From the editor: On flipping the script and growing the franchise

By Pat Foran, Editor

Class Is haven’t had much to write home about the past few years. They’ve been taking “body blows … some wounds self-inflicted, and some not,” as my colleague and independent transportation analyst Tony Hatch put it in a Sept. 26 Progressive Railroading virtual summit. The blows range from the supply-chain crisis to rail-service snafus (and STB hearings surrounding same) to last year’s contentious labor round to East Palestine and its ramifications. But late last year, Class Is began showing signs they were beginning to recover from the blows and rewrite the script.

At Norfolk Southern Corp.’s December 2022 investor conference, President and CEO Alan Shaw talked about managing through a cycle, thinking longer term and taking a more balanced approach to service, productivity and growth — an approach Hatch termed “The Great Experiment.” Other Class I leaders also began talking in similar fashion, articulating to stakeholders that railroads need to invest in growth — and that the operating ratio is “not the be all and end all,” Hatch said during his summit presentation titled “Can Rails Change the Narrative?”

CN execs also preached the growth-through-investment gospel at the railroad’s May 3 investor conference — but not without some pushback, Hatch said. “They were asked, ‘Do you really need to spend all that money?’” he said. “The answer was, ‘If we want to grow, we do.’”

CN leaders don’t just want the railroad to grow. They expect it to by running a more tightly scheduled operation so it can move assets more efficiently, serve customers more efficiently and drive growth, as Managing Editor Jeff Stagl reports in our October cover story. Through late summer, the railroad was performing better this year (pick your service metric) despite weather challenges, wildfires, a Canadian port strike and a lackluster economy.

‘We never talk about PSR’

One thing about CN’s current operating approach: Don’t call it precision scheduled railroading (PSR), a strategy most Class Is have adopted and a phrase/abbreviation that, to some, is code for cost-cutting.

“We never talk about PSR. That’s not in our vocabulary,” CN EVP and COO Ed Harris said during the investor day event. “What we do is run a scheduled operation based on the car with a strong level of safety and strong level of commitment to our customers. The velocity of the operation is what makes this thing hum.”

What’ll make all rail stakeholders hum — and give railroads something to write home about — is if Class Is can flip the script on service and grow their respective franchises. They’d have to step it up on the highway conversion front, improve service and the customer experience, and tap into unserved markets, said Oliver Wyman Partner Adriene Bailey during the Sept. 26 summit in a presentation titled “Finding the Growth Curve for Rail.”

Bailey believes railroads can find it.

“I’ve seen amazing things done in incredible circumstances by people who work at the railroad,” she said. “I have absolute faith in the resilience and the creativity and the ability of railroaders to figure out how to solve this problem over time.”