Railroad revenue gains to continue in 2004, Hamberger says
Intermodal service became the top revenue producer for North American railroads in 2003, Association of American Railroads President Edward Hamberger said Friday, confirming what many in freight transportation circles already understood about the growth of intermodal traffic.
During the last decade intermodal volumes have surged as railroads have improved service. Intermodal offerings have increased to the point that revenue now exceeds that from bulk and boxcar moves. In 2003, intermodal traffic accounted for 22 percent of railroad revenues.
“In 2003, we saw the greatest revenue generation from intermodal traffic” ever, Hamberger told journalists at a Transportation Table luncheon sponsored by Traffic World magazine in Washington. The trend has continued in 2004, with the week of April 24 recording the biggest intermodal traffic volume in history.
“Intermodal has become the No. 1 revenue generator” in the railroad industry “and will continue to be the fastest growing sector,” exceeding bulk businesses for agriculture products, waste paper and coal, Hamberger said. The shift to containerized service is significant “because it means freight railroads are part of the 21st century economy and a participant in global supply chains” rather than being perceived as a pre-modern industry serving the old smokestack industry.
Boxcar and coal businesses are also growing, the AAR leader said. Rates are increasing along with demand for rail service.
Hamberger acknowledged that railroads such as the Union Pacific have experienced delays and other service problems, but said measurements by the Hub Group, an intermodal marketing and logistics company, show railroads have met on-time performance goals 93.5 percent of the time. That figure is down from record-high on-time service levels last year of 97 to 98 percent.
“Talk about a meltdown, that we can’t handle the volume of business, is a bit over the top,” Hamberger said.
The industry plans to hire 80,000 new employees during the next six years to address the lack of manpower that has caught railroads short-handed and led to service problems during peak periods, but he acknowledged that the influx of new employees would just maintain employment levels at status quo because so many current workers are expected to retire.
Having enough bulk-car capacity, however, could be an issue this summer because utilities have let coal inventories get lower than normal, Hamberger said. The rail industry is talking to utility companies to start planning ahead for shipments to avoid a rail car crunch and brownouts, he said.
Hamberger said railroads plan to spend $6.1 billion in capital investment this year on locomotives, railcars, double tracks, upgraded signal systems and intermodal ramps. Burlington Northern Santa Railway Co., for example, said earlier this month it plans to spend more than $250 million for more locomotives, crews and large-capacity hopper railcars to help carry grain during the 2004 grain harvest. BNSF said it will take delivery of 1,500 covered hopper cars by this fall, and another 1,500 in early 2005.
Railroads have taken steps since the terrorist attacks on U.S. soil to increase security, but the vast nature of their networks makes security a difficult challenge. Hamberger said the AAR has had talks with the National Guard about guarding key facilities and overpasses, but said the Guard has not figured out how to fund the cost of providing such service.