Union Pacific Climbs Out of Its Hole
Now, nearly two years later, there is evidence that they were correct. UP, which had shifted as much traffic as it could to competitors in 1997, appears to be regaining some of the intermodal freight, or at least the volume that it wants to handle.
UP intermodal volume was up 6.9% for the first quarter, compared with the same 1998 period, but the gain was from a particularly weak period. Burlington Northern Santa Fe Railway, which has gained much of its traffic at UP’s expense, reported a 7.2% gain from a strong 1998 first quarter. Industrywide, intermodal was up just 3% in the first quarter.
The service collapse began soon after UP acquired the Southern Pacific Transportation Co. and began integrating the two formerly competitive rail systems, but before it completed key infrastructure capital spending projects.
Western carriers, essentially UP and Burlington Northern Santa Fe, are well into multiyear, multibillion-dollar capital spending programs. BNSF spent $60 million on intermodal in 1997. That increased to $72.2 million in 1998, when the company spent $57.7 million for capacity expansion and $14.5 million for maintenance. This year, BNSF plans to spend $76.8 million on its intermodal-automotive group: $59.9 million for expansion and $16.9 million for capitalized maintenance.
Chuck Schultz, BNSF senior vice president of the intermodal-automotive business unit, is optimistic about the future of intermodal at his railroad. “The [pre-merger] Santa Fe was a good example of an intermodal success story. No other road could have had the percentage of revenue from intermodal [nearly 50%] and the operating ratio that we did. We realized early on that to survive, we had to grow, and intermodal would have to get us there.”
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