The railroad will spend about $1.6 billion this year to maintain its network and embark on a handful of modest intermodal terminal expansion projects, down from $2.7 billion in 2016 — about a 40-percent decline.
CSX has created capacity across its system by moving tonnage on fewer, longer trains and by operating a more fluid network as trains move faster and cars spend less time in yards. It also has stored locomotives and freight cars.
As a result, the railroad could bring on 20 to 30 percent more traffic before needing to spend on additional capacity, Foote told an investor conference this week.
“Obviously I’d love to have 20 percent growth and be in a position where I had to add capacity,” Foote says. “But that’s not on the table right now.”
Last year CSX was the lone Class I railroad to not have 4 percent growth in volume. Its traffic grew 1.5 percent, mostly due to the impact of the ongoing pruning of the railroad’s overly complicated intermodal network.
Foote says CSX’s intermodal rationalization — which took 7 percent of volume off the railroad in 2017, another 7 percent in 2018, and 3 percent this year — will ultimately improve the quality of service and the profitability of each container and trailer carried.
The goal, Foote says, is to get intermodal profitability up to the middle of the pack of all commodities that CSX hauls.
CSX intermodal volume was up in 2018 despite the demise of the railroad’s hub-and-spoke intermodal strategy in 2017 and further lane closures during 2018, Foote notes.
So far this year CSX’s intermodal volume is down 3.6 percent, according to the latest Association of American Railroads data. But it’s growing when the impact of the rationalization is factored in.
“People are coming to our new and improved service product,” Foote says, including customers whose lanes were curtailed under the rationalization program.
The point-to-point network is more reliable and more truck competitive for customers such as J.B. Hunt and Schneider, Foote says.
The railroad’s goal is high 90-percent on-time performance for intermodal loads, measured from the time they arrive at the gate to the time they are available at the destination terminal.
CSX has a big future in intermodal, Foote says, but carloads also figure into CSX’s growth plans.
Eastern rival Norfolk Southern’s embrace of Precision Scheduled Railroading doesn’t matter at CSX headquarters in Jacksonville.
“We know our prime competitor is truck,” Foote says.
To win back business that migrated to highways over the years, railroads will have to improve service reliability.
“Railroads for a long time, not only individually but collectively, have not served the needs of the customers very well and that’s why all the traffic migrated to the trucks,” Foote says. “We need to individually and collectively prove to the customers that we are the option they should go to when they need transportation service. And that’s going to take time.”
Foote spoke at the Barclays Industrial Select Conference on Thursday.
