The views expressed here are solely those of the author and do not necessarily represent the views of FreightWaves or its affiliates.
Beyond the image beauty of this BNSF train is a complex business model.
Some may not appreciate the North American intermodal business model. Heck, even I am dissatisfied by some aspects, like its stalling growth and relatively fewer origin/destination pairs. And many are disappointed by the lack of rapid highway truck diversion to rail as a “growth strategy.”
Yet, to be fair, this is an excellent profit-making intermodal approach.
Who does this as well globally? Commercially? Financially?
No one.
This model works best right now across only Mexico, Canada and much but not all of the United States. Translation: Some places, like Alaska, New Hampshire and New York City plus Long Island, don’t get this kind of high-efficiency service.
In the first photograph, what do you see?
Here is what these old railroader’s eyes see.
It portrays a complex business — all within the photos if we look hard.
Jim Blaze’s market view sees these commercial elements:
☑️ The first view is of a BNSF paint scheme locomotive. That may or may not signify that the train is on BNSF tracks. Sometimes trains run over another railroad’s rails using a trackage rights agreement. What is diesel-electric unit No. 7360?
• It’s a GE ES44-DC type.
• It has six powered axles.
• Its build date was December 2009 at the Erie Pennsylvania factory of General Electric (now WABTEC).
• It has an EPA Tier 2 classified emission type.
• It has an expected service life, with rebuilding, of ~35-plus years.
• It has 4,400 horsepower, with starting tractive effort pulling power of about 142,000 pounds.
• It is 208 tons or more in weight.• It has DC motors, designed for faster freight trains.
☑️ This is the last of three power units. Behind it is the first of a trailing line of TTX stack cars. Each stack freight car is part of a three-nation TTX-owned car fleet.
☑️ Out of sight to the right in the photo are a couple of hundred 53-foot domestic containers as J.B. Hunt-invested assets.
☑️ Thousands of smaller boxes inside the bigger containers, all as beneficial freight whose shipper and receivers are known freight only to J.B. Hunt, not to BNSF.
☑️ A hook-and-haul intermodal train.
☑️ A crew of BNSF train drivers substitute for more than about 300 long-distance truck drivers.
☑️ At a railroad cost per container railroad mile of less than 70 cents.
☑️ At a railroad contract price close to a secret, maybe $1 to $1.10 a container mile — internally providing at this train size an “OR” profit margin for BNSF of about 35% to 40%.
☑️ Some containers provide spot rate capacity on the train. In other words, some contract train ticket holders can sell their box capacity to others in times of heavy traffic and charge higher rates than normal. We cannot see that. But we know it happens.
☑️ Note that imported goods often ride inside special 20- or 40-foot-long maritime containers. Yes, the maritime boxes also have long-term contract rates with the Class I railroad carrier like BNSF or UP.
☑️ Plus, back in the train consist, there are some Schneider containers (a competitor of J.B. Hunt) also hitching a ride on this train — which visually most of us assume is a Hunt train. Translation: It is not actually a private, Hunt-only train set.
(Photo: Jim Allen/FreightWaves)
☑️ Occasionally, we see a few autorack cars stuck onto the end of the container train. Why? Because the railroad company can opt to do so. It is solely a BNSF management choice.
☑️ This train is running over remotely dispatched tracks (in railroad language called CTC) with separate safety software/hardware called Positive Train Control (PTC). The daily theoretical yet practical capacity of the parallel (double) tracks allows for 70 or more trains a day.
☑️ Here with double track freight speeds in the 65-mph range or more, the freight traffic might well exceed 100 million annual gross tons running across the tracks we see.
☑️ Those stack train TTX cars cost $100,000 for each. Might be as many as 300.
☑️ Plus each container that we see costs Hunt capex.
Did you see all of that?
That complex business plan in a few photographs?
Commercially, this is a successful business model. This is a complex yet efficient business model. Even with its shortcomings, we cannot abandon something that works this well.
Railroad executives just need to tweak it for short-hauls competition.
Colleagues, what’s your opinion?
Joseph Wambach
Creatively written and highly informative article. It says to the old trucker, me, the bottle neck in truck transportation can easily be solved with current intermodal capacity. I agree.
Brian Watt
I see 31 years of collusion between JB Hunt and BNSF Railway primarily for the benefit of Walmart. In a confidential agreement struck initially by JB Hunt Sr and Michael Haverty, President of the ATSF Railway (predecessor of BNSF), JB Hunt (the company) managed to obtain a “forever” rate from Mr Haverty. How that was done is not known. The contract lives under the Federal 1980 Intermodal Exemption which allows this kind of price-fixing. The Quantum deal, struck in 1989, has never been reviewed by the Surface Transportation Board. The STB HAS jurisdiction, but will not review this contract or a myriad of like practices between railroads and their intermodal partners. Upon reading the 1980 Intermodal Exemption, that piece of policy was designed to protect the nascent intermodal modal from internal economic squabbling between Class 1 railroads at a time when the was greater railroad competition. That competition is now gone. Yet, Quantum still lives. At what point does a confidential contract become collusion?
The Quantum Agreement is the single-most damaging contract in our business. Your only real alternative to competing with this model is to ignore it. It is like choosing to shop at Walmart versus anywhere else.