Look out: CSX is in virgin territory

Posted by Fred Frailey
on Wednesday, July 16, 2014

I’ve been reporting a story for Trains Magazine about the railroad mess we call Chicago, and one of the worst sinners is CSX Transportation. What bothered me was this: The railroad during April-June was still 4.7 percent shy of its traffic volume in the last peak year of 2006. So why is its whole northern tier a mess and Chicago a quagmire?

The railroad’s second-quarter conference call with analysts provided some insight. Traffic across the northern tier, according to Chief Operations Officer Oscar Munoz, was 20 percent greater in this year’s second quarter than last year’s. Hearing that, I pulled up the 2Q reports for both 2006 and 2014 and here is what I found:

True enough, volume was 4.7% less in 2014. But take away the huge slide in coal loadings since 2006 and a starkly different picture emerges. Merchandise traffic was 4.2 percent ahead of 2006 in during the last quarter and intermodal units were 26.3 percent greater. Put merchandise and intermodal together, and traffic was 13.7% greater than in the so-called peak year of 2006. And remember, all that lost coal business was concentrated in the corridor between Appalachia and Newport News, Va. But along the former Conrail and Baltimore & Ohio lines, CSX is in virgin territory and lucky to be alive today operationally. Moreover, intermodal trains gobble up capacity, adding to the impact of the higher traffic levels.

At the very least, this puts Chicago’s congestion in a whole new light. I don’t (yet) know what a similar analysis of the other Class I railroads would reveal because they haven’t reported quarterly earnings yet. But I would expect results for 2014 versus 2006 to roughly parallel those of CSX, for Norfolk Southern in particular.—Fred W. Frailey

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