“For us, PSR is all about improving the consistency, reliability, and resiliency of our network and it’s really focused on service and growth,” CEO Patrick Ottensmeyer said on the railroad’s earnings call Wednesday.
“Our service has greatly improved,” he said. That will enable KCS to get back to more rapid growth – unlike 2018 when KCS simply could not put more traffic on its congested cross-border network.
Ottensmeyer said if KCS is going to err in its rollout of PSR, it’s going to be on the side of moving too slowly rather than too quickly.
“I never want to have to come back on an earnings call and say there was more business than we could handle but we couldn’t take any and we couldn’t move it because of a lack of power or crews or other assets,” he said.
The goal of PSR is to ensure that KCS has the capacity to handle what Ottensmeyer called the railroad’s “four oversized growth areas:” refined products, plastics, automotive, and intermodal.
KCS service metrics, outlined by Chief Operating Officer Jeff Songer, tell the story of the pace of operational improvements from the fourth quarter to the first quarter: average train speed is up 13%, terminal dwell is down 16%, and the number of cars online has dropped even as cross-border traffic surged 13%.
One of the main drivers of the turnaround was cleaning out the yard in Monterrey, which handles carload traffic for 600 nearby customers, 150 of which are high-volume locations.
Sameh Fahmy, a Canadian National veteran who is KCS’s new executive vice president of Precision Scheduled Railroading, said that on his first visit to Monterrey in December the yard was so full he could not see the tracks.
A full yard can indicate good business, Fahmy said, but congestion also means you can’t switch efficiently. So KCS worked with customers to pre-block traffic at their facilities and also collaborated with them to minimize the number of switches required to handle their traffic.
The result? Car inventory in the yard is a manageable 1,500 cars, which is 40% below the peak levels of last year, Songer said.
KCS does not envision pruning its yard network as part of PSR, Fahmy said. Rather, it will use the existing yards more efficiently.
By reducing terminal dwell, KCS will be able to provide more reliable service while absorbing more business, he said.
A key to KCS’s operational improvements, Fahmy says, is an intense focus on operational discipline and closely monitoring train delays to identify causes and fix problems. “We have a lot of room to go,” he said.
“Houston is becoming a bit like Chicago and improving the velocity in that area can significantly improve the velocity on our whole network,” Fahmy says.
The railroad is working closely with UP, another railroad adopting PSR, to address pinch points in Houston so that its cross-border trains can more easily thread the needle.
KCS is combining trains to make the most of the available slots through the terminal, Fahmy says. It’s also exploring the possibility of using shorter, faster UP routes through Houston.
“Houston is a very complex terminal complex,” UP CEO Lance Fritz said on the railroad’s earnings call on Thursday. “It’s got a number of different Class Is operating and a ton of industry with a lot of local service attached.”
This has historically made Houston a challenging place to provide reliable service, Fritz said. UP’s new operating plan is providing more frequent local service in and around Houston, which is helping, he said.
“We’re a big footprint in the area but we’re not the only one and we have to rely on smooth coordination with the other railroads in the area, which we work on every day and we’re getting a little bit better at every day,” UP Chief Operating Officer Jim Vena said.
UP is continuing to work on ways to make Houston more fluid as traffic grows in the area. “I want us all to be successful,” Vena said.
UP is KCS’s most important interchange partner – particularly for cross-border traffic exchanged at the Laredo, Texas, gateway – and the railroads have begun joint operational changes, Fahmy said.
Among them: Pre-blocking traffic for destinations in Mexico and the U.S., as well as combining intermodal and manifest traffic into longer trains.
“We are definitely in this game together,” Fahmy said.
