Report: Scheduled railroading could improve North American freight-rail service

North American railroads' growing interest in precision scheduled railroading has the potential to improve flagging service levels, according to a new report by Moody's Investors Service.

Last month, Union Pacific Railroad became the latest Class I to adopt precision scheduled railroading principles as part of a new operating model. Under UP's new Unified Plan 2020, the company will roll out precision scheduled railroading in phases across its network starting today.

Class Is embracing precision scheduled railroading now account for the majority of the North American rail sector, the Moody's report noted.

"The rail sector's increasing adoption of this operating model comes at a time of prolonged weakness in train speeds and terminal dwell times," the report's authors wrote. "The latest round of pronounced deterioration began in the first quarter of 2017 as freight volumes rebounded following significant declines during mid-2015 and through 2016. Service levels eroded further between March and August of this year amid accelerating freight growth during this period."

Railroads that implemented precision scheduled railroading have demonstrated a marked improvement in service levels according to some measures, the authors noted.

"CSX Corp. provides the most recent illustration, even though a rapid network-wide implementation initially led to significantly worsened service levels," they wrote. "CSX's train speed in the third quarter of 2018 increased to only 2 percent below its average level in 2013, a base line year that we use for the industry during which railroads sustained good service levels. Furthermore, terminal dwell time for CSX dropped to 16 percent below its 2013 average."

Precision scheduled railroading is not a panacea for service problems, however.

"Even with an operating model based on precision scheduled railroading, railroads will periodically experience weaker service levels, particularly during sharp increases in freight volumes," according to the report, which noted that CN — an early adopter of precision scheduled railroading — experienced a drop in service metrics starting in fourth-quarter 2017.

At the same time, BNSF Railway Co. — which has not implemented precision scheduled railroading — "has maintained good service levels that to date exceed its average 2013 levels," the authors wrote.

"In addition, precision scheduled railroading's primary objective is to increase the efficiency of operations, which could come at the expense of the railroad's ability to accommodate customer needs," they said.