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Operational execution in the form of network fluidity, productivity and asset utilization improvements paid off — literally — for Canadian National Railway Co. in the third quarter. Diluted earnings per share jumped 21 percent to 96 cents, net income increased 14 percent to $456 million, operating income rose 10 percent to $697 million and revenue increased 12 percent to $1.9 billion compared with third-quarter 2007 figures.

CN officials attributed the revenue gain to rate increases, of which about two-thirds were related to higher fuel surcharges resulting from year-over-year diesel price increases, and higher volumes in specific commodity groups, particularly intermodal, metals and minerals, and coal.

Five of seven commodity groups registered revenues gains: coal (41 percent), metals and minerals (29 percent), intermodal (24 percent), petroleum and chemicals (9 percent), and automotive (3 percent). Forest products and grain/fertilizers revenue declined 2 percent and 1 percent, respectively. Revenue ton-miles decreased 2 percent compared with third-quarter 2007’s total.

Net income included deferred income tax recovery of $34 million following the resolution of various income tax matters and adjustments related to prior years’ tax filings. Third-quarter 2007 net income included a deferred income tax recovery of $11.5 million because of net capital losses from the reorganization of subsidiaries.

However, CN’s third-quarter operating ratio inched up six-tenths of one point to 62.6. In addition, operating expenses rose 13 percent to $1.15 billion primarily because of higher fuel and purchased services/material costs.

Overall, CN officials expressed satisfaction with the quarterly results, but cautious optimism for the quarters ahead.

"Looking forward, the uncertain economic landscape in North America and around the world will pose challenges to CN and its customers,” said CN President and Chief Executive Officer E. Hunter Harrison in a prepared statement. “But we believe CN is well positioned to weather the headwinds — we have a unique business model anchored on precision railroading, and a strong freight franchise with growth prospects in intermodal, bulk commodities and energy-related developments in western Canada.”

One way CN is dealing with economic uncertainty is a “tight rein on hiring,” Harrison said during the Class I’s earnings conference held yesterday.

“We have a hiring freeze right now,” he said. “But we couldn’t do it if we didn’t have the kind of productivity [we’ve had].”

CN also has identified $200 million in capital spending cuts “without getting to the basics,” said Harrison. “We have a Plan A, B, C and D, if need be.”