Since late 2018 UP has scrapped service between hundreds of intermodal points it jointly served with CSX Transportation and Norfolk Southern, as well as Canadian National and Canadian Pacific.
UP executives have said the railroad was serving too many low-volume lanes, whose traffic moved in small blocks that could not efficiently be handled via steel wheel interchange in Chicago and other gateways. The slimmed-down interline service reduces operational complexity, executives say, which has cut costs while making service more reliable.
Volume in UP’s premium business segment, which includes intermodal and automotive traffic, declined by 7% last year amid stronger competition from trucks and trade tensions with China.
UP announced the resumption of domestic service, effective Feb. 1, in a customer announcement posted to its website on Jan. 27.
“As a result of Union Pacific’s Unified Plan 2020, and our objective of providing safe and reliable service products, we are pleased to inform you that Union Pacific will be opening a number of domestic interline lanes originating on Union Pacific and destined to various points in the Eastern United States,” UP said.
The announcement included a list of UP origins that would resume service to 19 destinations on CSX and 39 points on NS.
Norfolk Southern Chief Marketing Officer Alan Shaw, speaking on the railroad’s earnings call on Wednesday morning, did not refer directly to the resumption of service with UP. But Shaw says, “We’re working feverishly with our interline partners and with our customers to look at new lanes that offer value to our customers and offer value to our shareholders.”
UP’s resumption of service fits a Precision Scheduled Railroading pattern established at Canadian National, says independent rail analyst Anthony B. Hatch of ABH Consulting.
While adopting PSR under then-CEO E. Hunter Harrison, CN restructured its intermodal network with an eye toward simplicity and boosting profitability and reliability. UP’s chief operating officer, Jim Vena, was chief operating officer at CN under Harrison.
“I’m not sure that I would characterize this as a retreat or reversal although it certainly is from a market perspective,” intermodal analyst Larry Gross says. “PSR has always been an inwardly focused, operationally driven exercise. I have previously heard the general plan as being one where the railroad simplifies the system, gets everything running smoothly and then adds back lanes and complexity. So from a UP perspective this may have been part of the plan all along.”
