The second half of the year could be a time when Class I railways will move away from maintenance problems and see improved performance due to the railways ’spring efforts to strengthen the ranks of train and machine workers, investors and industry observers told FreightWaves.
The additional conductors and train engineers who will be working on the railways in the second half of the year will “help tremendously with some of the [railroads’] the ability to maintain efficiency in networks, ”said Jeff Windau, a transportation analyst with Edward Jones Financial Consultancy.
Rail transport problems and the Land Transport Council the answer to them were notable topics during this last season income as Class I railways presented their financial results for the first quarter of 2022.
“I think so [the Class I railroads] showed progress through [first] a quarter, but not enough to be obvious, so I’m not sure the second quarter will be superb. … [But] I really hope for the second half, ”said Tony Hatch, a transport analyst and consultant at ABH Consulting.
Although service issues dominated the discussion of the results, the first quarter appears to have stabilized between the fourth quarter of 2021 and the first quarter of 2022, despite some deterioration in rail performance, observers say. .
“I really hope that they will be able to establish and demonstrate to us at a sustainable level, not just once … that the amount of compliance with their travel plans has improved and that they have improved in the second quarter not only consistently but also during the quarter month before months. These are the numbers I will be looking for, and we will have to wait until July to see, ”Hatch said. Compliance with the travel plan it is an indicator that compares the time it takes a wagon of customers to travel from end to end, with the estimated time of arrival.
Other problems that affected the results of the first quarter got out of control of the railways. Among them are inflation and rising fuel prices, which have been affected by the conflict between Russia and Ukraine.
The automotive industry is also trying to return to normal production levels, they said.
“The whole Russian-Ukrainian conflict has really affected supply chains, and we are seeing some potential reorientation of supply chains for many of the goods that carry the rails, be it fertilizers or grain,” Windows said. “It will take some time to get through the system, but we believe we will start to see improvements [for the railroads] throughout the year. “
Although “there were no real bright spots in revenue,” the tone of the calls was more upbeat and encouraging, and questions from Wall Street transportation analysts focused on service and growth opportunities, Hatch said.
“I saw some green shoots there and I hope we look back and say that then [the railroads] began to flourish, ”for example, opportunities for the growth of domestic intermodal, some industrial products and, in the short term, coal, Hatch said.
The move to support environmental, social and governance principles may also end up increasing revenue for railways as shippers seek to use railroads to support ESG shipper initiatives, Hatch continued. Railways have also begun to move away from focusing on reducing OR and supporting the growth of their activities, and this move will benefit both railroaders and shippers.
Although investors hope that the second half will improve over the first half in terms of service and financial performance, a number of headwinds may still come into play, for example, in the first quarter: the ongoing conflict between Russia and Ukraine, inflation and high fuel prices.
But regulatory uncertainty is also looming. The STB may act in accordance with some shipper-friendly proposals to the Council concerning railway services, e.g. mutual switching.
However, other powers of the federal government, such as the Democrat-controlled House of Representatives Committee on Transportation and Infrastructure (T&I), question whether the STB should be given more power to address rail transportation issues.
Committee of the House of Representatives a hearing is being held on Thursday during which he will interview each of the five STB members on how the council should respond to rail service issues.
Some members of the railroad industry are concerned that the board may be given more power than is guaranteed, as most U.S. cargo is not transported by rail, and trucks and barges do not have the same level. checks that railways do.
“If you’re into the railroad industry, play the usual defense of Washington. You know, all the guys are attacking each other and then go have some scotch tape at the Capital Grille. Do it, “Hatch said.” But at the same time, you have to improve your service. I mean, it all comes down to it. If you don’t, you’re not only going to have an annoyed T&I committee, annoyed STB, annoyed shippers, but you also won’t have a business that your shareholders have been told will appear in this new phase of growth for the railways ”.
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