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The Thoroughbred bucked a soft economy by increasing income and earnings, and decreasing its operating ratio in the second quarter. But Norfolk Southern Corp. is the first of the six largest Class Is to post a year-over-year revenue drop in the period.

Today, NS reported income from railway operations increased 2 percent to a record $690 million, net income rose 5 percent to $394 million and earnings jumped 10 percent to 98 cents per diluted share compared with second-quarter 2006. In addition, the railroad’s operating ratio improved 0.7 points to 71 — NS’ lowest second-quarter ratio since the 1999 Conrail integration.

Plus, quarterly railway operating expenses totaling $1.7 billion declined 2 percent as fuel costs dropped from $260 million to $249 million and compensation/benefit expenses decreased from $637 million to $629 million.

“We are pleased to report year-over-year improvement in our financial results, especially during a quarter characterized by continued softness in certain segments of the economy,” said NS Chairman, President and Chief Executive Officer Wick Moorman in a prepared statement.

However, quarterly operating revenue totaled $2.4 billion, a 1 percent decrease compared with second-quarter 2006 primarily because weak automotive and housing markets factored heavily into a 4 percent traffic volume drop. General merchandise revenue rose 1 percent to a record $1.3 billion, but intermodal revenue tumbled 4 percent to $479 million and coal revenue fell 1 percent to $579 million.

For the first half, NS’ income from railway operations and net income remained flat at $1.2 billion and $679 million, respectively. Operating expenses decreased 2 percent to $3.4 billion compared with first-half 2006 and the Class I’s operating ratio improved slightly from 73.8 to 73.7 — NS’ lowest first-half ratio since 1999.

But similar to second-quarter results, operating revenue in the first half dropped 1 percent to $4.6 billion because of declining traffic in several sectors. General merchandise revenue fell 2 percent to $2.5 billion, coal revenue decreased 1 percent to $1.1 billion and intermodal revenue dropped 2 percent to $941 million compared with first-half 2006.