Although a higher than anticipated attrition rate in the second quarter is slowing the pace of operational improvements, CSX still expects to continue to improve its service metrics in the third and fourth quarters.
“We’re in great shape to handle whatever traffic comes to us. … We only have one restriction right now and it’s crews, and we’re doing everything we can possibly do to hire as many people as we can,” President and CEO Jim Foote told investors during CSX’s earnings call Wednesday afternoon.
The freight railroad’s executives were surprised that the attrition rate of new hires was higher than what CSX has previously experienced or anticipated, and so the focus now is to look at compensation strategies as well as analyze the reasons for the attrition and find ways to improve the vetting of new hires, according to Foote and others on the call.
CSX (NASDAQ: CSX) has a target of 7,000 train and engine employees, which is roughly where headcount was for that category pre-pandemic. That figure could be achievable by the end of the third quarter, according to Foote.
But CSX also plans to continue hiring for more train and engine employees past the 7,000-person target to prepare “for anticipated growth over the next year or two,” said Jamie Boychuk, CSX executive vice president of operations.
CSX had nearly 6,700 active train and engine employees in the second quarter.
As CSX seeks to increase its workforce in the third and fourth quarters, the company said it will continue to focus on keeping terminals open and fluid during ongoing supply chain constraints. As network fluidity increases, that should improve the performance of CSX’s merchandise segment, according to Boychuk, who said CSX has also added assets to the network to better meet customer commitments and offset the impact of crew shortages.
Prioritizing trains on the network
To accommodate shippers’ needs, CSX adjusted its operations in the second quarter to prioritize bulk traffic, such as grain and coal, “which we would never have done before,” Boychuk said. Bulk volumes usually are stockpiled, but low coal stockpiles in the Carolinas and the need to ensure chicken feed in Alabama caused CSX to sometimes prioritize bulk traffic over merchandise traffic.
As a result, “when you are prioritizing different flows of traffic that you never really had before,” it can result in merchandise traffic seeing a 24-hour delay or a delay getting from terminal to terminal, Boychuk said.
“When we can get back to a normalized workforce with respect to being able to move every train and not having to make those tough decisions … you’re going to start to see that flow move better,” Boychuk said.
CSX’s intermodal trip plan performance was 90% on time in the second quarter, but its carload trip plan performance was 59% on time.
Despite macroeconomic uncertainties in the second half of the year, truck capacity shortages and customers’ focus on meeting environmental, social and governance standards by using freight rail should help CSX and the broader freight rail industry over time, executives said.
“Ninety percent of our hump terminals are running very well. Flat switching terminals are running well. Where we get congestion or a little bit of a bottleneck is at different crew change points where we don’t have crews to keep those trains moving or we [have] to make a decision on which train moves quicker than a different train,” Boychuk said. “So we’re very confident that the network is better than probably what it was in 2019, and we’re ready to go once we get the folks trained up.”
2nd-quarter 2022 financial results
CSX’s second-quarter 2022 profits were roughly flat compared with a year ago.
Net earnings were $1.18 billion, or 54 cents per share, in the second quarter of 2022, compared with $1.17 billion, or 52 cents per share, in the second quarter of 2021.
Operating income was $1.7 billion, compared with $1.69 billion a year ago.
Revenue rose 28% to $3.82 billion on higher revenue in nearly all markets, including automotive, minerals, coal and agricultural and food products. Pricing gains, fuel surcharges and the addition of Quality Carriers also contributed to second-quarter revenue gains. Expenses rose 63% to $2.1 billion.
CSX’s operating ratio rose from 43.4% to 55.4% in the second quarter amid the financial impact of acquiring Quality Carriers and Pan Am Railways, as well as higher fuel prices. CSX’s sale of real estate to the commonwealth of Virginia was a tailwind to OR, Foote said.
Investors sometimes use OR to gauge a company’s financial health, with a lower OR implying improved health.
“I am very proud of CSX’s entire team of employees, which now includes Pan Am railroaders, for their hard work and dedication over this quarter,” Foote said in a news release. “Though volatile commodity prices and persistent inflation have added uncertainty to the economy, our efforts remain focused on adding the resources needed to deliver improvements in our network performance, lift customer satisfaction and develop new rail service solutions to drive meaningful growth over the long term.”
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John
They want to talk about attrition rate, yet in the next article you read about class 1’s they will be talking about if they had one man crews everything would be fixed. Who in their right mind would want to work for a company that wants to cut their job off. Even if they make them “ground based “ it wouldn’t take nearly as many as conductors as we currently have. Oh and let’s just forget all about the sanity of the Engineer’s that’ll be stuck on a train by his self for 12 plus hours and still NOT have a regular work/sleep schedule they keep preaching the “ground based “ conductors will.
John
More proof of how out of touch these executives are. They have financially compensated new hires but as soon as they step foot in the ballast they start hearing from crews with tenure. Then they realize what’s really going on and they quit. From my view roughly 85% don’t last a year. We are seeing guys with 20 plus years quitting at an increasing pace. We’re not 9 to 5 people. We don’t know when we’re coming or going. No holiday pay. We dont have time off. IF we’re lucky enough to get a day off it is 24 hours. A typical worker outside the Railroad gets 36 to 40 hours for a day off. Think about it. Off at 5 p.m. then they have the rest of that day. Then 24 hours then the 9 hours before 9 a.m. This is why we’ve been traditionally paid better than average. Average is unacceptable. Compensate us reasonably. Stop disregarding our contractual agreements in place. Stop fudging the numbers which is done every day in every terminal. Impossible metrics we’re years ago. The metrics today are a flat out lies so people don’t get fired. This isn’t sustainable. I’ve lived long enough to see this business model adopted by most industries. PSR is just a hedge fund playbook. We know what they do. Its is tearing down our country. How much is enough? I don’t know but class one RR’s don’t shape up they’re gonna find out how much is to much. This article didn’t mention the strike that is rapidly approaching mid September. The POTUS just got involved. Buckle up.
Dusty
I can’t agree more. I don’t work for CSX however I do work for another class 1 railroad. It absolutely drives me crazy to see or hear the railroads boasting about their record profits and how they are so dedicated to increased customer satisfaction and developing new rail services, yet complain about high attrition rates for new hires. I would like to help people understand the high attrition rates.
Any article you read, the railroads state that the average railroader makes $130000/ year with benefits included. I can tell you that my income on a 40 hr/week for a year Is $68k. So, they are claiming we get $62k in benefits? They pay a portion of my insurance, so do I, and according to their proposal for the new contract, they want us to pay more.
What needs to be reported for people to understand if the facts.
As a railroad employee you will forfeit your weekends off for at least the next 10+ years. You will also, along with that, forfeit working a day shift job. Your schedule will be 3pm to 11pm or 11pm to 7am with Tuesday Wednesday or Wednesday Thursday off. As a low seniority employee you will be forced to work many 16 hour shifts when the higher seniority employees don’t want to work it. This is not a choice. If you have an option (which rarely happens) to choose not to work a holiday. That, as a lower seniority employee, will be stripped from you when a higher seniority employee doesn’t want to work it. What I’m saying is, you are giving up all of your weekends off and holidays off to work for the railroad. A normal life no longer exist. You will have to plan to celibate your birthday and holidays on a different day than everyone else. With people quitting the railroad ( which is something you never heard of before) the overtime has increase. You can plan on working several 16 hr shifts per week. So, between work and the desire to get a little sleep, your family life becomes next to none.
They offer a foolish vacation benefit that will never be appealing to a new hire and becomes even less appealing as an employee. Don’t get me wrong, I enjoy the time I do get but it is not enough for the hours we put in.
And let’s be clear. We have been working without a contract for 3 years. Everyone keeps hearing about the negotiations for a new contract. We should not be negotiating for the next 3 years until we negotiate what they owe us for the last 3 years then we need to immediately negotiate the next 3 years. They want to sugar coat everything in these article for the people to read but ignore the real problem. The railroad wants give us a small raise and increase our contribution to insurance and reduce our net pay, yet complain that the attrition rates are high. LMAO
You wanna lower the attrition rates and actually hire employees. Give us a 40% pay increase, leave our insurance alone, give us another weeks vacation and back pay us for the last 3 years. I’m pretty sure that’ll lower your attrition rate.
It’s to bad that none of our replies will be heard by anyone. The railroad will continue to pay us less while their CEO is making an unprecedented 14 million per year and calling us overpaid factory workers and truck drivers.
It’s funny, as a child it was a dream of so many kids to work on the railroad and operate a locomotive. Now, the very same people can’t wait to quit if they haven’t already.
Larry
If the unions strike, the economy will suffer and the rail workers will be blamed. It’s the railroads themselves who are to blame. Hopefully they will finally blink and do the right thing.
Scott
NO!..it’s the government thats to blame….are you crazy?
Scott
I’m so sorry to hear that…you guys
are the backbone of our country and you guys deserve better….