JACKSONVILLE, Fla. — CSX Transportation’s second-quarter earnings improved despite ongoing crew shortages that have snarled operations and forced the railroad to turn away traffic.
At the current pace of hiring and training new conductors, CSX expects to hit the magic number of 7,000 active train and engine crews by the end of September, which will help service recover to pre-pandemic levels, CEO Jim Foote told investors and analysts on the company’s earnings call on Wednesday afternoon.
“Our ability to hire and retain new workers, which is vital to improving our service and growing the business, remains challenged,” Foote says. “We are not alone in facing this problem. The labor market is tight … and the pandemic has had a profound effect on employees’ work and lifestyle preferences. Our hiring process has been steady, but slow.”
The railroad has 6,667 active train and engine employees, but new hires and veteran engineers and conductors are leaving CSX at significantly higher rates than usual. CSX will continue to hire conductors even after it reaches the 7,000-crew-member target in order to meet growing demand over the next couple of years, Foote says.
Despite adding 311 conductors to the active ranks during the second quarter, CSX’s performance metrics — including average train velocity and terminal dwell — deteriorated. Jamie Boychuk, executive vice president of operations, said crew availability was lower than usual due to a combination of rising COVID-19 infections and peak vacation season.
Intermodal trip plan compliance was 90%, up a point from a year ago, while carload on-time performance fell 10 points to 59%. Local service performance, however, edged up slightly to its best level in more than a year.
Boychuk says train crews are working harder than ever to fill in gaps created by crew shortages and that the railroad has to make tough decisions about what traffic moves and what gets held.
CSX continues to prioritize service-sensitive intermodal traffic. But in areas where crews are particularly tight, the railroad often has to prioritize bulk traffic over merchandise trains.
Normally, unscheduled bulk trains have the lowest priority on the railroad because they are delivering grain or coal to large stockpiles, Boychuk explains. With chicken-feed supplies running low and coal inventory dwindling at utilities in the Southeast, however, CSX has had to divert scarce crews to unit trains, causing delays of 24 hours or more to merchandise traffic.
“We’re in an environment when we have … to make sure that chickens get fed and … lights stay on,” Boychuk says.
He adds: “It’s a just-in-time service, and it never was before.”
CSX is hiring at a faster pace than attrition, Foote says, so the railroad should turn the corner on crew availability.
For the quarter, CSX’s operating income increased 1%, to $1.7 billion. Revenue rose 28%, to $3.8 billion, reflecting the inclusion of revenue from Quality Carriers, the bulk chemical trucking company the railroad acquired last year. Earnings per share grew 4%, to 54 cents. CSX reported a 55.4% operating ratio for the quarter.
CSX disclosed that it paid $601 million to acquire New England regional Pan Am Railways, a deal that closed on June 1.
Overall volume for the quarter was flat. Merchandise traffic was flat, intermodal was up 1%, and coal declined 3%.
As long as earnings are going up, and service is still going down, who cares? The stockholders are smiling all the way to the bank. wink-wink!