Commentary: When will PSR-driven volume and service growth emerge?

5.9.20 (1)

This week’s strategic question is “What are the bold new benefits shippers can expect now that the freight railways are super-efficient?”

It is May, and freight carriers – including the railroads – have issued their first quarter 2020 report cards. Simultaneously, it is a time of considerable economic uncertainty.

Previously in such crises, certain companies and leaders have stepped up with forward-looking new services and products targeted at seizing market share. They pursued strategic advantages, not just incremental advancement.

Therefore, I ask “what new offerings might customers expect to hear concerning how the railroads are going to parlay their recent internal efficiencies generated by precision scheduled railroading (PSR) into a truly expanded service role?” In other words, going for freight volume and not simply top-line revenues. 

What did senior executive officers and their boards of directors reveal during the quarterly earnings releases and analyst calls about their revised business outlook for year 2020 and into 2021?

It should have been bold and positive. Right? It should have been detailed rather than vague. Why should we have expected this from our American railroad companies? As a railroad veteran, I believe that of all the modes of transport that the seven Class 1 railroads are the strongest financially. 

I’d like to see what they can deliver as competitively priced services now that they are efficiently streamlined and so well-capitalized.

Regardless of one’s accounting or financial background, the North American freight railways – all publicly traded companies – have the strongest earnings, positive cash flows, and the highest profit margins of the different freight movers.

While the trucking sector has the highest market share of shipper-paid freight billings (revenues), it is the railroads, with their superior operating efficiency metrics, that are the soundest freight corporations.

As an example, none of the seven Class 1 freight railroads needs federal government assistance during this deep recession and pandemic.

Need further evidence? Let’s examine a few of CSX’s first-quarter graphics. Even during the turbulent first quarter, CSX managed to improve its calculated operating ratio (OR) to a record 58.7 percent. Compare that OR to the best of the major trucking companies.