Dependability and transparency keys to merchandise traffic growth, CSX says

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JACKSONVILLE, Fla. — CSX Transportation’s merchandise network will gradually regain market share from trucks as shippers begin to trust the railroad’s increasingly reliable service, CEO Jim Foote says.

CSX has lost nearly a quarter of its merchandise traffic over the past two decades but has seen its carload traffic hold steady over the past three years.

“It took the railroad industry decades of poor service to drive the business off the railroads onto the trucks,” Foote told investors and analysts on the railroad’s earnings call last week. “We are not going to get the business off the highway back onto the railroad in two weeks. So we’re going to have to earn it.”

CSX has to provide reliable service, prove it can deliver customers’ freight with trucklike dependability, and convince shippers that its service improvements are sustainable, Foote says.

Trip-plan compliance, which measures a car’s on-time performance, improved from 35% two years ago to around 85% today for carload traffic, Foote notes.

But given the way rail service has varied — good one year, poor the next — shippers are understandably skeptical of the improvements at CSX, Foote says.

CSX aims to sway shippers by providing trip-plan compliance data for every carload and intermodal container via the online ShipCSX portal, a feature the railroad rolled out late last year.

“We need to show him through this transparent tool that he can trust us to get his product there when we said we're going to get it there,” Foote says.

Shippers will shift more business to rail — and pocket a 15% savings versus truck — once they trust the railroad, Foote says.

“We need to prove to that customer that this is a long-term … structural fundamental change in the way we do business,” Foote says. “And when we do that we’ll continue to see where we grow our merchandise and intermodal volumes at a rate that is faster than the industry.”

Foote downplayed CSX’s opportunity to gain market share from rival Norfolk Southern.

“We have billions of dollars of opportunity available to us from truck. Customers today that are shipping products with us in a boxcar ... are also shipping 50% to 60% of their product in a truck because the truck is more reliable. I want that opportunity, which is billions,” Foote says. “It is crazy for me to go over there and price my service as a commodity to try and pick up a couple of million bucks off the other railroad. That's the business model that has run the railroad industry down for decades. And that is not the business model that we are pursuing.”

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