Getting the Next Volume Rebound Right

FROM THE EDITOR, RAILWAY AGE AUGUST 2023 ISSUE: Picking up where I left off with last month’s column, which was based on Loop Capital Managing Director Rick Paterson’s conversation with CSX Executive Vice President Operations Jamie Boychuk (who Aug. 4 unexpectedly departed CSX) on crew management, there is solid evidence that our freight railroads are emerging from the dark, dank tunnel atmosphere that permeated the first half of this year, on good track with clean ballast. The pain we’ve been experiencing is gradually draining away. 

“We’re now in that unfortunately rare situation where U.S. and Canadian Class I railroads are running decently well at the same time,” Paterson pointed out in a recent analysis, with the numbers to back him up. “That’s a good thing, and attention now turns to what has historically been a difficult balancing act for the railroads, which is to manage costs and headcount in the context of quarterly earnings pressures, while at the same time preparing network capacity for the inevitable rebound in volumes, whenever that may occur.” 

It could come sooner than later. Are we ready? Here’s an encouraging development:

“In the past, the knee-jerk response to soft volumes was to furlough crews,” Paterson noted. “But we’re seeing more restraint now, given the scars from 2021 and 2022, when crew shortages triggered service meltdowns.” 

Refraining from knee-jerk responses is mostly about satisfying basic human needs. Employees who feel valued, respected and secure in their jobs—not cut off at the knees—will in the long term produce “shareholder value,” putting substance behind the corporate-speak pronouncements. 

“It’s always important that the railroads get this balancing act right, but this time around is arguably the most critical time in memory,” Paterson said. “One by one, the U.S. railroads have restored service and began making the argument to customers that good service is here to stay and they are once again dependable supply chain partners. This might be good for some incremental volume recovery, but customers aren’t going to divert meaningful volumes from truck to rail until the railroads prove that service can remain above a satisfactory floor in the face of higher loadings. 

“It’s natural and OK for the networks to slow during a volume rebound, but customers need to be confident of a service floor rather than be worried about a service collapse. It won’t be until then that the spigots can be properly turned on and more meaningful market share opportunities present themselves. More than ever, the U.S. railroads need to get the next rebound right.”

Based upon the progress I’ve observed in service quality improvement and better relations with the people in the field doing the grueling work of running trains, I’m putting my money on the railroads “getting it right.” Perhaps that will get the politicians and pundits to cease their uninformed attacks, shut down the circus and relegate the pointless legislation to Capitol Hill’s dustbin? Call me an optimist.

I’ve been accused by some who are probabilmente dipendente dalla miseria, happy with painting a dystopian nightmare picture, of “not doing my homework.” With all due respect, vai a pestare il sale. Bear in mind that when you point a finger, there are four fingers pointing right back at you.