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August 2008

Rail News: Rail Industry Trends

A logical search for greener pastures, plus KCS's 2Q 2008 earnings (Pat Foran, Context, August 2008)

It’s hardly news in rail circles, but it’s just now creeping into the collective North American psyche: When it comes to “green” freight and passenger mobility options, rail trumps cars and trucks. And in varying shades of green, freight railroads and passenger-rail agencies are beginning to rethink their own eco-sensitive strategies — from productivity enhancements and product/equipment purchases to organizational planning and policy implementation, even marketing and customer outreach efforts (see this month’s cover story package).

They’re doing it because it makes sense — eco-sense, sure, but there’s also bottom-line and, increasingly, top-line logic to it.

Soaring gas prices continue to prompt fuel consumers to reconsider their transportation choices, and freight railroads and passenger-rail agencies are spreading the rail-is-more-fuel-efficient gospel with unprecedented urgency. They’ve developed commercials telling viewers that one train carries the load of more than 280 trucks; trains, the ads say, move a ton of freight more than 436 miles on a single gallon of fuel (“That might be our ‘Got Milk?’” Association of American Railroads’ President and CEO Ed Hamberger told me this spring). Meanwhile, green-related press releases from the transit-rail realm come to the likes of us regularly (“Public Transit Users Avoid High Gas Prices: Save Over $8,000 Per Household Annually,” notes an American Public Transportation Association July 31 release).

But marketing campaigns don’t entirely explain what’s driving railroads’ and agencies’ own efforts to step it up on the eco-sensitivity front. In large part, they’re doing it because the customers and communities they serve are demanding it. As Tri-County Metropolitan Transportation District of Oregon General Manager Fred Hansen told Associate Editor Angela Cotey: “We need to become green leaders. The public expects this from us.”

Expect even greater expectations, at least for the near term. The greening of the North American transport chain (and all that it entails) is just beginning.

Earnings addendum: KCS posts record 2Q revenue

Kansas City Southern reported its second-quarter earnings after we’d completed our Class I financials round-up, but we’ll sneak them in here: Riding a “strong pricing environment,” an increase in fuel surcharges and “significant growth in certain business units,” KCS generated record revenue of $486.2 million, up 13.8 percent, and earned operating income of $104.6 million, up 29.9 percent compared with 2Q 2007 totals.

Chemical and petroleum products revenue jumped 19.9 percent to $93.9 million; ag and mineral revenue rose 18.4 percent to $117.7 million; intermodal and automotive revenue increased 15.7 percent to $72.4 million (driven in part by a 44 percent increase in container volumes out of Mexico’s Port of Lázaro Cárdenas); industrial and consumer products revenue rose 12.4 percent to $140 million; and coal revenue went up 5.7 percent to $48.1 million. Carloadings increased 1.1 percent to 465,351 units compared with 2Q 2007’s total primarily because chemical/petroleum products traffic jumped 13.2 percent and intermodal carloads, 5.2 percent. KCS also posted increases in velocity and locomotive availability, lower terminal dwell times and a two-point operating ratio improvement (to 78.5).

The lone ledger negative? Operating expenses, thanks to a 38.8 percent fuel cost jump.

“All the positive revenue and operational trends that highlighted KCS’ first-quarter performance were even more pronounced over the prior three months,” said Chairman and CEO Mike Haverty in a prepared statement. “KCS’ diversified revenue portfolio and unique cross-border network ... are central to the company’s belief that we will be the fastest-growing railroad in North America over the foreseeable future.”

Join us at RailTrends 2008

Mark it down: Progressive Railroading will present its annual RailTrends conference Sept. 30-Oct. 1 at the Affinia Manhattan in New York City.

The program for this year’s summit is shaping up nicely. Speakers include John Kaiser, UP’s vice president of intermodal; John Giles, RailAmerica’s president and CEO; Kevin Kaufman, BNSF’s group VP-agricultural products; Jean-Jacques Ruest, CN’s senior VP of marketing; Brian Bowers, KCS’ senior VP, intermodal & automotive; Rodolfo Sabonge, the Panama Canal’s VP of market research and analysis; Paul Newbourne, Leveraged Execution Providers’ VP and general manager; and Leslie Moll, ArcelorMittal USA’s manager of logistics and external processing. For a complete agenda, additional information and/or to register online, visit



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