move forward at “breakneck speed” to further improve and streamline its operations.

CSX, which operated a dozen hump yards before Harrison’s arrival in March, has settled on four core humps: Cincinnati; Indianapolis; Selkirk, N.Y.; and Waycross, Ga. The railroad’s fifth operating hump yard, at Willard, Ohio, “probably” will be converted to a flat-switching facility soon, Harrison says.

Harrison deflected a question on the status CSX’s intermodal sorting hub at North Baltimore, Ohio, which is key to the railroad’s hub-and-spoke intermodal strategy. CSX has been pruning intermodal service to and from Louisville, Ky.; Detroit; and Columbus, Ohio, that is funneled through North Baltimore. The railroad will provide more detail at its investor and analyst event, scheduled for Oct. 29 to 30 at Palm Beach, Fla.

“Everything we’re doing is under review,” Harrison says of the Northwest Ohio Intermodal Terminal. “I can’t tell you what the outcome of that will be. We don’t go in there and look at an issue and have an answer. We go in there to look and develop an answer, and so we’ll see what it brings.”

CSX is developing trip plans for every carload that moves on the railroad. The plans should be rolled out by the middle of 2018, allowing CSX to further refine its operating plan and improve service.

Harrison says he has resumed giving Hunter Camps, intensive sessions that train field operating personnel in the finer points of precision scheduled railroading. He had told the the CSX board of directors that he didn’t think he’d have time continue the camps. But the board told him he didn’t have time not to run the camps.

An analyst noted that Harrison took a hands-on approach to operational turnarounds at Canadian National and Canadian Pacific, where he frequently was out on the railways and quickly and effectively implemented precision scheduled railroading.

“I’m not 45 years old anymore. I wish I was for a lot of reasons,” says the 72-year-old executive who uses oxygen and frequently works from his home office due to an undisclosed medical condition.

Harrison says he is relying more on his operating team and lieutenants to develop disciples of precision scheduled railroading. “We’ll get the same type results,” Harrison says.

The railroad issued a neutral outlook for overall traffic levels in the fourth quarter.
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