Lower costs, higher rates prop up railroad profits - Rail update - Brief Article - Statistical Data Included

Railway Age, Nov, 2001

Despite a softening economy and some service disruptions following the terrorist attacks, railroads performed well in the third quarter. Selectively higher rates and lower costs helped mightily.

Union Pacific Railroad's third quarter operating ratio was 79.7%, its best quarterly performance since 1996. The railroad said record levels of employee productivity and moderating fuel prices helped control costs. Despite the economic downturn, business was off only slightly from last year. Commodity revenues for the quarter were $2.63 billion, compared with $2.65 billion in the corresponding 2000 period.

Burlington Northern and Santa Fe posted a third-quarter operating ratio of 78.3%, compared with 75.4% a year ago. Commodity revenues were $2.31 billion, even with last year. Operating income was $502 million for the quarter, compared with $571 million a year ago. Operating expenses of $1.84 billion were $69 million higher than a year ago. Part of an ongoing cost-cutting effort will be elimination of 400 management jobs.

Norfolk Southern said an improvement in revenue yields plus effective cost controls helped the railroad improve operating income by 16% in the third quarter. NS's operating ratio dropped from 86.3% in the year-ago quarter to 83.8% this year. Operating revenues for the quarter were $1.51 billion, down 2% from last year. Net income was $79 million this year, down from $99 million in the year ago quarter, which included $46 million from the sale of timber properties.

CSX improved its operating ratio from 89.4% in the third quarter of 2000 to 86.7% in this year's quarter. Operating income for CSX's rail and intermodal businesses totaled $237 million in this year's quarter compared with $190 million a year ago. While carloads were down 2.6%, rate adjustments kept revenues about the same for both periods, around $1.8 billion.

Kansas City Southern Industries' consolidated third quarter revenues were $144.6 million, up slightly from $144.1 million a year ago. The Kansas City Southern Railway/Gateway Western operating ratio improved to 85.9% from 87.0%, on a comparable reporting basis, in the year-ago quarter.

Canadian National again reported the lowest operating ratio among all North American railroads, an impressive 67.5%, down 1.9 points from last year. CN's third quarter revenues were essentially flat, at $1.33 million (C). While carloads were down 4%, revenue per carload increased 5%.

Canadian Pacific Railway's operating ratio improved slightly to 75.3%, with operating income holding steady at $227 million (C), before $7 million in spin-off and incentive compensation charges. Revenue per ton-mile increased 1.9%.