Digital Edition

January 6 2020

Issue link:

Contents of this Issue


Page 103 of 147

102 The Journal of Commerce | Januar y 6 2020 Surface Transportation | Executive Commentary 2020 ANNUAL REVIEW & OUTLOOK ABH Consulting Anthony B. Hatch Principal Will rails regain their intermodal mojo in 2020? Well, they had better; inter - modal remains the best oppor- tunity for rail to show sectoral as well as cyclical growth and to participate in the new economy. Certainly, after the tough year of 2019, it will certainly look (somewhat) better, not just due to comparisons but because of reduced "de-marketing" under the new precision scheduled railroading (PSR) operating plans. The big macro questions, the ones the rails cannot control, remain the state of the economy and, particularly, the status of trade wars. In addition, trucking overcapacity may be coming down, but it isn't over. So what's a railroad to do? Looking back at the last two years, it is certainly easy to see what they should have done — provide more reliability and capacity in 2018 — which will go down as one of the biggest "missed opportunities" of all time. By the time they begin to get their service act back together (with the help — yes — of PSR), it won't be too late; they are still in the game. But the lost year of 2018, combined with a general policy of holding the line on price, meant that a stairstep or two of share was lost. The added volumes in 2018 came in the form of trailers, not uncoincidentally the worst performing subset in 2019. Had the rails been able to offer more domes - tic container capacity and reliability in 2018, they would have been ahead of the game. Some think the rail man- agement decision-making comes from short-termism and too much focus on the Operating Ratio (OR). I am sure that played a role. Looking ahead, balancing out the aberrations — trade & tariffs, ELDs, etc. — as PSR plays out across the industry, we can start to think of a restoration of the upward trend line in service and, therefore, market share. But I will always wonder, "What if?". Association of American Railroads Ian Jefferies President & CEO Despite under- lying softness and uncer- tainty in the market, caused in no small part by trade tensions, freight railroads continue to meet the challenges of today and tomorrow. This is true across multiple commodi - ties, including intermodal, where the picture amounts to more than meets the eye. After a record 2018, intermodal volumes today may appear confound- ing, yet they are very similar to what the industry saw in 2017, before a new wave of tariffs. While intermodal traffic in 2019 was short of 2018's record-setting volumes, this segment still performed strongly in line with recent years. Undoubtedly, increased trade certainty would provide a shot in the arm to the economy. In the meantime, carriers are doing what they always have done: keeping a long-term view and adapting to market changes. We are not chasing the short term. Instead, we continue to increase our focus on the consumer economy and truck-competitive business opportunities via intermodal offerings. Railroads are undergo - ing a transformation, deploying innovative solutions and redesign- ing service offerings to improve customer visibility, efficiency, reli- ability, and on-time delivery. The industry is bullish on a future in which freight demand, driven partly by e-commerce, will increase some 35 percent. We are particularly optimistic knowing that we control at least part of our own destiny through sustained private investments. Our track record is strong. In recent years, freight railroads have averaged $25 billion in annual investments to maintain and upgrade infrastructure and equipment. To put that into perspective, that is more than $480 million per week, or $68 million a day. 2019 was no different. Comparatively, our network is the healthiest in its history compared to our ailing highways that trucks rely upon. Sensible policy from Congress and the US Surface Transportation Board that promotes and enables further investment is essential. BNSF Railway Carl Ice President & CEO Our greatest strength at BNSF is our ability to adapt and respond to the conditions of the econ - omy. As the economy ebbs and flows, we have evolved to meet the needs of our cus- tomers and the demands of the market. Our international segment remains challenging due to uncertainty with trade tensions and routes. We will have to wait for variables to play out before the picture becomes clear, but we remain optimistic in the strategic advantages of less distance, short transit times, and supply chain flexibility asso - ciated with utilizing the US West Coast as part of a global supply chain. We are encouraged by consumer sentiment and confidence. Online retailing is now a mainstay of the econ- omy. With consumers having money to spend, we see a solid future in this sector that should drive demand for overall intermodal shipments. While a trucking industry surplus has created near-term headwinds, we see growth opportunities in the full truckload, LTL, and parcel segments, as our carrier partners want to grow with us as they deliver solutions for beneficial cargo owners. We have addressed our custom - ers' needs by continuing to deploy technology critical to safety and service and adapting our network to increase efficiencies, productivity, and densities in our lanes and facilities. Our new intermodal service from the Pacific Northwest to Texas leverages our underutilized capacity in the coal corridor, offering the most efficient way to ship to the largest markets in Texas. ◀ "The added volumes in 2018 came in the form of trailers, not uncoincidentally the worst performing subset in 2019." Anthony B. Hatch "In recent years, freight railroads have averaged $25 billion in annual investments to maintain and upgrade infrastructure and equipment." ▶ Ian Jefferies "We are encouraged by consumer sentiment and confidence." ▶▶ Carl Ice

Articles in this issue

Links on this page

Archives of this issue

view archives of Digital Edition - January 6 2020