UP's train-crew agreement to impact operating ratio in Q2

Union Pacific Corp. will incur a one-time pre-tax expense of $70 million in the second quarter as a result of UP's recent two-person train crew agreement with the International Association of Sheet Metal, Air, Rail and Transportation Workers–Transportation Division (SMART-TD).

UP Executive Vice President and Chief Financial Officer Jennifer Hamann announced the expense yesterday during a presentation at the 2023 Wells Fargo Industrial Conference.

The expense is expected to increase UP's second-quarter 2023 operating ratio by 120 basis points, according to a filing with the U.S. Securities and Exchange Commission. The added labor expense in 2023, combined with lower business volumes and increased operating costs, will likely result in a full-year 2023 operating ratio that exceeds 2022 levels, the filing states.

UP posted an operating ratio of 60.1% for full-year 2022 and 61% for fourth-quarter 2022.

Earlier this spring, UP and SMART-TD announced they reached an agreement to maintain two-person train crews, including making no changes to the current conductor position in each train. The agreement also provides long-term job protection to current employees and gives the railroad more flexibility to deploy brake or switch persons to work either in or outside the yard, UP officials said in a press release issued in March.

In December 2022, UP announced a pilot project that would have redeployed traditional conductors as ground-based "expeditors," but the project remained on hold as the Class I and SMART-TD continued negotiations and mediation on the proposal.