The RailTrends conference for 2023, last week’s gathering of lots of the industry’s operating executives in addition to those that finance, analyze or attempt to sell goods and services to the sector, had a cautiously optimistic tone that rail may soon give you the option to start out to snag some market share from the trucking industry.
It’s not a gathering at which unbridled optimism is generally present. Rail has not seen significant organic growth on the expense of 18-wheelers for a very long time. That point span may be viewed as ceaselessly, if you’ve gotten listened to a number of the speakers at RailTrends through the years.
Whereas the meeting in 2022 seemed almost like a gathering of people that thought an exorcism may be so as, after railroads did not capitalize on certainly one of the best freight markets ever and had an enormous variety of complaints about bad service as well, RailTrends 2023 might mark at the very least a turnaround in outlook that might still have to be backed up by actual performance.
What has been lost was starkly laid out by Rob Cannizzaro, COO of the Intermodal Association of North America (IANA).
In accordance with Cannizzaro, intermodal rail has lost about 1.4 million intermodal loads since 2017, which translates to about $3.5 billion in revenue.
Keith Creel, president and CEO of Canadian Pacific Kansas City Southern (CPKC), got here to the meeting because the CEO of the merged Class I railroad between its two namesakes (NYSE: CP), a deal that was not concluded by RailTrends a yr earlier. He said the combined railroad, which stretches from Mexico into Canada — the one Class I that could make that claim — is creating competition.
“This industry is getting stronger because of this,” he said. “Not only us. I believe for those who look across the board at every railroad, we’re in a greater place today than a yr ago. There’s motivation, there’s excitement, there’s energy and there’s investment.”
Specifically, Creel said the Midwest Express intermodal service that was announced in May to supply four-day service between Chicago and Mexico has been turning in a performance that has exceeded that goal on average by several hours.
Referring to other competing services between the U.S. and Mexico which were announced within the last yr, Creel said these expansions were signs that “competition is undoubtedly changing and driving a stronger industrial network to the good thing about the shopper and commerce.”
Creel said CPKC has “a really robust pipeline plan for next yr, and the next yr, there’s no shortage of demand.” But he cautioned that while he saw the road map to more growth, “for those who get ahead of yourself, and also you’re putting an excessive amount of traffic in your network, you destroy your value proposition.”
One other change from the 2022 meeting is that a yr ago, railroad and union negotiators had agreed upon a contract however the road to ratification had loads of bumps in it before full employee acceptance. That didn’t come for several weeks after the meeting.
Ian Jefferies, president and CEO of the Association of American Railroads, noted that difference between this yr’s RailTrends conference and last yr’s. “Within the weeks following [the 2022] conference, we were capable of get [the unions] to cross the finish line.”
He called it the “richest contract for our employees,” with provisions on leave that “created rather more work-life balance.”
Even Adrienne Bailey was positive. The partner at Oliver Wyman’s rail consulting group, a fixture on the agenda at RailTrends, has been strongly critical of the rail sector at earlier gatherings. Although her address was about “green propulsion,” the use of other fuels in power units, she prefaced her remarks by saying that she hoped “by next yr I will likely be talking concerning the shining successes” of the industry after reviewing positive steps taken prior to now yr.
Chuck Baker, on the identical panel as Jefferies, is the president of the American Short Line Rail and Regional Railroad Association. He said it’s “been a rough, I assume I might probably say, about six years at this point.”
But he also said that “you’re beginning to see lots of green shoots within the industry. It looks like we’re turning a corner.”
There have been several references through the conference to recent gains on the rails.
Beth Whited, president of Union Pacific (NYSE: UNP), echoed that view of recently stronger markets, saying the railway was having “a extremely very strong run through concerning the end of September, perhaps even into early October.” And while grain and coal shipments have slowed recently, Union Pacific had a “really strong” October in each its industrial and premium divisions.
It was the address by Joe Hinrichs, president and CEO of CSX (NASDAQ: CSX), that sounded more like a number of the gloomier forecasts of the past. Its themes were familiar: Good service is crucial for growth and we’ve got a protracted option to go.
Hinrichs lamented that railroading is the variety of activity that many individuals have had a “love affair” with “and one way or the other we lost that.” That fact has made it tougher to draw and retain talent.
One other result’s that railroads’ repute (damaged partly by the February fatal accident in East Palestine, Ohio, that was mentioned several times over the course of the meeting) has taken a success, with the industry sometimes being seen as “bad guys,” Hinrichs said.
A part of the answer for safety and technology shortcomings is more and higher cooperation, Hinrichs said.
“What in our railroads’ DNA inhibits us from working together on stuff like that?” Hinrichs asked. That the fate of the railroads is linked is apparent. Every railroad has derailments and once they occur, “all of us feel the results of that.”
Even when that might be overcome, “the standards are too low on this industry for customer support.” And if higher service were provided, “lots of our problems would go away,” Hinrichs said.
“We must always want our customers to be obsessed with doing business with us to be enthusiastic about their business,” Hinrichs said. “And the standards we set for that bar are too low in our industry.”
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