CSX executives said Wednesday the railroad has improved its service following problems that started in July and is now focused on refining the changes already made as it transitions into a precision scheduled railroading model.
Speaking at the Cowen and Company's Global Transportation conference in Boston, Chief Financial Officer Frank Lonegro said if his boss, CEO Hunter Harrison, was at the event "he'd say something like, 'We're back. Watch out. Here we come.'"
In comments that were webcast, Lonegro said the railroad has seen improvements in train velocity, terminal dwell and cars online following "transitional issues" with service in July and August. He noted CSX made "big changes" to its network during the Fourth of July weekend but modifications have slowed since and the rail system has begun to recover and improve within the new model.
"The CSX of the Hunter Harrison era is still under construction," Lonegro said. "While I say please pardon our dust, I also tell you that the fundamental building blocks are in place to enable us to provide two very important things: The first is consistent, high levels of service for our customers, and the second is a radically improved financial trajectory for our owners."
Ahead of Lonegro's appearance at the conference, Harrison said in a statement the railroad has made "very good progress in the last 60 days in transitioning its operating model" and he was "confident that many of the challenges we and our customers have recently faced are behind us."
STB MEDIATION
The US Surface Transportation Board met with CSX officials in mid-July following complaints from multiple customers and began weekly service calls with the railroad to provide an overview of operations and facilitate service improvements.
US coal producers Murray Energy and Foresight Energy filed lawsuits against CSX on August 1 over service problems.
The STB will host a public listening session with CSX and concerned parties Tuesday in Washington.
"The STB is doing their job," Lonegro said Wednesday. "When customers raise their hand and say, 'Hey, I'm having a challenge with my service,' the STB does the right thing and asks questions of us. They have us produce information and, ultimately, they want to connect the shippers and the railroad executives together, and that's what we're going to do next week at the listening session.
"I don't think you're going to see or hear anything different than you've already heard, whether it's been in the media or analyst reports," he said.
A 'CAUTIOUS' COAL OUTLOOK
Lonegro noted the railroad has followed others in the industry with a "cautious" view on coal business because of the US' role as a swing supplier in the global market. However, he said the export market has continued to see strength "deeper into the year than we had originally anticipated."
"It will always be a volatile market," Lonegro said. "We always try to leverage the upside and mitigate the downside but it will always be a volatile market. We're enjoying it this year. I can't give you much of a prognosis to where it will go next year, but we'll continue to move everything that wants to move."
The CFO noted domestic thermal stockpiles have been "bleeding off" throughout the year and some utility inventories in the South have fallen below average levels.
"We're, again, not bullish on domestic coal long term, just given the fact that there aren't any new plants that are being permitted or built," Lonegro said. "So, this is just a question of what is the pace of this declining annuity. It's more moderate this year than it has been the last couple of years."
