Shift to Precision Scheduled Railroading carries high stakes for industry

Trains Industry Newsletter
Get a weekly roundup of the industry news you need.
By signing up you may also receive occasional reader surveys and special offers from Trains magazine. View our privacy policy.
BALTIMORE — There’s a lot riding on the successful implementation of Precision Scheduled Railroading at Union Pacific, Norfolk Southern, and Kansas City Southern.

That’s the conclusion of railroaders, industry analysts, and shippers who spoke at the North East Association of Rail Shippers conference last week.

The rocky implementation of PSR at CSX Transportation under E. Hunter Harrison looms large in the memory of shippers, regulators, and the three Class I railroads that are shifting to PSR-based operating models.

Cowen & Co. analyst Jason Seidl, who serves as NEARS president, says if this round of PSR implementation creates massive delays for shippers, as it did temporarily at CSX in the second half of 2017, the industry runs the risk of having new regulations imposed by the Surface Transportation Board.

“Every trade association has a press release already written about poor service … they’re just waiting to date it,” says independent analyst Anthony B. Hatch of ABH Consulting. “The STB is already ready to open that envelope. They’re ready to have a hearing.”

Norfolk Southern Chief Marketing Officer Alan Shaw says the railroad aims to grow during its shift to PSR and will make changes slowly to avoid service disruption. NS also has increased the frequency of local service, which reduces congestion and helps make service more reliable.

Federal regulators understand this approach, Shaw says, and STB reaction to NS’s plans has largely been positive.

Gil Lamphere, a railroad financier who has served on the boards of Illinois Central, Canadian National, and CSX, last fall discussed Precision Scheduled Railroading with members of the STB, who are concerned about potential service impacts as well as the industry’s focus on the operating ratio.

Federal regulators are watching carefully as some Class I railroads cut back on capital spending and return money to investors in the form of share buybacks, Lamphere says. Some railroads also have reduced intermodal service in low-volume lanes and de-marketed less profitable merchandise traffic.

“You don’t abuse monopolistic power from land that was given to you in the 1850s for a right of way,” Lamphere says.

The industry is at a crossroads, Lamphere says. The future of railroading is not about the size of each railroad’s slice of the transportation pie.

“It’s making the pie bigger,” Lamphere says.

CN realizes this, he says, and is investing in capacity and technology that will enable it to grow.

Under PSR, railroads try to closely balance locomotive, crew and freight car fleets to current traffic levels — which can make railroads less resilient after bad weather, serious derailments, or unpredictable swings in volume.

Shippers urged railroads to keep a buffer of extra locomotives, crews, and cars on hand so that they can maintain service in the face of unpredictable events.

“In the long run, much of this is very, very necessary for us to accomplish in this industry, but how you do it and how quickly you do it is the watchword,” says Eric Jakubowski, who worked with Harrison at CN and is now chief operating officer of shortline holding company Anacostia Rail Holdings.

Shaw said NS would be putting the cart before the horse by making service changes, then adjusting resources only after the railroad sees efficiency gains.

“We’re going to get service right first,” Shaw says.

Service is key for an industry that has endured self-inflicted service problems during the past two years as the network has slowed down.

“The service product has to get more consistent. And hopefully PSR can do that,” Seidl says. “And then you can see gains on the intermodal and merchandise side.”

Todd Tranausky, a rail and intermodal analyst with FTR Transportation Intelligence, says it’s too early to measure how well railroads are doing with their PSR conversions, particularly considering how harsh winter weather in February, followed by flooding in March, affected Union Pacific and BNSF Railway.

Overall industry data — from train speed and average terminal dwell to things such as freight car utilization and carload volume trends — are inconclusive thus far, Tranausky says.

Service levels will ultimately determine whether railroads gain carload and intermodal volume or continue to lose market share to trucks, Tranausky says.

Current freight trends are stacked against railroads, he points out.

From 2012 to 2017, there was a significant increase in the percentage of freight moving less than 100 miles, a distance traditionally outside the realm of railroads. And the 10 commodity groups that are shrinking the fastest tend to be hauled by railroads, while the 10 fastest-growing commodity groups tend to be hauled by truck.

“If Precision Scheduled Railroading can delivery service and efficiency benefits consistently, then you will see more time-sensitive truck freight move into intermodal,” Tranausky says.

If not, shippers say they will be forced to use trucks even more often.

NEWSWIRETrains News Wire

  • Previous Day
  • April 09, 2019
  • Next Day
Leave a Comment
Want to leave a comment?
Only registered members of TrainsMag.com are allowed to leave comments. Registration is FREE and only takes a couple minutes.

Login or Register now.
Please keep your feedback on-topic and respectful. Trains staffers reserve the right to edit or delete any comments.
0 COMMENTS
FREE DOWNLOAD

FREE DOWNLOAD

BNSF Railway's Willow Springs Intermodal Yard 

SEE INSIDE THIS ISSUE

Learn more about the stories and photos in this months issue

Newsletter Sign-Up

By signing up you may also receive occasional reader surveys and special offers from Trains magazine.Please view our privacy policy
Subscribe Up To 54% off the newsstand price!
Subscribe To Trains Mag Today
+