CSX focusing on operational improvements, intermodal profitability

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CSX5339LittleFallsNY
CSX ES40DC No. 5339 leads container train Q156 east through Little Falls, N.Y., on CSX's former Conrail main line in April 2017.
Stu Noelte
NEW YORK – CSX Transportation is likely to set service-measurement records in the second quarter as the railroad continues to refine its operations, Chief Financial Officer Frank Lonegro says.

“It’s really fun to watch the service improvements happen, to watch the customers embrace the changes that we’ve been through and understand that we had to go through what we went through in order to be where we are today,” Lonegro told an investor conference on Wednesday.

CSX service suffered last year amid the rapid rollout of Precision Scheduled Railroading under then-CEO E. Hunter Harrison. The sweeping operational changes last summer prompted service failures, forced shippers to divert business to trucks and Norfolk Southern, and brought increased scrutiny from federal regulators.

With service problems largely in the rearview mirror, customers have brought business back to CSX, Lonegro says. Some are taking a wait-and-see attitude. If service continues to improve over the next six months or so, those customers are likely to send more traffic CSX’s way, he says.

CSX continues to build on the changes Harrison began last year by focusing on the intermodal network and closely monitoring trip plans that cover every carload and intermodal shipment on the railroad.

The railroad aims to boost intermodal profitability through price increases, improved terminal operations, running longer trains, and reducing the number of handlings en route, Lonegro says.

CSX continues to discuss the Howard Street Tunnel clearance project with Maryland officials. Harrison pulled the railroad out of a joint federal-state-CSX project to clear the Baltimore tunnel for double-stacks.

“We’re continuing to focus on train length,” Lonegro says. The average is up 13 percent year-over-year, to about 7,200 feet across all train types.

Moving the same amount of tonnage on fewer trains translates into a 10 percent reduction in train starts, Lonegro says. Having fewer trains on the network helps reduce congestion and boost average train speeds due to fewer meets in single-track territory.

“Fewer headlights makes the railroad easier to run,” Lonegro says.

The higher velocity means freight cars and locomotives turn faster, enabling CSX to operate with 1,000 fewer locomotives, 15,000 fewer freight cars, and 3,000 fewer employees, Lonegro says.

Trip plans map out every aspect of a car’s movement across the railroad from origin to destination. The plans are closely monitored.

“At an absolute level, the numbers wouldn’t wow you,” Lonegro says of trip-plan compliance. “But the trend line is what would really show you the improvement. We’re up about 10 percentage points in the last 30 days on trip-plan compliance.”

Previously, CSX focused on train performance measures – like whether train Q109 is on time – rather than the carload performance that matters to shippers.

“We understand where all the failures are,” Lonegro says. “If you don’t know where the failures are you can’t fix them.”

Chief Operating Officer Ed Harris and his team are focused on driving trip-plan failure rate down, Lonegro says, which will cut costs, improve consistency, and enable the railroad to land more merchandise traffic.

Lonegro says CSX service is still not where it needs to be, but that everything is trending in the right direction.

He reflected on the year of change that began when Harrison became CEO in March 2017 and brought Precision Scheduled Railroading to Jacksonville, along with a mentality of constantly asking why and pushing for better use of assets.

“It’s not just the operating model but it’s the mentality and the cultural piece that goes along with it, and that gives you momentum,” Lonegro says. “When Hunter first started, it was really just one person trying to lead transformational change...Now you’ve got a small army of people who are trying to drive that change forward. And as time goes by, that gets all the way out to ballast-level employees. And that’s what’s going to make us great is when everybody’s pulling in the same direction under that set of principles.”

Lonegro spoke at the UBS Global Industrials & Transportation Conference.

NEWSWIRETrains News Wire

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